Trouble brews: Starbucks causes 6% drop as expensive lattes and politics anger customers

Starbucks, the coffee giant that once dominated the US market, is now facing a significant decline in its customer base due to rising prices, long wait times and controversial political positions. According to a report by The Wall Street Journal on Friday, these factors contributed to a 6% decline in U.S. orders for the quarter ended June 30, 2024. Amid the flood of customer dissatisfaction, Starbucks is struggling to maintain its position as a leader in the coffee industry.

Rising prices drive away customers

One of the main factors in Starbucks' decline is the rising prices of its products. For many loyal customers, prices have reached a tipping point. Dan Palmer, a 66-year-old from a Chicago suburb, is an example of this frustration. He used to enjoy a mango dragon fruit smoothie every day, but rising costs have made it less attractive. “Prices have gone up — a lot,” Palmer said. The Wall Street Journal. “It's not a deal in any way.”

Palmer is not alone in his opinion. With uncertainty in the U.S. economy, nearly 40% of consumers have reported paying less for takeout, according to a survey by Revenue Management Solutions. This trend is forcing many to rethink their daily Starbucks habits in favor of more affordable alternatives. Brad Pearl, a former loyal Starbucks customer from Spokane, Washington, found the high prices and long wait times were no longer justified. He has since switched to a local coffee shop, saving about $150 a month. “It really is a luxury,” Pearl noted of the cost.

Long waiting times frustrate customers

In addition to rising costs, long wait times have become a significant problem for Starbucks customers. Despite the introduction of mobile ordering, which now accounts for 30% of sales, the system has not been effective in reducing store congestion. A 2024 Technomic Ignite Consumer Survey found that over 30% of customers reported waiting up to 15 minutes for their order, with some experiencing delays of up to 30 minutes.

Starbucks could consider strategies such as revamping its pricing model, improving the efficiency of its supply chain and improving its customer service to address these issues. Even Howard Schultz, Starbucks' former CEO, acknowledged the problem in a podcast interview in June. Schultz described the chaotic scenes in stores as a “mosh pit” and admitted that the current system detracts from the ideal Starbucks experience.

Political controversies fuel backlash

Starbucks has also been at the center of political controversy, further alienating portions of its customer base. Criticism has come from both the left and the right, with some viewing the company's stance as damaging. On the right, figures such as former President Donald Trump accused Starbucks of being “anti-Christian” for not featuring explicit Christmas symbols on its holiday cups. On the left, the company faced a global boycott by the Boycott, Divestment, and Sanctions (BDS) movement for allegedly financially supporting Israel. Although Starbucks denied these allegations, the damage to its reputation was significant. These controversies not only resulted in a loss of customers, but also damaged Starbucks' brand image and market position.

Starbucks prices vary by state

The cost of Starbucks coffee also varies considerably across the United States. According to a study by PriceListo, the average price per cup is highest in Vermont at $5.73. On the other hand, Starbucks coffee is cheapest in Maine, costing an average of $4.44 per cup.

Starbucks prices are also high in the US, such as in New York and Washington, DC. Customers pay about $5.20 per cup. In California, a cup of coffee costs an average of $5.07. The central US states, including Wyoming, South Dakota, Arkansas and Oklahoma, are among the most expensive places to buy Starbucks coffee.

Impact of rising labor costs

In addition to the price increases, Starbucks recently raised the prices of its menu items in response to a new minimum wage law for fast-food workers in California. This adjustment resulted in a price increase of $0.50 to $1.00 per item. A Starbucks spokesperson confirmed that the price increases were a direct response to the new wage law, although the company declined to provide the average increase for each menu item.

Starbucks must face these challenges and its ability to adapt and regain the trust of its customers will be critical to its future success. The coffee giant, once a symbol of convenience and quality, now faces the daunting task of reversing its decline in a competitive and changing market.