Starbucks has great employee benefits — and that’s not cheap
“I highly doubt the price increase is directly related to the diversity initiatives,” says Doh. “I think these things are on two different tracks. My strong suspicion is these price increases are designed to recoup expenditures on employee benefits.”
And those employee benefits are cushy when compared to most other quick-serve establishments. At all levels of the company, depending on hours worked, Starbucks offers healthcare, full tuition coverage with Arizona State University, career sabbaticals and more.
Andy Hoffbauer, a barista who has worked in managerial positions at a few coffeehouses (excluding Starbucks), most recently at Steel City Coffeehouse in Philadelphia, says that these perks are pretty rare in his world.
“Nowhere else provides these type of supports to people who aren’t administrative or managerial staff,” Hoffbauer says. “Paying for a degree that may not even be used [at Starbucks]? That’s amazing — and unheard of elsewhere in the coffee business.”
That basic brew is pricier to create than you thought
Though Hoffbauer hasn’t worked at Starbucks, his experience in the managerial side of the coffee business enables him to give a pretty good guess at how much a cup of coffee costs the company to make on average.
“Coffee is about $8 a pound, depending (and Starbucks may get it for cheaper), which gets you about 26 small cups of coffee. So for just the coffee, that’s about 30 cents a cup.”
Now that sounds like my grandpa’s kind of price expectations! But don’t forget everything else that goes into making that cup: staff, real estate, utilities and machinery and then the other commodities like various types of milk, sweeteners, napkins and so on.
The waste factor is also significant.
“Every couple hours you need to re-brew,” Hoffbauer says. “You could be dumping a couple gallons a day. You also have to factor in spills and people ordering something and being misheard by the barista or changing their minds.”
Starbucks also spoke to the variety of costs in its email statement.
“There are many factors that contribute to pricing decisions, including various operating and occupancy expenses (i.e. rent, labor, local mandates and regulations, competition, distribution, marketing, and commodities — including coffee — but also other commodities associated with beverages, foods, materials and operations). Coffee commodity costs are only part of our value equation, historically comprising a relatively small percent of our overall store operating and occupancy expenses,” the spokesperson said.
Starbucks has created a special stickiness in customer experience
When you take all that into consideration, $2 for a cup of sounds less outrageous. Then add in the customer experience, which is designed to be impeccably efficient while still seeming chill.
“My main expertise is in global trade and I go to Starbucks all over the world,” says Doh. “There is consistency and familiarity and even when the wait looks long it usually isn’t, which is a great consumer experience. There’s this whole constellation of experiences and I bet a lot of money goes into it. Starbucks has created a kind of glue or stickiness between the Starbucks experience and the customer. That glue is profound, and I think it would take a lot more than a relatively small price increase to dislodge it.”
I still think I need to spend less on coffee, but I’m no longer judging Starbucks negatively for upping the price. Turns out, a heck of a lot goes into that one cup of joe.
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