Fri, July 30, 2010
Lifestyle > Food & Drink

Asia's most expensive cup of coffee

2010-07-30 10:10:39 GMT2010-07-30 18:10:39 (Beijing Time)  Forbes

(Photo: REUTERS/Cathal McNaughton)

HONG KONG -- Say you're in Beijing and you have 50 yuan, or just over $7, to blow. What can you buy?

A glass of decent Australian or Chilean wine. Four or five pirated DVDs. Bus fare for a commuter--for a month.

Or one cup of coffee.

China's massive capital city tops our list of where you'll find the 20 most expensive cups of coffee in Asia. According to data from consultancy Mercer's annual cost-of-living study, a cup of coffee plus tip from a reputable global brand can run a java-drinker $7.17 in Beijing, population 14 million. Other cities where a cup of joe costs more than five bucks include Hong Kong, Taipei, Seoul, Tokyo and Osaka, Japan, and four more mainland Chinese cities: Guangzhou, Shanghai, Shenyang and Shenzhen.

"These cities are developing," says Marie-Laurence Sepede, a Geneva-based senior researcher at consulting firm Mercer. "In India the prices have definitely increased with the development of its cities; more and more luxurious brands have entered the market. So the prices have been increasing. And you could say the same is true for Manila, Kuala Lumpur and cities in fast-developing countries."

Coffee drinking in China has doubled since 2002, even though per-capita consumption is still relatively low, Commodities Nowreported. As a high-end coffee producer, China hasn't yet reached its full potential, according to the quarterly journal Tea and Coffee Asia, but urbanization and the spread of international chains like Starbucks are sure to help propel the drink's popularity in the world's most populous nation.

In its efforts to estimate the cost-of-living for a well-heeled expatriate, Mercer gathers information about the cost of over 200 items, from apartment rentals to dry cleaning to groceries, in 214 urban centers. Their cost comparisons were made in March 2010, using exchange rates from that period. Prices were then converted to the U.S. dollar for comparison. For this list, Forbes used data from cities in the Asia-Pacific region. Mercer's researchers try to use the same international chains across countries to determine the average price for a cup of coffee.

"There's no correlation to the way of living and the cost of living for locals," Sepede says.

If, for example, there is no Starbucks in a certain location--like Karachi, Pakistan--researchers will take into account the price of a cup of coffee at an upscale hotel, Sepede says. She cautions, however, that much of the price difference between a place like Karachi ($2.24) and Beijing comes from value-added and import taxes.

Further to the North, Japan is another Asian coffee haven. Tokyo was home to the first Starbucks outpost outside of North America, which opened in 2001; in 2006 Starbucks opened its 600th store in Japan. Commodities Nowdeemed Japan the world's third-largest coffee consumer, noting it is home to more than 10,000 coffee shops. Japan is also likely to remain the leading per-capita consumer of coffee products in the region, according to Tea and Coffee Asia.

Little of a cup's cost comes from the price of the actual coffee beans, according to Nestor Osorio, executive director of the International Coffee Organization.

"In New York, you can still find a cup of coffee for $1, $1.50," he says. "In Hong Kong it will be twice or three times that price."

The price of coffee beans has risen recently, Osorio explains, because of a scarcity of high-quality harvests coming out of countries like Colombia and Central America. The supply pressure could be reflected, sooner or later, in the price of a cup of coffee in cafés.

"If prices remain high, then the people from Starbucks will have to pay a little more to the supplier," Osorio says. "That will be transferred to the consumer sooner or later."

Southeast Asia's coffee-growing culture resulted mostly from colonization, when British, Dutch and French settlers introduced the crop to Malaysia, Indonesia and Vietnam, among others. But it's China and India that are seen as the fastest-growing markets for coffee consumption in the region, Tea and Coffee Asia says.

Take India, which has the potential to produce 300,000 tons of coffee a year, while domestic consumption is about 80,000 tons, according to Tea and Coffee Asia. Experts expect the market to grow at a pace of 10% per year. The nation's biggest coffee chain, CaféCoffee Day, has over 400 outlets and competes with Barista Coffee Company (run by Italian coffee company Lavazza), the U.K.'s largest coffee chain Costa Coffee, Coffee World, Gloria Jean's and others.

There's even hope for finding coffee in Karachi, strife-torn Pakistan's largest city. Tea consumption in Pakistan is among the highest in the world, according to a May 2010 report by research firm Euromonitor International, but coffee has growth potential as "consumers develop a taste for the product." Costa Coffee built an outpost there in 2005 and CaféCoffee Day opened a store in Karachi in 2006--the first place outside of India and Vienna it targeted for expansion. Will Starbucks be next--and will higher prices follow?

(Hana R. Alberts, Forbes.com)

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