Starbucks has raised the prices of its items. Yet, despite the price increases, people continue to return for more.
The coffee chain raised its drink prices due to inflation. Despite the difficulties, Starbucks’ sales rose month after month. According to its quarterly earnings reports, the company earned more than expected. The company’s sales were at an all-time high in the report, which ended in October. For example, in North America, Starbucks chains saw an 11% increase in earnings during the same period last year.
Starbucks’ average ticket price increased by 10%. This means that people purchased 10% more this year than last. The company’s Executive Vice President and CFO, Rachel Ruggeri, stated that the company’s sales increased by 15% in the last quarter compared to the previous year. In terms of sales, Starbucks made more than $6.1 billion. However, compared to last year’s profit, it has decreased to $1.1 billion, down from $1.3 billion.
According to David Reibstein, a professor at the University of Pennsylvania’s Wharton Business School, price increases should happen more frequently. These are caused by inflation. Like other coffee chains in the United States, Starbucks is no exception. But, according to Reibstein, consumer loyalty changes the story for many of these companies.
“As they raise the price, they’ve got so much customer loyalty that they’re still able to keep those particular customers,” he said.
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Starbucks and the challenge
While the company’s profit is increasing, it needs help with its human resource management. Starbucks struggles to combat the simultaneous unionization of its stores across the country. The company closed a store near Cornell University in Ithaca earlier this year. The coffee chain reopened the store in response to union pressure. The Ithaca workers union’s demands eventually influenced federal labor officers to compel Starbucks to open the store.
The effectiveness of unions in advancing workers’ rights encouraged other groups of Starbucks employees to vote on unionization. So far, 300 stores have voted to join the union. In just over a year, 250 of these have approved unionization. The first Starbucks store to unionize was in Buffalo, New York.
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The continuance of the operations
Despite the management’s concerns about worker unionization, the company said it would continue to operate its more than 9,000 chains across the country. This is where unions come in. Starbucks’ unionized stores account for only about 3% of its total store count. Furthermore, negative publicity from unionization efforts reduces the incentive for other stores to follow suit.
Meanwhile, Starbucks’ interim CEO, Howard Schultz, announced that the company would open eight new stores daily. The decision contributes to the company’s goal of having around 45,000 locations worldwide by 2025.
“We continue to manage the business through today’s challenging operating environment. Right now, we’re at a stage where everybody is expecting inflation and not overly put out by the fact that Starbucks is doing it,” Reibstein said.
Photo Credit: Alex Tai