Starbucks the Latest Target of Food Pricing, Safety Concerns in China

Retail

Published: October 21, 2013 6:37 am

Starbucks Corp. (NASDAQ: SBUX) is the latest global brand to be targeted by China Central Television (CCTV). The world’s largest coffee chain has pricing that is unfair and discriminatory in China, according to CCTV.

In a survey reported on Sunday, CCTV found a medium-sized cup of latte was priced at 27 yuan ($4.40) in China, compared to 2.5 pounds ($4.00) in London and $3.26 in Chicago. CCTV claimed that Starbucks can charge higher prices in China because of the “blind faith of local consumers in Starbucks and other Western brands.”

Starbucks fired back in a statement that its pricing is based on local market costs, such as labor and commodity costs, infrastructure investment, currency and real estate. After the United States, China will be the company’s second largest market in 2014.

Chinese Premier Li Keqiang has pledged to protect consumers and to crack down on food safety in the country. This eventually could prove to be a hurdle for other U.S. food retailers as well.

In July, Danone and Nestle cut prices of baby formula products in China by as much as 20%, following accusations of price-fixing. And when CCTV reported that a KFC supplier provided chicken meat with higher than standard levels of antibiotics, Yum! Brands Inc. (NYSE: YUM) apologized in January.

And it is not just food. After Apple Inc. (NASDAQ: AAPL) received criticism from government-backed news outlets, CEO Tim Cook apologized in April for iPhone warranty and repair policies in the People’s Republic.

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