Starbucks, which is the largest coffee retailer in the world, has a reputation for serving good coffee in upscale surroundings. It also has a reputation for being expensive.
The high prices for coffee, other drinks, and snacks don’t prevent millions of loyal customers from making their daily visits to Starbucks for their favorite drink.
Why Is Starbucks So Expensive?
Starbucks is so expensive as the company can charge high prices for its products due to customer loyalty, convenience, and quality. Also, expenses like rent and operating costs factor into the higher prices. Finally, investments in employees, like good wages and benefits and ethical and sustainable business practices, add to higher costs.
Finally, Starbucks is so expensive because it has read its market correctly. Regular customers are willing to pay higher prices for all of these reasons. So, read on to discover more reasons why Starbucks’ prices are higher!
1. Brand Loyalty
Over the years, Starbucks has developed a loyal customer base that is numbered in the millions.
For example, these regular customers have made a trip to Starbucks part of their daily routine and can’t imagine changing it.
Because of brand loyalty, Starbucks’ high prices and price increases will not deter regular customers from getting their favorite Starbucks drinks.
In fact, higher prices for coffee and drinks are part of the upscale Starbucks brand image and don’t hurt the company’s sales.
Also, customers realize that they’re paying for the overall Starbucks experience and not just a good cup of coffee.
If that cup of coffee costs twice what it would at the convenience store, they’re okay with that.
2. People Are Willing To Pay More For the Convenience
There’s no doubt that it’s cheaper to make coffee at home. However, there’s also no doubt that it takes much less effort to pick up a cup of excellent coffee at Starbucks on the way to work or school.
With that, Starbucks customers are willing to pay more for the convenience of having a trained barista make their morning coffee for them and not having to wash the cups and coffee maker afterward.
Also, Starbucks stores are located strategically for busy commuters or office workers to get a caffeine fix or a relaxing drink.
3. Taste
Starbucks coffee may cost more than the cup you can get at the corner store, but it also tastes so much better.
For example, Starbucks was the first to make espresso widely and readily available to American coffee drinkers, a significant change in taste from the drip-filter coffee that was common before.
Over the years, Starbucks customers have shown that they are consistently willing to pay more for a good cup of coffee.
4. Coffee Is Addictive
A daily coffee habit is addictive, and high prices will not prevent regular coffee drinkers from getting their morning jolt of caffeine.
Nor will an increase in the already high prices of Starbucks coffee drive away regular customers.
5. Wages and Benefits
Starbucks pays good wages and offers excellent benefits to its employees, including paid leave, health care insurance, and college tuition.
The desirable benefits mean that Starbucks’ regular operating costs are high, which is reflected in the high prices.
However, Starbucks’ ethical work culture is part of its brand image and popularity.
In other words, customers are willing to pay more for products from a company that treats its employees well.
6. Employee Career Development
Starbucks invests in its employees through training at the start and throughout their careers. However, training employees is another major recurring expense that drives up prices.
Though it leads to higher prices for Starbucks products, these are also acceptable to customers because they prefer to buy from an ethical company.
7. Rents and Other Overheads
The strategic location of its stores plays a big part in Starbucks’ success story.
However, real estate in high-traffic and upscale neighborhoods comes with a hefty price tag, impacting the prices of drinks.
Also, other overheads, like utilities, keep rising, and customers eventually foot the bill for higher operating costs.
8. Employee Training
Employee training is a continuous process at Starbucks, starting with the newly hired baristas.
For example, new employees have to master making all the drinks on the Starbucks menu, which requires skills similar to a bartender.
Since Starbucks requires its employees to learn about coffee, how to make drinks, and the company culture, the cost of training impacts the prices of drinks heavily.
9. Ethically Sourced and Sustainable Products
Starbucks prides itself in its image as an ethical company, which uses ethically sourced and sustainably produced materials all along its production chain and operations.
With that, ethically sourced coffee is produced by workers paid a fair wage and who have safe working conditions.
Also, it minimizes the negative impact of the entire chain of production on the environment. These practices do increase operating costs and prices.
However, customers have shown their preference for buying coffee and other products from a company that follows ethical and sustainable business practices.
10. Sustainability
Starbucks has made a significant public commitment to sustainability by cutting its carbon footprint by 50% by 2030.
Previously, Starbucks has set itself sustainability goals and sometimes failed to meet them.
However, the company’s efforts to reduce waste and use renewable resources and materials do find public support, even if it means paying more for products.
11. Innovation
Starbucks has led innovation along many fronts, as new products that appeal to the customer base, like new drinks flavors, are constantly being introduced and tested.
Also, Starbucks is an innovator in sustainability, leading the efforts to develop the “Green Cup” to minimize the problem of plastic pollution.
With that, Starbucks has recently introduced recyclable and compostable cups, which could prevent millions of cups from being thrown away in the trash.
Starbucks also has made a public commitment to make its operations more sustainable. So, innovation on this scale takes substantial investment, which leads to higher prices.
12. Support For Farming Communities
Not only does Starbucks invest in its employees, but it also supports the farmers and communities where the coffee, tea, and cocoa used in its products are grown.
For example, Starbucks’ Coffee and Farmer Equity or C.A.F.E. practices support farmers and agricultural communities in maintaining workers’ rights and sustainable farming practices.
Unfortunately, this investment results in higher prices for Starbucks customers.
However, as with sustainability practices, customers are willing to pay higher prices for an ethical cup of coffee.
13. Reading the Market Right
Each of these reasons shows that Starbucks has read its market right and that its loyal customers will support high prices for several reasons.
If you are looking to learn more about Starbucks, you can also read our posts on whether or not Starbucks has oat milk, if Starbucks refreshers have caffeine, and why Starbucks failed in Australia.
