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Starbucks responds to reports of over-pricing

Updated: 2013-10-22 15:08

A China Central Television report said Starbucks coffee and mugs were more expensive in China than in London, Chicago and Mumbai. A cup of 354 milliliters of Latte coffee costs 27 yuan ($4.4) in China as compared to only 19.98 yuan in Chicago, 14.6 yuan in Mumbai and 24.25 yuan in London, the report said.

The coffee chain's second quarter financial report shows the Asia-Pacific region provides the biggest profit margin - a whopping 32 percent compared to 21 percent in Americas, and less than 2 percent in Europe, the Middle East and Africa.

In a written statement, Starbucks says the regional disparity is due to a larger number of franchised stores vs directly operated ones in China. And costs in those franchised Starbucks are not shown in the company's financial results.

"I'm sorry. We do not have the statistics. We don't provide market-specific numbers." Wang Xingrong, Communication Director of Starbucks China said.

In the telephone interview, the company also said its pricing is based on a number of factors such as cost of labor, equipment, rent and custom duties, in addition to its cost of raw material. All these factors together contribute to the differences in pricing across regions.

We have to look at all the variables, but I can't help you compare every one of them." Wang Xingrong said.

Starbucks currently has about one thousand shops in China, and the Asian country is on its way to replace Canada as the coffee giant's second largest market.

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Starbucks responds to reports of over-pricing