[Correspondent Diary] The Arrogance of Starbucks

China Takes Price Control Measures, Uses Starbucks as a Pawn to Warn Against Indirect Price Hikes
Key Points of China's Two Sessions, Consumer Price Inflation Target

[Asia Economy Beijing=Special Correspondent Jo Young-shin] 'Starbucks' arrogance will not last long.'

[Image source=Reuters Yonhap News]

Chinese media Guancha Wang harshly criticized Starbucks in an article with this title, reporting that Starbucks raised coffee prices by 1 to 2 yuan starting from the 16th. In China, the price of a tall (basic) size Americano increased from 25 yuan to 27 yuan (about 5,100 KRW), and the grande (large) size price rose from 28 yuan to 30 yuan.

Guancha Wang reported that Starbucks recently sparked public outrage in China after being caught using expired ingredients. It also pointed out that Starbucks drew criticism from Chinese netizens for chasing away Chinese public security officers who were eating lunchboxes at outdoor stores, placing Starbucks under public scrutiny. Guancha Wang warned that Starbucks only issues formal apologies when problems arise, and such arrogance will reduce consumers' purchasing power. It also cited Starbucks' Q3 (October-December 2021, FY) financial statements, noting that Starbucks' sales in China decreased by 14%.

Other Chinese media outlets are also attacking Starbucks, saying that the company raised prices again just four months after the last increase in October of last year.

The critical articles from Chinese media about Starbucks' price hikes contain complex underlying reasons?namely inflation. Chinese media attribute Starbucks' price increase to a decrease in coffee bean inventory and the resulting rise in international coffee prices. They also analyze that the abnormal operation of global supply chains due to the spread of COVID-19 is another factor. Chinese media recognize that not only coffee but also other processed food prices inevitably have to rise.

In fact, Chinese media Pengpai recently reported that three coffee brands as well as some fast-food brands like McDonald's and KFC have raised prices. They explained that rising material and logistics costs have pushed consumer prices up since the end of last year.

Li Wei, a professor at Nanjing Agricultural University in China, told the state-run Global Times, "Due to complex reasons such as the global pandemic, international raw material prices for coffee and dairy products will not fall for the time being."

On the 19th, the National Development and Reform Commission (NDRC) of China jointly announced support measures for the service industry with 14 other departments. The NDRC is the department overseeing China's economic planning. The NDRC introduced measures to minimize factors causing price increases in the service industry, such as support for COVID-19 nucleic acid testing and quarantine costs, encouraging platform companies to reduce delivery fees in high-risk COVID-19 areas, expanding credit loans for small and medium-sized enterprises (including self-employed), and rent support. This reflects an intention to control price increases through various support measures, in other words, to manage cost inflation. The attacks on Starbucks by Chinese media are interpreted as a kind of warning to foreign companies doing business in China.

If prices rise, the Chinese government's economic revitalization policy of injecting money to stimulate the economy will inevitably fail. The Chinese government will hold the Two Sessions (National People's Congress and Chinese People's Political Consultative Conference) on the 4th of next month. This is why there is more interest in the consumer price inflation target than in this year's economic growth target set by the Chinese government. Last year, the Chinese government's target was around 3%.

This content was produced with the assistance of AI translation services.