CCTV, China’s state television, went after Starbucks Corporation (Nasdaq:SBUX) this weekend for price discrimination in the country and it's only the latest example of negative press for foreign brands from official Chinese media.
But should foreign companies be worried for their reputation? Not likely.
Weibo, China’s microblogging platform, has erupted in protest that the media should be going after state-owned enterprises that are responsible for driving up prices in necessities in China instead of coveted foreign brands.
“We have the most expensive real estate in the world, the most expensive cars using gas with the fastest-growing prices, we eat the most unsafe food in the world, we have a medical system that would bankrupt most families in the case of a serious illness, and expensive, slow and disgusting Internet,” the top trending Weibo post on the topic, from user @作业本, said. “All of these you choose not to see, but tell me that a cup of coffee that I drink less than five times a year is the most expensive coffee in the world, how funny!”
The TV program that ran on Sunday said that a tall Starbucks latte in Beijing costs 27 yuan ($4.43), while the same drink costs only 24.25 yuan, 19.98 yuan and 14.6 yuan respectively in London, Chicago and Mumbai. According to the chairman of the Coffee Association of Shanghai, which CCTV quotes, the latte costs less than five yuan to produce, and that Starbucks has a 32 percent profit margin in the China/Asian-Pacific region, the highest in the world as of the second quarter of the 2013 fiscal year.
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Starbucks is of course only the latest international brand Chinese media have attacked. Earlier in the year, Apple Inc. (Nasdaq:AAPL) was accused of faulty customer service in China, while late last year, McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc.'s (NYSE:YUM) KFC were said to have added 18 kinds of antibiotics to their poultry, according to the Shanghai-based First Financial Daily.
Was the Chinese public supposed to greet reports like this with outrage? Perhaps in days past, but not now it seems.
Thanks to Weibo, CCTV’s campaigns against foreign companies are largely unsuccessful nowadays. Well-informed Internet users were quick to point out after Sunday’s news program that these programs are designed to keep the people’s eyes on foreign companies, so that state-owned enterprises which cause a lot of problems in the country are not scrutinized. In other instances, China’s faulty or incomplete regulations are to blame.
Take luxury cars, which in China can cost twice as much as models sold in other markets – the auto segment has to pay a steep 25 percent import tariff, a 17 percent value-added tax and a consumption tax based on the size of a vehicle’s engine.
And unlike Starbucks’ latte many of the costs of state-owned enterprises, like medical care and housing, are necessities.
“I won’t die from not drinking Starbucks, I haven’t drunk Starbucks many times in my life,” wrote Weibo user 战略兵王V. “But can I not use the Internet, a cell phone, not buy a house and not go to the doctor when I’m sick? Which of these is cheaper than outside China?”