Starbucks Raises Prices in China Amid Rising Costs, Slowing Sales

Starbucks Raises Prices in China Amid Rising Costs, Slowing Sales

What’s new: Starbucks plans to raise the prices of its coffee drinks and snacks in China by 1–2 yuan ($0.16–0.32) following similar hikes at its U.S. stores.

The coffee chain told Caixin that its pricing is based factors including operating costs. Packaged coffee beans and merchandise products such as coffee mugs are not included in the price increases.

Starbucks boosted prices in the U.S. in October and again last month. The company plans to increase prices several times in 2022, citing inflation, supply chain disruptions and rising labor costs, Starbucks said earlier this month.

Like many restaurants and retailers, Starbucks has had to pay more to retain workers during the pandemic. In the first fiscal quarter of 2022, the company spent 25% more on employee compensation and benefits than a year earlier.

The background: Higher costs have weighed on Starbucks’ profits, leading the company to miss quarterly earnings estimates and cut its earnings outlook for fiscal 2022.

The coffee giant reported fiscal first-quarter net income of $815.9 million, or 69 cents a share, up from $622.2 million, or 53 cents a share, a year earlier. China’s same-store sales fell 14% in the quarter as authorities imposed travel restrictions on some areas.

Starbucks is facing increasing competition from local rivals. As of January, Starbucks has 5,557 stores in China, about 500 fewer than local brand Luckin Coffee. A series of new tea drink brands, such as Nayuki and Xicha, are also diverting customers from Starbucks.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)

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