Starbucks’ Grand Deal in Emerging Markets

Note: Starbucks is one of the cheapest coffee shop options that you can find in China. Other Chinese-run places charge at least 10 percent more, the decent ones of course; I’ve tried many (I find it interesting tbh) so I know what I’m talkin’ about. Coffee is a luxury item in China, and the surge in Starbucks branches all over the country is a strikingly brazen attempt to buy market share, and the same applies with other international chains like Costa Coffee etc…

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Let me tell you what Starbucks are up to in China, coz it affects me, being the coffee lover/addict that I am. Well Starbucks just raised their prices all over China!! And the price hike favors nobody, from Esspressoz to Macchiattosas and Cappuccinones, Lattess; every drink you order is 1 Kuai more. That’s 1 over 6.5 Dollars more, not much, right? Yes, and imagine how many more such a price hike could make in profits, given the volume of sales they make there..

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Post-Hike Drinks List at Starbucks

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Post-Hike Drinks List at Starbucks

I’ll say a word or two about the coffee industry in China, keep it simple. Chinese people drink tea, or “Cha” as they call it. It’s already in the culture, the history, it’s part of Chinese heritage. And by the way, China makes so much export money off of countries, especially in the West, where tea is not an area of particular expertise, and so Chinese exports to the West are usually not the best quality tea leaves packaged and sold at the highest prices to us stupid foreigners, while they keep the good stuff for local consumption. At least, this is the opinion of my Chinese elective teacher who taught us foreigners a course about Tea in Chinese History, and her claim is reenforced by the views the local Tea vendor expressed to me personally in his tea shop just outside the compound I live in. Every time I drink tea I think China, especially (haha) when I’m in China where I learned to drink cheap tea multiple times eeryday.. you get the point.

During weekdays, staying indoors tends to be quite boring, especially when you have lots of work and studying to do. I ended up discovering a Starbucks coffee shop literally 5 mins away if you have a e-bike, as I do, in a hidden street that was only recently constructed to foster new buildings catering for foreign companies opening newly in Hangzhou. I got to find that Starbucks branch after using Baidu Maps, coz Apple Maps on my iphone would not reveal it. How lucky!! Lucky because that’s where I started studying every single weekday, and also a way to get my doze of coffee.

Remarkably, Starbucks in China tastes exactly like Starbucks in my country or the US, EXACTLY, and I’m used to it (not saying it’s the best coffee, not at all, but I favor routine in some aspects of life, some habits die hard).

Will I stop going to Starbucks every day? Will the Chinese people reject the price hike? No, no, no, most of us, myself included, will resume life as usual. And Starbucks’ll win, especially in a China with a rising middle class and new generations with more money to spend that they previously would not have had. Starbucks, perfectly in parallel with its policy and vision to make itself more of a luxury brand (finding a niche and its own customer base in a more competitive world), has found it really easy to execute this plan immediately. And it won’t be the last price hike, we’ll see more of that coming.

OK I took these pics immediately after the price hike, on the same day the prices changed. I was there a couple of days earlier, and I have the receipts given that I had the loyalty app, which saves my history.

Previously, meaning two days ago, Cappuccinos are charged as following: 27 for Tall, 30 for Grande, and 33 for Venti sized cups. Now the new prices include a 1 Kuai increase for all sizes, as follows: 28, 31, and 34 respectively. Similarly a shot of espresso costs 16 Kuai instead of 15 Kuai.

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In China, Coffee is a Foreign idea, it’s foreign to their culture, it’s new and Western and trendy and weird. But I can say this, people who have money to spend, with the presence of enough marketing budgets, will, as people have proved, learn new habits and ascribe to different lifestyle models. Starbucks’ annual growth numbers do not reflect growth in New York City nor Paris nor Milan; actually, it’s all happening in the East, and China is a prime example.

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You Can Call Me John Doe

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