Amid high inflation and soaring cost of coffee beans, Starbucks hiked its prices again, in a move that might draw complaints from Chinese customers
Starbucks (SBUX: Nasdaq) stores in China have increased the prices of their drinks by CNY 1 (USD 0.158) to CNY 2, a decision that has prompted an outcry from price-sensitive consumers amid a slowing economy.
The company explained that the pricing was based on factors including operation cost, and prices of whole-bean coffee and other merchandise would not change.
This is not the first time for the coffee giant to increase prices, and last October it put a higher price tag on its food. In many places, the prices spiked at a faster rate than inflation.
Meanwhile, its major rivals in China, Luckin Coffee and Tim Hortons, also adjusted their prices.
Luckin said takeaway and pick-up prices rose CNY 5 across several hundred of its stores. Tim, the Canadian coffee chain that entered the Chinese market in 2019, told media it raised prices as well, without specifying by how much.
"We have additional pricing actions planned through the balance of this year," Starbucks's CEO Kevin Johnson said after unveiling the latest quarterly financial report early this month.
Supply shortages emerged worldwide following coffee crop shrinkage due to adverse weather, while demand surged as people craved coffee beans, power and other coffee-flavored products for at-home consumption during the Covid-19 pandemic.
This week, coffee futures in New York reached a 10-year high due to challenging weather and shipping bottlenecks in Brazil, the world's largest coffee producer.
According to the Brazilian Institute of Geography and Statistics, coffee powder prices skyrocketed 56.8% in January 2022 from the same period last year, a faster rate of expansion than all the other consumer products.
Global shipping congestion has kept beans stuck in transit. Exporters generally use containers to ship coffee beans around the world, but with a contraction in global sea freight services, traders struggled with slower vessels, facing frequent loading postponements.
Johnson also pointed out that the increases "play an important role to mitigate cost pressures, including inflation."
But unlike unfazed customers elsewhere who continued to contribute to the company's revenue, same-store sales in China dropped 7% in the fourth quarter of the 2021 fiscal year ending September 30 last year and another 14% in the first quarter of the 2022 fiscal year, which ended January 30.