Tuesday, January 10, 2012

Starbucks Price Increase for Loyal Customers

The price of coffee as a
commodity rose and fell
 during 2011
Starbucks has restructured its UK Starbucks Rewards Card programme and removed the "tall filter for £1" part of the offer. Now, customers will pay £1.50 but receive a free coffee for every 15 purchased. Customers on the old rewards card scheme have been put on gold level meaning they retain the other free extras they used to get, but my guiess is that most regular customers will now be out of pocket with, what is in effect, a 40-50% price increase.

My initial obserrvations is that Starbucks has got quieter at peak times in the morning and afternoon.

The price increase has been caused by sharp rises in raw coffee prices and reflects price increases by Starbucks in other markets recently. Prices for coffee peaked in October after a sharp rise over the summer, prompting retailers to increase prices Prices have since fallen back to a lower level. It remains to be seen how Starbucks will react to the price fall.

3 comments:

gbdrbob said...

Rubbish. Raw material costs make up such a tiny proportion of the final price of a brewed coffee sold for 99p or £1.50 that fluctuations in commodity prices are totally insignificant.

Even at the very highest levels of $3 per pound in March/April 2011 (see see http://www.ico.org/prices/p2.htm) the 6 grams of ground coffee required for a typical 250ml service would have cost around 4 cents (2.5 pence). That's ignoring the fact that a bulk buyer like starbucks almost certainly gets extra discounts and holds forward contracts to hedge against such increases.

The changes to the Starbucks loyalty scheme are quite simply a bare faced attempt to greedily squeeze more money from UK consumers during a recession. They've gone from a simple scheme with real immediate benefits (50p off brewed coffee, free refills, free drink with beans purchase), to a complex system that involves paper vouchers sent in the post after every 15 transactions (buy 10 coffees together? That's one transaction).

I've already switched to pret a manger who continue to offer brewed coffee for 99p.

Gordon said...

I agree. The price increase in raw coffee has not been high enough to justify it. However, they have definitely lost a substantial amount of regular business. As for paper vouchers in the post, well that's an expensive nonsense designed to reduce the number of redemptions. If they were serious they would credit the account with 1.50 or issue an email voucher like they do for everything else.

Gordon said...

Update: Its all kicking off over on the Starbucks blog where Starbucks are addressing the criticism of the changes (apparently it made it into the marketing press:

http://starbucks.co.uk/blog/my-starbucks-rewards-uki/1137

Including this comment from a customer:

"Just returned from ordering my regular bold filter coffee to be told by the Barista that from next week, ALL Starbucks will only be offering Pike Place. This is the final straw - the loss of the discount was bad, but I was prepared to chalk that up to Starbucks being a business and wanting to increase its profits - but removing the bold option from the filter coffees - I'm sorry, but Pike Place tastes like dish water. Bye bye Starbucks."

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