Starbucks Corporation (NASDAQ:SBUX) is facing irate internet users in China after announcing price hikes.
What Happened: On Thursday (Beijing Time), the People’s Daily reported that Starbucks price hikes dominated Weibo — a social media platform akin to Twitter.
Starbucks price increases in China spanned RMB 1 to 2, generally. For a large cup of American-style iced black coffee, customers will now have to shell two extra renminbis.
Netizens decried the price hike in what has become Starbucks’ fastest-growing and largest overseas market, as per People’s Daily — the official newspaper of the Central Committee of the Chinese Communist Party.
An online commentator reportedly said that though the price increase was not steep, they are “extremely resistant.”
Zhu Danpeng, a food industry analyst, said though Starbucks' price increase has a certain degree of rigid demand, the company’s overall gross profit margin is relatively high.
Zhu said Starbucks could have absorbed the cost pressure but the company wants to use brand effect and scale effect to drive profit margins and support its stock price, as per a machine-translated version of the People’s Daily report.
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Why It Matters: Online rage against Starbucks was fueled earlier in the week after staff at a store in Chongqing asked local police to refrain from eating lunch outside the store.
A staff member told police personnel, who were eating boxed lunch outside the Ciqikou store in Chongqing, to eat elsewhere because it was not good for the company’s brand image, reported Shine, a digital media portal associated with the Shanghai Daily.
Chinese Netizens left angry comments on social media on the way the police officers were treated by the Starbucks staff.
On Monday, Starbucks issued an official apology on its Weibo account and gave its account of what had transpired.
Starbucks said a misunderstanding occurred while coordinating seats and apologized for it. The company added there was no case of driving away the police or complaining about the police as was reported on the internet.
Price Action: On Wednesday, Starbucks shares closed 0.7% higher at $95.18 in the regular session.
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