Inflation has finally caught up with millions of people’s morning coffee routine.
The Kobeissi Letter, a financial analysis firm, looked at Seattle’s purveyors of caffeinated delights (I hesitate to call them “coffee”) to ask: “What happened to Starbucks?”
Starbucks has released its second-quarter results. The company reported that “North America and U.S. similar store sales decreased 3% due to a 7% decrease in comparable transactions.” The company reported. The average ticket price was higher, but I will come back to that in a minute.
The situation was even worse in China where “same-store sales plummeted 11%, with an 8% drop in the average order.” China is Starbucks’ second largest market in terms of sales volume, after the U.S.
Starbucks shares fell as much as 15 percent today after the news.
The most alarming statistic is that company-wide, same-store sales dropped 4% this quarter and traffic was down 6%. If sales are down 4% but the number of customers walking into Starbucks is down 6%, then it indicates that the most price-sensitive customers are leaving.
Liberty Belle, an old Twitter/X friend, posted that “$8-9 per large beverage is absurd.” Overpriced coffee is cut when the cost of living increases.
Will they return after trying something better and cheaper?
Kobeissi said that even the most loyal customers of Starbucks are seeking discounts. This tells me, in one way or another Starbucks’ bottom line will continue to suffer.
Each coffee drinker is different. Some people drink whatever’s in that giant urn in the breakroom that has been there for years. Some people don’t consider coffee to be real until it’s made from beans that are ethically sourced from a specific hill in Guatemala. They’re also only interested in coffee that is brewed using beans picked by descendants of Juan Valdez who receive Fair Trade wages and then air-shipped to the United States overnight on electric planes.
I want something more delicious than the old office urn coffee I used to drink, but I do not have the time or patience for a French Press or pour-over. Illy’s Intenso Dark roast Iperespresso was my choice a few decades ago. These capsules combine the convenience of K-Cups with a big Italian taste.
When I want my morning kick, I like it to be strong and fast.
The sticker shock of a Salted Caramel Cream Coldbrew with Cinnamon Dulce sprinkles and a shot of Peppermint Syrup will make people say, “Maybe, I’ll grab something from Dunkin’.”
Starbucks deserves credit for turning cheap coffee into an expensive product. After three years in which wages have been shrinking for most and inflation is not expected to end, the high prices of Starbucks’ coffee could be its Achilles heel.
Starbucks’ expensive chickens — ethically sourced, of course — could finally come home to brew.
