Chinese Want Their Starbucks, No Matter the Price

Chinese coffee lovers are now having to shell out even more of their hard-earned yuan for a drink at Starbucks (NASDAQ:SBUX). On January 31, the coffee giant raised prices on some products in its Chinese stores — prices that were already prohibitive for the average Chinese consumer, according to a report in China Daily.

Citing increasing operating costs, the world’s biggest coffee chain has priced its products in China almost the same as in U.S. stores, if not higher. Now a 16-ounce “grande” latte costs 30 yuan ($4.75), up from 28 yuan, the report said. And in a country whose per capita gross domestic product last year was only $5,184, that’s not just a hill of beans.

And yet, Starbucks is so popular in China that the company opened its 500th store in the country in October and plans to open three times that number by 2015. It has even announced plans to enter less metropolitan areas, such as Langfang in Hebei province, where the annual per-capita GDP is only slightly more than $3,000, according to the report.

So, why is this traditionally tea-drinking society so crazy about an expensive American coffee chain? Experts say a lot of has to do with prestige.

According to Zou Deqiang, a professor and consumer behavior scholar at Fudan University, Chinese consumers will pay “unreasonable” prices for a nontraditional beverage because they are buying more than just coffee.”

“In China, Starbucks is not just coffee anymore. It represents a Western lifestyle,” he said. “Some people in China want to live like people live in the developed countries so, to some extent, drinking a cup of coffee that people in the US drink helps them fulfill that dream.”

To contact the reporter on this story: Gina Smith at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com