Is Starbucks an "affordable luxury"?

A recent analysis by Credit Suisse shows that Starbucks is an "affordable luxury" compared with other coffee brands / coffee chains.

The chief analyst at Credit Suisse said that a survey of coffee shops in the 10 largest US cities found that the average price of hot coffee in a medium cup (meaning about 350ml) at Starbucks was $3.07. The average price of coffee served by fast food restaurants such as McDonald's is $2.14. In Credit Suisse, which is defined as a regional chain or independent coffee shop, the average price of a medium cup of hot coffee is $3.43. In addition, the average price of a medium iced coffee at Starbucks is $3.60, while that for fast food restaurants is $2.60. The average price of a medium cup of cold extract coffee at Starbucks is $4.30, compared with $4.60 at a boutique coffee shop.

According to the survey, Starbucks will be more affordable than some non-chain boutique coffee brands in terms of the average price of hot coffee / cold extract, and the price will also be higher than that of other fast food chains such as McDonald's. Analysts believe this is because Starbucks wants to distance itself from fast-food chains and tilt its customer base towards white-collar and high-income people who work in the office. Although the coffee industry was particularly hard hit during the COVID-19 epidemic, the coffee industry as a whole has grown by 10% since 2019, while Starbucks' sales and operating income are also on a growing trend, thanks to the intensity of consumption by the customer base. According to Starbucks' first-quarter results for the fiscal year 2022 released on February 1st, sales rose 18% year-on-year in the first quarter ended January 2, or $1.3 billion in revenue in the first quarter. Seeing that some friends here may think that Starbucks is so expensive and tastes ordinary, why do so many people go to Starbucks to spend money? obviously, the coffee produced by many coffee shops outside is more affordable, and the quality of the coffee is better.

If you look at Starbucks as a cup of coffee, and in terms of the cost of the drink, it is indeed a lot more expensive than other coffee brands. But Starbucks doesn't price in this way. what they think about is how much consumers will spend on a product. Instead of using material cost pricing, Starbucks is priced through customer demand, that is, determining the price range, and then thinking about what kind of goods it can provide to match the price. One person thinks Starbucks coffee is expensive because the cost and taste of materials are used to measure the value of the cup of coffee; one thinks Starbucks is worth it because Starbucks brings him an invisible "sense of hierarchy". The value of a commodity is compared, the former by cost comparison, the latter by brand awareness and positioning for comparison. No one is right or wrong. After all, everyone's needs are different.

Starbucks initially aimed at high-end white-collar consumers, stores are mostly set up in commercial areas, in order to demonstrate the "sense of high-end", consumption also needs a product that can symbolize their identity. The price is higher than other similar products + the brand is well known in the world. Starbucks' success lies in its targeted brand positioning based on the needs of high-paid white-collar workers. so that these customer groups can get the brand products like a "luxury" to show their different symbols. Compared with luxury goods such as bags, clothes and watches, it is not unreasonable to say that Starbucks is an "affordable luxury". Photo Source: Internet

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