Image source, Getty Images
- Author, Natalie Sherman
- Role, BBC news
- Reporting from New York
Andrew Buckley, a self-described “mocha man,” recently ditched his Starbucks habit after the company’s latest price increase pushed the cost of his drink above $6.
The 50-year-old, who works in tech sales in Idaho, had been a loyal customer for decades and cherished his almost daily venti mocha as a small luxury that allowed him to stretch his legs during the workday.
But the company’s latest price increase crossed a line.
“It was the straw that broke the camel’s back for my feelings about inflation in general. It’s like, ‘That’s it. I can’t do it anymore,'” says Buckley, who called customer service with complaints before going to the social services went. media for ventilation.
“I just lost it,” he said. “I don’t plan on coming back either.”
The decision was a sign of the larger issues at play at Starbucks, which is meeting new resistance from inflation-weary customers, as well as fights over unionization and protests against the company being cast as a way to oppose Israel’s war in Gaza, prompting calls for boycotts and tarnishing the brand.
Image source, Andrew Buckley
The company’s revenue fell 1.8% year-on-year globally at the start of 2024.
In the US – by far the company’s largest and most important market – sales at stores open at least a year fell 3% – the biggest decline in years outside of the pandemic and the Great Recession.
Among them were some of the company’s most dedicated customers – rewards members, whose active numbers marked a rare 4% decline compared to the previous quarter.
Former regular customer David White says he has stopped nearly all his Starbucks purchases in recent months, sometimes abandoning orders mid-purchase, dismayed at the totals in his cart.
He says his outrage over the price hikes has been amplified by other company decisions, including a crackdown on workers who want to join a union.
“They’ve become too full of themselves,” says the 65-year-old from Wisconsin. “They are trying to put too much pressure on their everyday customers and make a profit through their employees and prices.”
For Andrew Buckley, the decision to leave the company was a result of the prices, but he notes that the various voices around the company on political issues have left a bad taste in his mouth.
“This is a coffee shop. They serve coffee,” he says. “I don’t want to see them in the news.”
On a conference call to discuss the company’s latest results, Starbucks CEO Laxman Narasimhan said sales had been disappointing, partly citing more cautious customers while acknowledging that “recent misinformation” had weighed on sales , especially in the Middle East.
He defended the brand and promised to bring back sales with new menu items such as boba drinks and a pesto egg sandwich, faster service in stores and a flurry of promotions.
Chief Financial Officer Rachel Ruggeri said this week that the company was seeing signs of revival, noting growth in the number of active rewards members.
The company has no plans to back down from its expansion plans, but she warned investors that the challenges wouldn’t go away anytime soon.
“We think it will take some time,” she said.
The company’s struggles have fueled debate over whether they are a kind of canary-in-the-coal-mine warning that the happy consumer spending that has powered the world’s largest economy in recent years could abruptly lose steam.
Like Starbucks, a slew of other major fast-food brands, including McDonald’s, Wendy’s and Burger King, have reported declining sales and announced discounts to revive enthusiasm.
But many analysts believe Starbucks’ sales decline says more about the company than the broader economy.
“When you look back and you see the magnitude of the shift… that has happened in such a short period of time, it usually doesn’t indicate anything that is macro-related or price-related in nature,” said Sharon Zackfia, head of the consumer at asset manager William Blair, who expressed concern in a note to clients last month that the brand could lose its luster.
Image source, Getty Images
The company was already under pressure from a years-long battle with union activists, who raised concerns about pay and working conditions that were at odds with the company’s progressive reputation.
In late October, after Starbucks sued the union over a social media post expressing “solidarity” with Palestinians, the dispute landed in the middle of debates over Israel’s war in Gaza, leading to global calls for a boycott that started to live their own lives.
Starbucks – not the only US brand to face backlash over the issue and not a target of the official Boycott, Divestment and Sanction (BDS) movement – has blamed misinformation about its views after issuing a blanket statement issued condemning the violence in the region.
The union has also taken a different path in recent months: the two parties are now issuing joint press releases in which they claim progress in contract negotiations.
But according to a Bank of America analysis, calls for boycotts increased on social media in January and have continued.
Last month, YouTube comedian Danny Gonzalez apologized to his 6.5 million followers for the incidental presence of a Starbucks cup in a recent video following a backlash.
Although Starbucks executives have remained relatively silent on the subject during sales calls, as Ms. Zackfia puts it, “You’d really be burying your head in the sand if you didn’t think it had an impact.”
Bank of America analyst Sara Senatore said she had initially been skeptical about the boycott’s major impact, but other causes seemed insufficient to explain such a sudden and severe drop in sales. She noted that the company’s price increases are indistinguishable from those of its competitors. .
She says a quick turnaround could be a tall order, when you compare the impact to the brand crisis Chipotle faced after its stores were found responsible for causing e-coli outbreaks that took years to get rid of. shake.
“All you can do is try to mute the noise or basically overcome it with other things,” she says. “It may be a matter of time.”
On a recent sunny afternoon in New York, where the density of Starbucks cafes is among the highest in the world, it was difficult to gauge the state of affairs.
Some stores seemed empty, until customers rushing in for a mobile order interrupted the peace.
Even loyal drinkers said they saw room for improvement.
Maria Soare, a 24-year-old woman from Washington, D.C., still picks up drinks from the company three or four times a week, but her support has waned since the pandemic, when it was a reason to get out of jail. house.
She says the recent price increases “sting” and advises the company to “change the food.”
For friends Veronica and Maria Giorgia, the atmosphere of the company has changed.
Veronica, 16, says she doesn’t go as often anymore due to a combination of better options elsewhere, the rise in prices and recent protests by labor activists.
“That opened my eyes,” she says. “It feels more like a chain.”
And while Maria Giorgia remains a regular customer, the 17-year-old says her perception of the company has changed.
“It used to be cool in high school. Now it’s just convenient.”