SHANGHAI: Starbucks Corp has been charging customers in China higher prices than other markets, helping the company realise thick profit margins, a report by the official China Central Television (CCTV) said.
The world's largest coffee chain is the latest foreign company to come under fire from official Chinese media, which has targeted other prominent foreign names like Apple Inc , and comes amid a pricing crackdown by regulators.
The report by CCTV, aired on Sunday, said a medium-size latte at the American coffee house in Beijing costs 27 yuan (RM14), or one-third more than at a Chicago store in the United States.
"Starbucks has been able to enjoy high prices in China, mainly because of the blind faith of local consumers in Starbucks and other Western brands," Wang Zhendong, director of the Coffee Association of Shanghai, told CCTV.
The report echoed a separate critique by the official China Daily newspaper published last week.
Starbucks' pricing strategy in China, which the company estimates will be its second-biggest market after the US by next year, is tied to local business costs such as labour and commodity costs, infrastructure investment, currency and real estate, the company said in a statement.
"Each Starbucks market is unique and has different operating costs, so it would be inaccurate to draw conclusions about one market based on the prices in a different market," the company said.
Imported products often cost more in China because of high import duties and tax rates. Roasted coffee beans, for example, draw an import duty of 15 per cent and a sales tax of an additional 17 per cent, according to DutyCalculator.com.
China has been cracking down on pricing in markets ranging from milk powder to drugs, with the high premiums enjoyed by imported goods attracting much of the ire from local watchdog groups and media.
Retail sales of coffee in China grew more than 90 per cent between 2007 and 2012, hitting seven billion yuan last year, according to data from Euromonitor.
The rise of China's cafe culture helped the China-Asia Pacific region top the sales growth table for Starbucks in 2012, and has prompted the company to consider opening 600 new outlets in the region this year, targeting 1,500 stores in China alone by 2015.
Starbucks had a profit margin of 32 per cent in China-Asia Pacific in its second quarter, compared to 21 per cent in the Americas and two per cent in Europe, Middle East and Africa, said the CCTV report. Reuters