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Starbucks Corp. may be known for having “gourmet” pricing on its coffee drinks, but an analysis conducted by Credit Suisse shows that it’s an “affordable luxury” when compared with specialty purveyors.
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,
averages $2.14. At a specialty coffee shop, which Credit Suisse defines as a regional chain or independent shop, the price is $3.43.
The average price of a Starbucks medium iced coffee is $3.60 versus $2.60 at a fast-food restaurant.
The average price of a medium cold brew at Starbucks was $4.30 versus $4.60 at a specialty shop.
Credit Suisse conducted the analysis during a period in which inflation has reached a 40-year high and consumers are more closely considering their purchases, including items like a daily cup of coffee. Coffee shops in 10 of the largest U.S. cities were examined.
Analysts found that for a basic hot drip coffee or basic cold brew, Starbucks was more affordable than the specialty competitors. Starbucks was priced higher than the QSR chains, but the price gap narrowed at chains like Dunkin’ and Panera Bread.
“Starbucks is generally viewed as more discretionary than QSR peers given a premium price point and potential for trade down to ubiquitous peers during economic downturns,” wrote Credit Suisse, citing underperformance in the years 2008 and 2009.
Also: Analysts say this is the least expensive restaurant option to feed a family of four
“We believe Starbucks is a more resilient brand now, supported by the power of Starbucks Rewards, noting the program was started in FY08 in an effort to offer value and capitalize on loyal customers, as well as the shift to more cold beverages over time (~70% of beverage mix), which we believe are more differentiated and difficult to replicate at home.”
Analysts note that the Starbucks customer tends to skew to higher income earners, and there should be benefits to a return to activities, like working from the office.
The coffee segment was hit particularly hard by the COVID-19 pandemic, but has grown 10% since 2019, which, analysts say, speaks to how “attractive” the category is.
Starbucks shares have slumped 32.5% for the year to date.
