Why Starbucks In China Is So Expensive

“The Chinese people, they know nothing about coffee, all they know is that they look rich drinking it,” a Taiwanese owner of a small cafe in Jiangsu Taizhou once told me.

This sentiment was echoed later on when I asked a Chinese girl hanging out in Starbucks why she thinks this cafe chain has become so popular in her country: “People come here,” she began, “because it is expensive and lux . .. lux . . .”

“Luxury?” I helped out.

“Yes, luxury,” she continued.

CCTV, China’s national television network, recently launched another of its propaganda campaigns against yet another foreign brand that has become hugely popular in China: Starbucks. The report intended to spark something that has been dubbed the “Starbucks Pricing Controversy,” and compared the price of a latte at Starbucks in China with those in other countries around the world.

From Wiebo:

“An insider exposed that the cost of materials for every cup of latte is less than 4 yuan, while the sale price in China reaches as high as many tens of yuan!”

“The Price of a 354ml Medium Cup Latte — At a Starbucks in Beijing, the selling price for a 354ml cafe latte: 27 yuan RMB; at a Starbucks in London, UK, the selling price for a 354ml cafe latte: 24.25 yuan RMB; at a Starbucks in Chicago, USA, the selling price for a 354ml cafe latte: 19.98 yuan RMB; at a Starbucks in Mumbai, India, the selling price for a 354ml cafe latte: 14.6 yuan RMB.”

The report, basically, was true: Starbucks in China is more expensive than pretty much anywhere else in the world. But it completely missed the point:

In China, Starbucks, and many other cafe chains like them, don’t just sling caffeinated beverages, they provide a luxury service for middle and upper class consumers; they sell class consciousness, status. The fact that they are expensive is one of their biggest selling points.

There is a large sect of Chinese society that is ready and willing to pay for price tags. There is a value of status here that extends far beyond the goods and services being purchased, whether it be expensive gymnastics classes for children or dropping thousands of dollars for a license plate with an auspicious arrangement of numbers on it.

“There’s also the possibility that the high prices may give the coffee shop more cachet by making it seem like a venue for more affluent customers,” Jing Daily reported.

If people in China want cheap coffee and tea they can go to a 90°, Take Away Cafe, or one of the hundreds of other working/ student class cafes that pack cities throughout the country. When people go to Starbucks they are looking for something else other than fancy, internationalized drinks.

It is a well known fact that Starbucks is expensive, and this isn’t a commercially inhibiting factor, it’s one of the chain’s best marketing strategies. Starbucks doesn’t just sell coffee in China, they sell status. It’s the same rule for just about every other company marketing its good and services towards China’s moneyed classes: luxury items in China are far more expensive than in the West for no other reason than the fact that this country has a rather large, new rich consumer class which desires the status symbols to separate themselves from the masses.

The people inside a Chinese Starbucks are the haves: they have the money, they have the power to be there. Getting a double mocha latte whatever here is a symbol of something far greater than a drink.

As Felix Gervais wrote at Why Customer Service in China is Different Than You May Expect:

It might sound paradoxical, but it’s because most rich-class goods and services are not about the intrinsic value, but about the experience and the image. Rich folks don’t care about how soft the fabric of their $450 Italian designer shirt is, or the improved drivability of their luxury car, or in the aforementioned case, the quality of the concert. They care about how awesome they will look, and the relationships with other rich people they can foster through buying all that.

From a Weibo user quoted by Tea Leaf Nation:

“If you buy the goods it means that you have the ability and will to pay the price, and you think that the price for Starbucks coffee is right.”

As put by Beijing Cream:

You shouldn’t play the lute for a cow, nor should you speak common sense to it. CCTV, every few months, will unfurl one of these “investigations” to remind its reviewers that we live in a world of haves and have-nots. Yes, Starbucks coffee is expensive. Yes, so are Apple products (CCTV went after Apple in March, even eliciting an apology). And what of it? It’s market economics, the same calculated, cold type that Deng Xiaoping enacted and that businessmen and politicians have been exploiting for decades to make themselves wealthy. But heavens forbid CCTV try to talk — or tweet — about that.

So it’s now official, confirmed by China’s state sponsored media: Starbucks is a place for rich yuppies with money to waste, which is exactly what so many people in this country are striving to be. What the CCTV attack on Starbucks successfully accomplished was cementing the chain’s reputation as an elite luxury establishment that not every plebeian can afford: exactly.