When the price of coffee beans fell by 44%, why did Starbucks go against the trend of Starbucks marketing strategy coffee?

This month, Starbucks China will raise the price of basic coffee in 12 cities, including Chengdu and Chongqing, by another 2 yuan, and the price after two price increases will be on a par with first-tier cities such as Beijing and Shanghai.

Starbucks highlighted the rise in operating costs while ignoring the decline in coffee bean prices. Why raise the price? Is this death? How does it have the strength to raise prices against the market?

Starbucks' third-quarter fiscal 2015 results were pretty good-- Starbucks' fiscal third-quarter 2015 results showed that sales of $4.9 billion exceeded Wall Street analysts' expectations, with adjusted earnings of 42 cents per share. one cent higher than analysts expected.

As expected, earnings per share fell sharply from 67 cents a year earlier. But on the other hand, revenue is up 17.5% from a year earlier. Starbucks' same-store sales grew by more than 5% for 22 consecutive quarters.

Why is that?

For a long time, Starbucks' marketing strategy has been very successful, attracting thousands of customers and giving its stock a steady return. But this summer, Starbucks said its costs had risen, and the price of most of its coffee products would rise by 5-20 cents.

The price volatility in the global coffee market is staggering. The futures price of Arabica beans, which represents premium coffee, peaked in October last year and fell 44% by July 6, the day Starbucks announced the price increase. As a result, many companies have responded by cutting prices.

While the price of coffee beans has fallen in the global futures market, it is shocking that most of Starbucks' retail coffee prices are rising against the market. Coffee is getting cheaper and cheaper. Why should I spend more money on coffee at Starbucks?

Starbucks spokeswoman Lisa? Starbucks is trying to "strike a balance between providing value to loyal customers and attracting new customers while making a profit," Percy said in a statement. Starbucks is not a place to drink cheap coffee. It sells experiences, not goods.

Starbucks experienced a period of rapid and efficient growth, which was able to expand while balancing its income and expenditure. In a conference call with investors on July 23, Starbucks executives revealed that the company had settled the price for 80% of its coffee supply next year.

Hamish, a commodity economist at Capital Economics in London. Companies like Starbucks "can't afford a coffee supply emergency or a sudden higher-than-expected price increase," Smith said in an interview.

Workers pour coffee beans at a Starbucks in Seattle

As can be seen from Starbucks' financial statements, it tries not to jump into the quagmire of currency or product volatility through some hedging or pre-purchase.

Starbucks' operating costs fell in the last fiscal year that ended September 28 last year, due to lower commodity costs, mainly coffee, according to the company's annual report.

But when coffee prices fall as unexpectedly as this year, these early strategies will have some short-term negative effects: it is likely that Starbucks will pay a higher price for coffee reserves than the spot market price. this will also have an impact on later financial statements. This is one of the reasons why Starbucks is not at the same time as the big market.

Another reason is that coffee accounts for less than 1% of Starbucks' overall costs, said Olson, a company spokesman. Starbucks also has to take into account rent, labor and a large number of employee benefits, equipment, distribution and marketing, he said.

Maybe there's another reason. Howard, CEO of Starbucks? "in US stores, 20 per cent of in-store transactions are done through mobile payments, twice as much as two years ago," Schultz told investigators during a conference call last month. Consumers use mobile phone APP to pay, it's easy to transfer money, but they don't pay attention to how much money is spent.

Huang Huajun, president of the first Business Network, analyzed that Starbucks, which plays the brand of culture and taste in China, is "strong" because of insufficient competition from the coffee chain, and other coffee and catering brands do not pose a threat to it.

So, in any case, the impact of price increases on sales is likely to outweigh the disadvantages.