Starbucks has become the most recent consumer facing organization to come under media fire in China. Starbucks has been charging customers in China higher prices than other markets, earning the company strong profit margins. A medium-size latte costs about $4.43 in Beijing, which is about a 33% premium over the cost on the same drink in Chicago. Retail sales of coffee in China grew more than 90% between 2007 and 2012, hitting $1.5B last year. Starbucks had a profit margin of 32% in China-Asia Pacific in its second quarter, compared to 21% in the Americas and 2% in Europe, Middle East, and Africa. The Chinese media can complain all they want, but if Starbucks can continue to raise prices in this market without loosing sales, why shouldn’t they?
Check out this awesome graphic from the Wall Street Journal on all the cost components that go into a Starbucks Latte in China.