The big news around the water cooler in the last half day or so was that Starbucks is raising the prices of its ”fancy” coffee. That’s right, the “latte factor” just got bigger!
For those of you who aren’t familiar with the “latte factor,” here is a brief description along with one of my recent coffee-related moral dilemmas. Basically, the “latte factor” suggests that you can accumulate a ton of cash by reducing your daily spending by a few dollars and investing that money instead. The expensive lattes, like the ones you find at Starbucks, are often used as an example of an easy expense to cut. If you’re interested in how my moral dilemma played out, I drank quite a bit of free, fancy coffee. (It wasn’t Starbucks, but it was one of the “big boys” in the business.)
So what does this mean to you? For many of us (those who are too cheap (or “frugal”) to pay for Starbucks coffee) it’s not that big of a deal. And I am a big fan of free-market business, so I don’t have a problem with “profits.” Especially with coffee, there are so many cheaper alternatives if people are price sensitive. Either way, you won’t be seeing me paying for a Starbucks coffee any time soon (you also haven’t seen me pay for a Starbucks before very often either…).
So how does this play out? Do people buy cheaper drinks at Starbucks? Do people switch to cheaper coffee shops? Does it change anything at all? Or is it like cigarettes where tax hikes are passed onto consumers who seemingly keep smoking no matter how high the cost?
If I had to guess I would think most people who go to Starbucks will end up still buying the fancy coffees like nothing changed. If you’re already paying $3 or $4 per drink, a 10-15% price raise might not make a difference. My guess is this will be a net benefit to the company. Yes, unfortunately, people will likely not put their credit cards down and step away from Starbucks.
But hopefully you all will at least put your credit card down and slowly step away from the mall!
{ 0 comments… add one now }