Starbucks China said earlier in the week that the prices in China reflected local conditions. The company provided a breakdown of costs, claiming the higher real estate and raw material costs drive up the bottom line.
Take a Grande sized latte for example. It is sold at 28 yuan in Starbucks China. As per Starbucks, the operating cost, including spend on electricity, water, and advertisement take up over one-third of the total price.
The second major cost is the rent, which takes up 20% per cup of a Latte. Raw materials including the combined prices of milk, coffee beans, and paper mugs account for over 14%, which is equal to the combined costs of equipment, administration, and tax.
Labor cost takes up around 8%, which is slightly lower than the profit, which is over 9% of the total price.