Price hikes brewing for Starbucks drinkers

BEIJING - Starbucks Corp raised the prices of some of its products in China effective Tuesday to offset higher costs, the coffee chain's first price hike in five years.

The increases, ranging from 1 yuan (16 US cents) to 3 yuan, will mainly affect drinks such as espresso-based beverages, fresh-brewed coffee and hot chocolate, the company said on its official micro blog at sina.com.

Seattle-based Starbucks said the decision reflected higher operating costs.

"The last Starbucks price adjustment in China was in 2007," said Li Jing, public relations manager of Starbucks China.

In early January, Starbucks started charging more for certain beverages in the Northeast and Sunbelt regions of the US, citing increased competition and higher ingredient costs.

Commodity prices, especially for agricultural commodities, surged to multi-year highs in 2010. Raw sugar futures were at a 30-year high, while the price of arabica beans touched a 14-year high in New York in May as heavy rain caused by the La Nina weather system cut output in Colombia, the world's second-largest producer of the variety, according to Bloomberg.

"The price increase is acceptable as prices of everything here are surging," said a customer at a Starbucks store in Beijing. "But I hope drinking coffee will not become a luxury lifestyle in China."

UK-based Costa Coffee, a subsidiary of Whitbread PLC and a major rival of Starbucks, has more than 160 cafes in China and has vowed to expand quickly in the country.

"The company has no plans to raise prices in the near future," said Su Bo, marking manager of Costa Coffee in Beijing.

Chinese coffee rivals such as UBC Coffee, which has about 500 stores nationwide, said their prices wouldn't change in the near future.

Another competitor, Sculpting In Time Cafe, which has 18 cafes in the country, said it would soon introduce a new menu and adjust some prices.

Last month, McDonald's Corp increased the prices of some of its menu items in China by 0.50 to 2 yuan, which the US fast-food giant attributed to rising costs of property and materials.

Starbucks operates more than 500 cafes in nearly 50 Chinese cities. It aims to triple its mainland outlets to 1,500 by 2015.

China Daily

(China Daily 02/01/2012 page15)