Why is Starbucks Coffee so Expensive?
A study was recently conducted whereby the cost of a cup of Starbucks coffee was measured across eight major tourist destinations across the world. Interestingly, but perhaps unsurprisingly, the cost per cup of coffee varies region by region. What however is surprising, is that the price difference between the cheapest cup of a tall cappuccino during this study was found to be as high as 92.38%! ($6.06 – $3.15 = $2.91). Of the eight cities compared, New York City came out cheapest at $3.15 for a tall cappuccino, and Berlin most expensive at $6.06 for the same drink. (Business Insider. 2016)1
I suppose one of the major values factored into the price of this tall cappuccino is that, regardless of where you are in the world, you can be confident that when you order a tall cappuccino in Berlin, Brussels, or Birmingham, you will be served a perfectly comparable cup of coffee.
This is made possible due to the company’s enterprising efforts to establish a hallmark standard with their training schemes through the ‘Starbucks University’, a now City & Guilds recognised apprenticeship scheme (level 2 – 6). It could be suggested that through endeavours such as their training programmes, Starbucks has completely transformed the coffee consumption experience, creating an accredited craft for more than 14,000 employees across the UK, and 182,000 worldwide (StaticBrain.com. 2017)2, enabling the company to successfully introduce an option rich menu, featuring seventeen categories. (https://www.starbucks.co.uk/menu)
This becomes all the more valuable to its customer base when you realise the depth of dietary requirements and taste preferences that Starbucks caters to. Here, a map produced by Quartz Media shows what people order at Starbucks around the United States http://time.com/2946311/these-are-the-most-popular-starbucks-drinks-across-the-u-s/ (Quartz Media. 2014)3
Walk into almost any Starbucks store worldwide and you will begin to notice a number of recurring sights. Readers, writers, student study groups, you might even see an interview or two! We are somewhat spoiled for choice when it comes to getting a daily coffee fix, and there are many much cheaper alternatives available. However, Starbucks, in keeping with its vision, has become somewhat of a community hub (or are we all just drawn to the free wifi?)
Is this premium justified? Its loyalty scheme seems to suggest so.
“Starbucks has more customer money on cards than many banks have in deposits” (MarketWatch. June 2016)4. A recent review revealed that, at the time of writing the article, Starbucks Corp had more than $1.2 billion loaded onto Starbucks cards and Starbucks mobile apps (first quarter of 2016), more than a number of regional US banks and financial institutions. And despite a number of ill-received changes to the loyalty card scheme, this number is only seeming to get bigger.
So, why is Starbucks so expensive?
Starbucks is selling more than just a product, it is a brand with a very strong identity. So strong in fact, that a marketing decision was made to remove the words “Starbucks Coffee” from its logo, January 2011. (Starbucks cuts name and “coffee” from logo. Reuters, 2011)5.
It is selling a vision “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” A vision that is bought into by more than 12 million loyalty scheme members (as of Q1 2016. UK.BusinessInsider. 2016)6.
Perhaps, also, Starbucks simply has to pass its accountancy and legal bills onto us, its sympathising consumers, as they forever battle their way out of and around paying their fair share of tax. 7,8
– Seth Wilkinson.
Bibliography:
1) Business Insider. 2016. How much a cup of Starbucks coffee costs around the world – Business Insider. [ONLINE] Available at: http://uk.businessinsider.com/cost-starbucks-coffee-around-the-world-2016-11?r=US&IR=T. [Accessed 18 October 2017].
Mail Online. 2017. he price of a Starbucks latte in 30 countries revealed | Daily Mail Online. [ONLINE] Available at: http://www.dailymail.co.uk/travel/travel_news/article-3473320/How-pay-caffeine-fix-holiday-price-Starbucks-latte-30-countries-revealed-ll-need-deep-pockets-Zurich.html. [Accessed 18 October 2017].
4) Tonya Garcia. 2016. Starbucks has more customer money on cards than many banks have in deposits – MarketWatch. [ONLINE] Available at: http://www.marketwatch.com/story/starbucks-has-more-customer-money-on-cards-than-many-banks-have-in-deposits-2016-06-09. [Accessed 18 October 2017].
5) Starbucks cuts name and “coffee” from logo (January 6, 2011)
6) Business Insider. 2016. Starbucks’ loyalty program now holds more money than some banks – Business Insider. [ONLINE] Available at: http://uk.businessinsider.com/starbucks-loyalty-program-now-holds-more-money-than-some-banks-2016-6. [Accessed 18 October 2017].
3) Time. 2017. Map: Most Popular Starbucks Coffee Drink Orders In U.S. Cities | Time.com. [ONLINE] Available at: http://time.com/2946311/these-are-the-most-popular-starbucks-drinks-across-the-u-s/. [Accessed 18 October 2017]
2) Statistic Brain. 2017. Starbucks Company Statistics – Statistic Brain. [ONLINE] Available at: http://www.statisticbrain.com/starbucks-company-statistics/. [Accessed 18 October 2017].
7) U.K.. 2012. Special Report: How Starbucks avoids UK taxes | Reuters. [ONLINE] Available at: http://uk.reuters.com/article/us-britain-starbucks-tax/special-report-how-starbucks-avoids-uk-taxes-idUKBRE89E0EX20121015. [Accessed 18 October 2017].
8) Financial Times. 2017. Starbucks’ European unit pays $15m UK tax. [ONLINE] Available at: https://www.ft.com/content/5222fd14-3d3b-11e6-9f2c-36b487ebd80a?mhq5j=e5. [Accessed 18 October 2017].
Seth