starbucksforbidden.jpgStarbucks has chosen to close its controversial coffee shop in Beijing's Forbidden City. Authorities told Starbucks that its only option to continue trading there was to relinquish control and share space in a new store that would be managed by the Forbidden City.

That would also mean competing for consumers' attentions with other companies' products, which the Seattle-based chain decided was unacceptable.

Starbucks has more than 250 stores in China but this particular store has attracted more than its fair share of controversy . The Forbidden City management was accused of cultural insensitivity for allowing this potent symbol of western capitalism in such a high-profile location.

Starbucks opened in the Forbidden City in 2000 at the invitation of palace managers, who needed to raise money to maintain the 178-acre complex of villas and gardens.

But it attracted criticism from the outset and Starbucks had to disguise the store by removing its exterior sign. That failed to satisfy the critics and a Chinese TV journalist led an online protest claiming that the coffee shop undermined the solemnity of the Forbidden City.

Starbucks closed the 200-square-foot outlet on Friday after Forbidden City managers decided they wanted all shops on its grounds to operate under the palace's brand name.

It is tempting to read a lot into this incident but Starbucks has plenty of other stores in Beijing for those who must drink flavoured cappuccinos and the financial impact is likely to be minimal. More importantly, by choosing to close the store, Starbucks neutralises a boycott that threatened to undermine the years of work that Starbucks has spent building up its brand in China.

China has been the source of many challenges for Starbucks. It recently took control of the JV that previously operated its Beijing stores and it has suffered heavily from plagiarism by home-grown coffee stores that copy its distinctive signage and branding. See this EngagingChina story for more.

Time's China Blog has more on the story.

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