Starbucks Corp. may be known for having “gourmet” prices on its coffee drinks, but an analysis conducted by Credit Suisse shows that it is “affordable luxury” compared to specialist suppliers.
Analysts led by Lauren Silberman found that the average cost of a medium-hot coffee at Starbucks SBUX,
is $3.07. The average price at a quick service restaurant like McDonald’s MCD,
or Wendy’s WEN,
on average $2.14. At a specialty cafe, which Credit Suisse defines as a regional chain or independent store, the price is $3.43.
The average price of an average Starbucks iced coffee is $3.60 compared to $2.60 at a fast food restaurant.
The average price for a medium cold brew at Starbucks was $4.30 compared to $4.60 at a specialty store.
Credit Suisse conducted the analysis during a period when inflation hit a 40-year high and consumers are taking a closer look at their purchases, including items like a daily cup of coffee. Cafes from 10 of the largest US cities were examined.
Analysts have found that for basic hot drip coffee or basic cold brew, Starbucks is more affordable than specialty competitors. Starbucks was more expensive than QSR chains, but the price gap narrowed in chains like Dunkin’ and Panera Bread.
“Starbucks is generally considered more discretionary than its QSR peers given higher pricing and potential to trade to ubiquitous peers during economic downturns,” Credit Suisse wrote, citing years of underperformance. 2008 and 2009.
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“We believe Starbucks is now a more resilient brand, backed by the power of Starbucks Rewards, noting that the program was launched in fiscal year 2008 with the goal of delivering value and capitalizing on loyal customers. , as well as moving to more cold drinks over time (~70% of the drink mix), which we believe are more differentiated and difficult to replicate at home.”
Analysts note that the Starbucks customer tends to favor those with higher incomes and that there should be benefits to resuming activities, such as working in the office.
The coffee segment has been hit particularly hard by the COVID-19 pandemic, but has grown 10% since 2019, which analysts say shows just how “attractive” the category is.
Starbucks shares have fallen 32.5% since the start of the year.