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  1. #1
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    Will other shops raise prices like Starbucks next month?....

    I read an article about Starbucks raising prices on October 3rd. 5 cent increase which means an additional 1.8 % for a cup of coffee. Do other chains/stores plan on doing the same thing?

  2. #2
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    Starbucks Price Increase

    We will not be raising our prices in our shop just because Starbucks is raising theirs. We have our mechanism for price adjustments, and they have theirs. Obviously, this increase may justify an increase for some shops, but overall I think that most independant coffeehouses will use this as a reason for new customers to come to their shops - they have more reasonable prices for their food and drink. Starbucks doesn't think that this is a big deal, even with their other events that didn't do so well (their first movie, coupons not being honored, etc.), and its been a number of years since they (corporately) have raised prices across the board.

    Good luck to them, because I think they will need it. I don't think they'll hit their 15,000 stores in the U.S., but who knows. Only time will tell if this has any backlash in their stores.
    Darren Kirby
    The Comfy Place Coffeehouse

  3. #3
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    Honestly the SB price increase is just to cover the raise that most employees at SB are getting (mine is a .43c raise) due to a standard cost of living increase. (man I hate admitting i work there. I really despise a lot of their practices. (long story not here for that in this thread))

    So I would say: Don't increase just because SB increases. Don't living in SB's shadow.

  4. #4
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    Re: Will other shops raise prices like Starbucks next month?

    Quote Originally Posted by SactoMike
    I read an article about Starbucks raising prices on October 3rd. 5 cent increase which means an additional 1.8 % for a cup of coffee. Do other chains/stores plan on doing the same thing?
    It's funny just before their announcement I was thinking of increasing our prices by about 5% to 7% simply because the increases in COGS. Our prices are already more than Starbucks, so our customers are not coming to us because we are "more reasonable".
    You want cream and sugar?
    NO COFFEE FOR YOU! NEXT!

  5. #5
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    Re: Will other shops raise prices like Starbucks next month?

    Quote Originally Posted by SactoMike
    It's funny just before their announcement I was thinking of increasing our prices by about 5% to 7% simply because the increases in COGS. Our prices are already more than Starbucks, so our customers are not coming to us because we are "more reasonable".
    Just passing by, but when I saw the post I was hopeing someone would put this in its proper context. While Starbucks sells Big Mac of the coffee world, the private shops have the option of selling quality specialty coffee and a more personal service......well, let's hope so.

    This minimal increase at their (S$) volume equates to a substantial gross cash flow nationwide. However, and in my opinion, private shops should use this to their advantage and could actually lower coffee prices while manipulating other profit centers, such as pastry, hardgoods, etc. A good marketeer might take one specific drink and make it an advertised loss leader, just to flaunt it in the face of the recent increase.

    Starbucks' price increase is one heck of an opportunity for the private owners.

    Just a thought.
    And I ask myself... why take blood pressure med's every morning... when they're backed up by downing two double capuccinos? I mean, I love the taste, but my heart's beat'n like a scared rabbit...!!!

  6. #6
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    Re: Will other shops raise prices like Starbucks next month?

    Quote Originally Posted by alsterling
    Quote Originally Posted by SactoMike
    It's funny just before their announcement I was thinking of increasing our prices by about 5% to 7% simply because the increases in COGS. Our prices are already more than Starbucks, so our customers are not coming to us because we are "more reasonable".
    Just passing by, but when I saw the post I was hopeing someone would put this in its proper context. While Starbucks sells Big Mac of the coffee world, the private shops have the option of selling quality specialty coffee and a more personal service......well, let's hope so.

    This minimal increase at their (S$) volume equates to a substantial gross cash flow nationwide. However, and in my opinion, private shops should use this to their advantage and could actually lower coffee prices while manipulating other profit centers, such as pastry, hardgoods, etc. A good marketeer might take one specific drink and make it an advertised loss leader, just to flaunt it in the face of the recent increase.

    Starbucks' price increase is one heck of an opportunity for the private owners.

    Just a thought.
    I simply don't see anyone changing their coffee destination over a nickel. So I must say I disagree with your suggestion. Also, pastry and other hard goods are lower margin items, if you lower your coffee prices and still want to maintain your overall margin, you have to either increase other items by a larger percentage or you buy lower, cheaper, and smaller. Either way it is not an attractive proposition. It would be easier to just raise your coffee prices or not change at all. Using Big Mac as an example, if indie burger joints of America have to compete on prices against Big Mac, then they are in trouble big time.
    You want cream and sugar?
    NO COFFEE FOR YOU! NEXT!

  7. #7
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    Re: Will other shops raise prices like Starbucks next month?

    I simply don't see anyone changing their coffee destination over a nickel. So I must say I disagree with your suggestion. Also, pastry and other hard goods are lower margin items, if you lower your coffee prices and still want to maintain your overall margin, you have to either increase other items by a larger percentage or you buy lower, cheaper, and smaller. Either way it is not an attractive proposition. It would be easier to just raise your coffee prices or not change at all. Using Big Mac as an example, if indie burger joints of America have to compete on prices against Big Mac, then they are in trouble big time.
    I actually agree with you. That's the whole point here. who in their right mind would drive an extra mile to save a nickle? Only if we could get 60 miles to the gallon off weak coffee, right??!

    What I'm saying here is don't look at the "price increase" literally as someone gaining or losing 5 cents. At the small operator level it's not an issue. The issue is how to convert this moment of coffee awareness into something positive for your operation.

    Look at this as a "marketing opportunity." Starbucks has no choice but to be published as having raised prices. On the other hand, I could see an "In-store" promo that plays off of the increase by rubbing it in their face while you reinforce your shop being the better choice.

    If you accept that Starbucks has made your job easier by paving the way, then you might consider that any nationwide publicity in specialty coffee can possibly be used as a marketing opportunity?

    Al
    And I ask myself... why take blood pressure med's every morning... when they're backed up by downing two double capuccinos? I mean, I love the taste, but my heart's beat'n like a scared rabbit...!!!

  8. #8
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    Margins......?

    Not a trick question. I'm really curious and would like to know.....

    How do you figure your "true cost" on served beverages? Do you include and charge off all labor involved in an espresso drink? I honestly felt that "stock and sell" pre packaged items would show a higher true net margin. I'm referring to the painful task of cost accounting where you account for every dollar; where it comes from and where it goes as an expense.

    I didn't presume that coffee would be the obvious higher margin item. It's contribution to overall gross profits, I thought, was in the volume?

    Best, Al
    And I ask myself... why take blood pressure med's every morning... when they're backed up by downing two double capuccinos? I mean, I love the taste, but my heart's beat'n like a scared rabbit...!!!

  9. #9
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    Folks - it's a PR stunt. I've already been contacted by 3 media outlets asking for my impression of "how this will affect the specialty coffee industry." My answer: not at all, but it certainly got you talking about them again (for free).

    Honestly, what's the point of press releasing a price increase? As the old adage says, any press is good press.

  10. #10
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    Re: Margins......?

    Quote Originally Posted by alsterling
    Not a trick question. I'm really curious and would like to know.....

    How do you figure your "true cost" on served beverages? Do you include and charge off all labor involved in an espresso drink? I honestly felt that "stock and sell" pre packaged items would show a higher true net margin. I'm referring to the painful task of cost accounting where you account for every dollar; where it comes from and where it goes as an expense.

    I didn't presume that coffee would be the obvious higher margin item. It's contribution to overall gross profits, I thought, was in the volume?

    Best, Al
    Not a trick question, but a hard one to answer because each shop is unique. If your barista does nothing but make espresso drink then you should factor his labor cost to espresso drink's margin. In my case, the barista performs other tasks when there is no espresso drinks so it's very hard to factor in labor cost per espress or per cappuccino when I don't know the percentage breakdown per shift that is dedicated to espresso making, and to other tasks. In the same token, I don't factor in cashier's and bar back's cost per brewed coffee, tea, muffin. I don't know how to do that so I just figure my total labor cost per shift is X, and seperate it out from COGS.

    I guess you can look at your coffee transactions per day vs. baked goods. Let's say you sold 100 cups of coffee and 30 muffins. If you reduce your coffee price by 5 cents, you have to increase your muffi price by 17 cents just to stay even.
    You want cream and sugar?
    NO COFFEE FOR YOU! NEXT!

 

 
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