SMART NEWS

The Price of a Starbucks Coffee Has Nothing To Do With the Price of Coffee Beans

Despite the dropping price of coffee don’t expect your Starbucks receipt to get any lighter

Contributor

November 12, 2013

Starbucks is often criticized for its overpriced coffee. And you can, in fact, order a drink that costs $47.30. But it’s not the cost of coffee beans that determines the cost of a mocha-latte-frappuccino. So although the price of Arabica coffee beans has dropped recently, that cup of joe won’t be any cheaper.

According to Quentin Fottrell, at Market Watch, it’s all the trappings at Starbucks that you’re actually paying for:

Coffee commodity costs historically comprise only 8% to 10% of Starbucks’ overall operating expenses, Hutson says, citing other costs like rent, labor, equipment, materials, and commodities such as fuel, energy and dairy.

While the cost of coffee beans is dropping, the cost of about a third of the drinks at Starbucks increased by about 1 percent in June of this year. In 2011, the company increased the price of packaged coffee by 11 percent. Fottrell argues that Starbucks can set the price independently of the price of coffee for a couple of reasons. “Americans tend not to care about the price of coffee — at least not in the same way that they are sensitive to minute fluctuations in the price of a gallon of gas, currently more than $3 a gallon, experts say.” Unlike a chain of gas stations, Starbucks can attract loyalists with its atmosphere and convenience, more than its prices.