Coffee shops in China raising prices amid jump in costs

BEIJING: Several coffee brands in China have raised prices recently, and market watchers have predicted that prices are likely to continue rising, given the upward pressure on raw material costs.

On Wednesday, without any official announcement, consumers found that Starbucks had increased the prices of various drinks by 1 yuan ($0.16) to 2 yuan. Starbucks (China) acknowledged the rise, and explained that it was based on a comprehensive consideration of various factors such as operating costs.

Luckin Coffee also raised prices. Media reports said that from December last year, prices in hundreds of stores have increased by about 3 yuan, with the increase blamed on operating costs such as rent, manpower and raw materials.

Canadian coffee brand Tims, which entered the Chinese market in February 2019, also raised its prices. Tims customer service said that it did raise the price of a small number of products, which was a decision made after comprehensive consideration of the current operating conditions.

The price of coffee beans, the main raw material for coffee, has risen sharply over the past year. The price of high-quality Arabica beans has more than doubled in the past year due to dry weather in top producer Brazil, reduced production in Vietnam, weak supply chains and soaring freight costs.

In addition to raw materials, high labor costs are also an important factor. Starbucks CEO Kevin Johnson recently stated that under the influence of the epidemic, there has been a “staff gap” in some stores.

In order to retain staff, Starbucks China announced in October 2021 that all full-time store employees will enjoy 14 months of salary for the first time, covering nearly 40,000 people. In addition, Starbucks China has also upgraded employee welfare, which also increased the company’s business costs.

On February 1, Starbucks disclosed its financial results for the first quarter of fiscal 2022, showing that its revenue rose 19 per cent to $8.05 billion, and its net profit was $816 million, up from $622 million in the same period last year.