Welcome to the middle class, China: The $5 cup of Starbucks has arrived

November 29, 2012
Obsession
How We Buy
November 29, 2012

Prices from Starbucks Asia and Pacific division; US cost for New York City

For American coffee connoisseurs, the morning cup of joe just got a little more expensive. Starbucks is now offering a Grande-size cup of new Costa Rica Finca Palmilera for $7. The pricey brew, grown from a rare South American varietal, is only being offered at 46 stores in Seattle and Portland. In only 24 hours, the beans sold out at Starbucks online store.

But in China, consumers find the price of sophistication painful. For an average worker who earns $750 a month, $5 for a cup of coffee is a lot, which is why many of the store’s customers bring their own food or don’t buy anything at all.

Earlier this year, Starbucks announced it would raise its prices in China by one to three yuan (two yuan is 32 cents) on hot chocolate, fresh-brewed coffee and esspresso drinks—increasing a tall latte’s cost to around $4.20. Around the same time, prices rose an average of 1% in the US Northeast and Sunbelt region due to higher costs for coffee, milk, and fuel.

In November, the outlet made another two yuan increase to more than five drinks, including lattes, cappuccinos and mochas in 12 cities in China. The raise in price was made in order to offset the lower operating margins reported in the fourth quarter as spending goes toward the outlet’s expansion.

One Sina Weibo user wrote:

What we are disgusted with is not the price hike at Starbucks. We are annoyed to be buying the same product in China at a higher price than in the US.

When the first Indian Starbucks opened in October, customers were pleasantly surprised to find a tall cappuccino cost the equivalent of $2.15. Anand Kothari, a development consultant in Mumbai said: “Wow, I’d definitely try them out, I was expecting the drinks to cost around Rs. 300 (around $5).” In India, this pricing is considered premium where the average income is less than $2 a day.

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