Apple and Starbucks in Chongqing, China: Price-Sensitive Inland Consumers (2)
April 16, 2015
Akira Kondo
 Starbucks at Hongya Cave. Its logo along with SUBWAY is on the traditional Chinese building.
Starbucks in Chongqing
While I have been interested in Chinese consumers at Starbucks stores in inland, I was able to visit several stores in Chongqing during my second trip to China this year. It is quite interesting to explore Starbucks stores in different cities, especially in inland. Chongqing, not belonging to any province, is widespread and there are several downtown areas across this municipality. With its long history and tradition thanks to Chiang Kai-shek, a former Chinese leader of the Republic of China and later the leader of the Kuomintang, famously known as KMT in most history books, Starbucks nicely offers modernity to the traditional as well as historical city of Chongqing. Despite three Apple Stores available in Chongqing, a number of Starbucks stores in the city are not significant. As of end of March 2015, there are only 12 Starbucks stores available in this municipality, far less than Hunan province’s 21 stores. It is counterintuitive that Chongqing, about 15 percent wealthier than Hunan Province overall, offers less Starbucks stores. However, Hunan province is twice populous than Chongqing. Therefore, it is pretty much understandable if we just compare between these regions by the population size. 
Basic Facts: Shanghai, Chongqing, Hunan Province | Sources: Apple Inc., Deutsche Bank Research, Starbucks, National Bureau of Statistics of China
After simply observing several Starbucks stores in downtown Chongqing, Starbucks is not as popular as in the other cities, such as Changsha as well as global cities, like Shanghai and Beijing. When I visited one of Starbucks stores in Changsha a few months ago, the store was fully crowded even in the late evening (Please visit: “Starbucks in Changsha, China: Growing Upper Middle-Income Consumers”). While Changsha is located about a half way between Shanghai and Chongqing, it is not easy to conclude that far western inland cities yield less coffee consumption. However, it seems it is one of the reasons though. Chongqing is not as global as historical Beijing and less-global historical Chongqing consumers are somewhat resilient to western coffee. Tea culture may yield much, much, higher.
Although Chongqing’s income level is 15 percent higher than that in Hunan province, it is still reasonably considerable that Starbucks’, for instance, a 30RMB Tall Caramel Macchiato, is still costly for local consumers. Food-oriented Chongqing people would prefer consuming much cheaper multiple snacks at food stands available everywhere in the city. This city is home of famously known Suan La Fen (酸辣粉: hot sour sweet potato noodles) and Dan Dan Mian (担担面: spicy noodles). These noodles are Chongqing people’s all time favorites and you will definitely see them and smell them while walking down a street anywhere in the neighborhood. At food stands, where available again everywhere even in downtown, those noodles are selling at just 5RMB and above, no more than 10RMB unless you get into a tourist area, such as Hongya Cave. 
(L) Suan La Fen and Dan Dan Mian are Chongqing people' all time favorites. Both of them are reasonable at 5-6RMB, or about US$1 each. (R) A man is making Suan La noodles, which are originally made from potatoes.
In addition, Chinese people love eating Xiaochi (小吃), small snacks, and of course Chongqing people are indifferent. In Chongqing, such snacks are available everywhere. An each snack costs about 2RMB and above. For instance, one steamed corn costs 3RMB while the most popular spicy octopus legs BBQ stick cost 3.5RMB. With these tasty and reasonable food available everywhere in their minds, Chongqing consumers are willing spend for such snacks and noodles, rather than pulling 30RMB out of their wallets for one cup of drink.
(L) A food stand sells a variety of Xiaochi, small snacks. A steamed corn costs 3RMB or 50 cents. (C) Many kinds of Xiaochi are available but most of them are very spicy. (R) Ladies are eating Xiaochi outside. It seems tastes yield greater than modernity.
Xiaochi does not offer modernity as people eat in outside while walking. On the other hand, the Chinese tend to feel modernity when holding a Starbucks cup in hand. That modernity experience is probably not in favor yet in Chongqing compared to the other big cities China. However, without such modernity, I still see numerous traffics in each Starbucks store in the city. In overall China, upper middle-income consumers are growing despite the continuing slowdown of the nationwide economy. These consumers, who are getting out of a middle-income trap, they are the next ones to become Starbucks’ returning customers while holding a new iPhone 6 Plus in hand. |
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