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Starbucks hikes prices for 2nd-tier markets in second bump this year

By Zhang Ye Source:Global Times Published: 2012-11-15 23:55:08

Starbucks Corp told the Global Times Thursday that it raised prices of some of its coffee products by 2 yuan ($0.32) in 12 Chinese cities from November 6 in order to bring prices level with those across the country, in the US coffee chain's second price hike this year.

This round of price hikes, in 12 second-tier markets like Tianjin, Dalian and Chengdu, is different from the one in the beginning of this year, which involved first-tier markets like Beijing and Shanghai as well as the rest of China, Wang Xingrong, head of PR at Starbucks China, told the Global Times Thursday.

"Only five coffee products, including lattes, cappuccinos and mochas, are on the list this time, since these products cost less in second-tier markets than in first-tier markets," Wang said.

The year's first price hike - the first in five years in China - took place in February, affecting drinks like espresso-based beverages, hot chocolate and fresh-brewed coffee and ranging from 1 yuan to 3 yuan, the company said on its official Sina Weibo account in February, a move intended to cope with higher operating costs in China.

However, operating costs such as rents and raw materials have little effect on the second price increase, according to Wang, who noted that the company plans to continue to open new stores around China, aiming to bring the total from more than 700 stores currently to 1,500 by 2015.

The coffee market in China has not been saturated yet, which will continue to provide coffee businesses with a promising and lucrative market, Fan Jie, an industry analyst from Adfaith Management Consulting, told the Global Times Thursday, noting that recently this sector in China keeps increasing by some 15 percent per year in sales volumes.

However, profits have narrowed amid increasing operating costs, Fan said.

Fan also noted that the rapid expansion of Starbucks may cause fierce competition not only with other counterparts like the UK-based Costa Coffee, but also among its own stores.

The continued price increases stirred Chinese consumers to speak out online.

"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," a Sina Weibo user wrote Thursday.

In Zhengzhou, a second-tier market, people usually have to wait in line to get a cup of coffee in the local Starbucks, a local resident surnamed Yi told the Global Times Thursday.

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