Why is Starbucks so expensive? (Not just salary..)
In 2021, the production of Arabica coffee in Brazil, the world’s largest supplier of coffee beans, is about 40% lower than the previous year. The reduced production is the result of drought in some areas and a frost in July.
Naturally, the global shortage of coffee beans also has a knock-on effect on global coffee prices, and Starbucks is no exception. But even before the supply chain crisis, Starbucks coffee prices had been rising.
So why is Starbucks so expensive? 6 Reasons Starbucks Is So Expensive – The Answers Might Surprise You!
Why is Starbucks so expensive?
Starbucks’ high prices are the result of a combination of factors, including operating expenses, brand loyalty and business strategy.
These costs include their recently increased wages, replenishment and store maintenance, among others. While these factors made Starbucks expensive, they weren’t the only reasons, as Starbucks’ third-quarter net income rose 25%.
The key factors contributing to Starbucks’ high prices are its value-based pricing approach and overall marketing strategy.
Labor cost
Before diving into Starbucks’ pricing strategy, let’s take a look at Starbucks’ employment costs. Labor costs are one of the highest expenses of any business, especially among retailers who emphasize great service.
First, Starbucks pays its employees fairly, provides adequate training and professional development, and operates an extensive benefits program.
So we can expect high quality service and delicious drinks like iced coffee, chai tea and discontinued peach green tea lemonade (to the disappointment of many fans). Other favorites include the infamous Pumpkin Spiced Latte and Ice Caramel Macchiato.
Of course, Starbucks has to train their baristas to handcraft their drinks quickly and accurately, especially during peak hours.
location and layout
Starbucks has more than 14,000 stores in the United States, each strategically located in high-traffic areas. That way, anyone rushing to work in the morning can conveniently grab a meal at Starbucks.
Starbucks is also opening in urban centers and places with wealthy customers. Rental costs in these prime locations are also relatively high, inevitably increasing Starbucks’ operating costs.
In addition to location, Starbucks also emphasizes its store layout and atmosphere to stand out from the competition. Store design, furniture, and other amenities like WiFi all contribute to Starbucks’ high prices.
You’re also paying for Starbucks’ unique positioning as a place where people feel at home, not just a grab-and-go coffee shop. This is reflected in their mission statement: “To inspire and nurture the human spirit – one person, one cup, one community at a time.”
Pricing Strategy
Starbucks has consistently priced higher than its competitors — long before the bean shortage and the COVID-19 pandemic. Clearly, there’s another factor at play in Starbucks’ prices: their value-focused pricing strategy.
Value-based pricing refers to setting prices based on the customer’s assumed value of a product.In other words, Starbucks doesn’t price their products if only Pay for it; their products are expensive to maximize profit margins while offering excellent value.
This value is reflected in satisfying service, a comfortable atmosphere, and savvy differentiating products from competitors.
Let’s put it this way – people are willing to buy Starbucks Because it’s StarbucksOf course, competitors like Dunkin Donuts, Costa Coffee, and McCafe may also sell coffee, but not the same.
Ethical Sourcing
Another reason Starbucks is so expensive is the ethical sourcing of its sustainable products. Starbucks has made it clear that they pay farmers fairly and support programs that improve farmers’ livelihoods.
One such initiative is the Coffee and Farmers Equity (CAFE) practice, launched back in 2004. The program aims to support farmers while increasing transparency in their supply chains.
Sure, your cinnamon roll Frappuccino may take more damage to your wallet, but you can rest assured that your money will be used to support farmers and promote ethical business.
loyal customer base
Starbucks is one of the largest coffee retailers in the world, with the U.S. being the largest customer base. keep things in mind, Americans buy more than 4 million cups of Starbucks coffee every day.
Not just mere sales. These customers are loyal to Starbucks and will stop at nothing to get their holiday-exclusive drinks. Starbucks further encourages repeat customers through the Starbucks Loyalty Program, which rewards points for every transaction.
All in all, Starbucks’ large loyal customer base gives it plenty of leeway to raise prices without worrying about falling sales.
taste
Starbucks is more expensive simply because it tastes so much better than your usual convenience store. Starbucks also uses special ingredients such as milk, syrup and honey to enhance the coffee’s flavor.
Other Starbucks products, such as pastries and cakes, are also popular for their delicious taste. You pay for what you get at the end of the day, and spending more naturally means getting better food.
in conclusion
People have long complained about why Starbucks is so expensive without getting a good enough answer. Starbucks’ prices are higher than its competitors due to better quality, value-based pricing, and operating costs.
Do you think all of these factors justify Starbucks being expensive? Why and why not? Let us know in the comments below!
