The Starbucks Latte Cost Breakdown
China is a huge market for many western companies like Starbucks. But, consumers there are starting complain about higher prices, sometimes double for the same item outside of China. The profit margin for a large Starbucks latte is 21% in the USA, while the same item in China it is 32%. The same item in Europe only reaps a 2% profit, why?
Starbucks only will say that prices vary by market because of the different costs for labor, commodities, rent or real estate and infrastructure investment (the building coffeehouse). In China, marketing showed that Chinese prefer bigger stores increasing real estate and infrastructure costs.
So, your typical Starbucks grand latter in China sells for $4.80. That amount is crazy for a latter consisting primarily of milk and coffee, and at least when I have one, I wonder just how much coffee and caffeine am I getting for that. For that price, you can easily by several pounds of coffee!
The price breakdown is roughly:
- $1.25 for rent
- $1.08 for profit
- .72 cents for store operating expenses
- .64 cents for raw material (cup\coffee\milk)
- .41 cents for labor\wages
- .24 cents for taxes
- .17 cents for equipment costs
- .28 cents for administration
Still, despite the paying more the same items in China, Chinese seem willing to pay the extra, just as most do elsewhere in the world for Starbucks.