Today I went to Starbucks with my girlfriend for a coffee which has become somewhat of a normal routine lately. I bought my coffee and she ordered her espresso drink coming out to a total of $9 and we just…paid for it. It’s not like we even gave it a second thought either. It got me thinking on the drive home about when everyone in society just kind of became ok with dropping that kind of money every morning and started feeling like I just got robbed without a weapon.
I didn’t want this article to be an attack on starbucks or Dunkin’ Donuts or anything because it’s not like we don’t have other options. I could just as easily go to Cumberland farms or McDonalds and buy a $1 cup of coffee or better yet get a coffee maker and grind up coffee and make a pot that would end up being around $0.30 a cup. We’re the ones doing this to ourselves so it’s no one else’s fault but our own.
I search for hours and couldn’t find a single Starbucks menu from when they first opened up but I did find a menu from coffee shop called ‘Il Giornale’ that Howard Schultz (Starbucks CEO from 1986-2000 and 2008-2017) founded in 1985.
This shows a regular 16 oz. coffee for $0.95 and a single shot macchiato for $0.70. Today a black 16 oz. coffee at Starbucks costs around $2.20 and a 16 oz. macchiato is around $4.40. The average inflation rate is 3.22% annually, so applying that to the price of a $0.70 macchiato over 35 years would end up being $2.12, under half the cost of an actual macchiato which means the price of Starbucks espresso drinks are growing at a faster rate than the average inflation by over 2%! It makes sense as to why Starbucks coffee costs more than their competitors though because they do use higher quality ingredients. The profit margins at a Starbucks are around 5.4% compared to somewhere like Dunkin’ Donuts, which boasts a profit margin of about 8%. This is why I’m not here to complain about Starbucks because despite what people say, the coffee isn’t overpriced compared to the cost of the product you’re receiving. What I am questioning though is how people got to the point that where they are so willing to spend the money every day on what seems to be so obviously a luxurious item. For example the average drink price at Starbucks is $3.93, if you bought a drink at Starbucks everyday, which isn’t that unusual for a lot of people, they would spend $117.90 per month and $1,434.45 per year. If that doesn’t convince you, the price of one 12 oz. bag of high quality, organic, dark roast coffee beans costs around $12 and will make 62, 9 oz. cups of coffee. Lets say you have two, 9 oz. cups a day, which is more that what you’d get at Starbucks, it would cost you only $12 per month and $144 a year plus whatever it costs for cream, say $5 a month and $60 per year making a grand total of $204. $1200 more for coffee that’s the same quality or worse than coffee you can make yourself.
I feel like the reason we all accepted this has to be deeper than costs, and more about smart branding and social media. Starbucks has always been a company that values quality over cost and that shows in their brand. They brand themselves as being that hip, hand crafted local coffee shop except it’s in every town. They’ve created an image of having a high quality luxury product that’s simultaneously very accessible. I think while they really succeeded in the 90’s and 00’s, social media has really worked in their favor to make their products as more of a status symbol. Now it’s harder for small businesses to grow and compete with Starbucks because with social media their brand is recognized everywhere, leaving little market space for a small business to gain momentum.
I think this acceptance of spending money on expensive luxury items is part of a deeper problem than just coffee. People are spending more money than they have on things they don’t need because people are comparing themselves to others more than ever before. Something like Starbucks that has the branding and the image already, was really in the right place at the right time for the society that took shape around it.