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

[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?

 

[Comfy Place]

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.

 

[tobiasknight]

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.

 

[ElPugDiablo]

Re: 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?

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".

 

[alsterling]

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

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.

 

[ElPugDiablo]

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

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.

 

[alsterling]

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

 

[alsterling]

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

 

[cafemakers]

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.

 

[ElPugDiablo]

Re: 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

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.

 

[alsterling]

I appreciate the response. While I've founded and managed two industrial manufacturing companies, I've yet to do the same in retail, although I've had exposure to the marketing and sales side of retail. Many of the small business issues that I see in my industry are repeated in other industries, coffee being a good example. The core principals of business management don't really change. That's why I tend to observe the opportunities rather than dwell on the challenges as areas that need "patching up."

This is one of the first sites that I've found that involves business issues in the specialty coffee industry. While I enjoyed CG at the outset for the art and science of coffee, I became frustrated with the lack of depth and perspective. I don't fault the forum, it's purpose is to explore the art and science, not the business. But when the conversation gets into the areas of Starbucks, the predictable feedback is rather shallow. I'm thinking that other than the "3rd wave" of specialty coffee, minus the euphemism (sp?) of 3rd wave, this is still an industry made up of small businesses, some trying to break into the medium to large category. I could see a website that concentrates just on the business issues of specialty coffee. The major difficulty, however, is that anyone who is working hard within the industry will more than likely not have or make time to participate in an on-line forum. I'm afraid that I would be one of those that would not have or make the time.

Anyway, your comments were appreciated........

Best, Al

 

[ElPugDiablo]

I appreciate the response. While I've founded and managed two industrial manufacturing companies, I've yet to do the same in retail, although I've had exposure to the marketing and sales side of retail. Many of the small business issues that I see in my industry are repeated in other industries, coffee being a good example. The core principals of business management don't really change. That's why I tend to observe the opportunities rather than dwell on the challenges as areas that need "patching up."

This is one of the first sites that I've found that involves business issues in the specialty coffee industry. While I enjoyed CG at the outset for the art and science of coffee, I became frustrated with the lack of depth and perspective. I don't fault the forum, it's purpose is to explore the art and science, not the business. But when the conversation gets into the areas of Starbucks, the predictable feedback is rather shallow. I'm thinking that other than the "3rd wave" of specialty coffee, minus the euphemism (sp?) of 3rd wave, this is still an industry made up of small businesses, some trying to break into the medium to large category. I could see a website that concentrates just on the business issues of specialty coffee. The major difficulty, however, is that anyone who is working hard within the industry will more than likely not have or make time to participate in an on-line forum. I'm afraid that I would be one of those that would not have or make the time.

Anyway, your comments were appreciated........

Best, Al

Have you check out scaa's forum? I don't go there often, but there is a section dedicated to retailers.

 

[demetri]

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

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.

Back in my insurance days (was one of the senior network administrators and a former claims adjuster) I had on many occasion after a premium increase hear many a salesman whine about losing sales because competitors were cheaper.

The comment fro the Underwriting VP was "I don't need any salesmen if I'm selling the cheapest product. I need salesmen that can sell our customers on why we're a better value".

Please also consider that McDonalds is not that cheap. I can take my lovely fiancée to McDonalds for lunch and drop $15.00 on burgers and fries. I can also take her to a decent restaurant here in Winnipeg for lunch and drop $25.00 and have a far superior lunch or go to a greasy spoon and get the same quality as McDonalds while spending $10.00.

I think if you’re business strategy is to follow Starbucks’ pricing then you’re doomed.

 

[alsterling]

Demetri, of course, that VP was right. Our corporation is in a similar position as we're a leader in our industry and, as would be expected, provide an overall better value, not necessarily a lower price.

And regarding SCAA's forum, yes. I've been there, but as mentioned, the number of posts is rather small. My best contacts have simply been either through meeting someone via a forum and then following up with a personal visit, or including various industry vendors and retailers in my travel schedule when time permits. I'd like to see a super active commercial site, but as mentioned, I'd be a hipocrite if I ask for the forum and then didn't participate.

What I was getting at with the price increase issue, was the obvious. This is simply another opportunity to work on "perceived" value for the smaller specialty coffee retailer. It's obvious that a nickel-dime price increase will most likely not influence buying behaviour. What it does signal is an opportunity for independent operators to figure out how they can take advantage of the publicity. But then, I wouldn't hold my breath, as many operators are too involved in the day to day to interupt their managment program.

I'd be very impressed, however, to see someone take advantage of the moment and run a promotion.

Best, Al

 

[ericesquire]

Re: 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?

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".

Wow...prices higher than Fourbucks...that's steep - must be a good cup of coffee.