CCTV criticism of Starbucks backfires

A special report on the price of Starbucks coffee in China, which was broadcasted by China Central Television (CCTV) on Sunday, has provoked sharp online criticism for its bias and for failing to take into account even basic financial knowledge.

The report said that Starbucks coffee is more expensive in China than in London, Chicago or Mumbai, and the company's margins are higher in China than in Europe and the US.

Chen Guo, an IBM executive, said on his micro-blog that gross profit is not only determined by price, but also by other factors such as the cost of labor.

Ma Guangyuan, a business commentator, said that the pricing policy of a business in a highly competitive industry is complicated. It is not appropriate to judge it simply by cost to the consumer.

Ordinary micro-blog users also expressed discontent over the CCTV report.

A micro-blogger named Qian'erya said, "Starbucks is innocent! Even if it sells the coffee at 100 yuan, it's a business practice. Those who buy it are willing to pay the price and those who dislike it can just ignore it. Is there monopoly or compulsion? Meanwhile, problems concerning state-owned petroleum producers, hospitals, medicines, real estates, highway tolls and airport taxes have been conveniently overlooked once again!"

Another micro-blogger, named Gaowei 89, said, "Is it necessary to criticize a foreign brand like that? It seems to be a routine. Chinese brands have more problems. Why not treat them equally?"

In response to the CCTV report, Starbucks China issued a statement on Monday, saying that its pricing was based on many variables, including raw materials and equipment costs and employee welfare.

In an interview with Reuters, John Culver, president of Starbucks' China and Asia Pacific region, said that the company's margins in China are not higher than in the US, because food costs and investment in areas such as employee training and ensuring food safety are higher in China.

Starbucks has to rent larger spaces for its coffee shops in China, because many Chinese customers tend to linger, while 80 percent of US customers take their orders to go, Culver said.

Starbucks Corp. is the largest coffeehouse company in the world. In 2014, China is expected to overtake Canada as Starbucks' second largest market, after the US.