Starbucks' Price Increases Are Most Likely Here To Stay

During the past year, it feels like everything has gone up in price, from a dozen eggs and a gallon of gas to a loaf of bread and a used car, and it feels like the end to the rising costs is nowhere in sight. Even a cup of coffee is more expensive, with Starbucks raising its prices by 6% in 2022, reports the AP. After the international company's first quarter financial report on February 2, it looks like that latte isn't going to cost less any time soon. 

The COVID-19 pandemic continues to impact Starbucks' sales, primarily in China, where stores were closed during the first quarter of the fiscal year. However, as of the last week in January, all Starbucks locations in China are reopened without any pandemic-related restrictions, Starbucks CEO Howard Schultz said. According to Reuters, Starbucks operates 6,090 locations in China. Schultz predicted that the company will reach its goal of 9,000 stores in the world's most populated country by the end of 2025 (via AP).

In China during the first quarter, sales declined by 29%, reports Reuters, while sales in the rest of the world were up around 5%. However, those positive numbers still weigh on Starbucks, which saw its shares drop 2.2% on February 2.

Customers still spending money

Despite the higher price for a mocha at Starbucks, customers are still ordering their favorite drinks. The AP reports that same-store sales in the U.S. increased by 10% during the first quarter, but overall transactions continue to stay at pre-COVID levels. The increase in transaction amounts can be attributed to more money spent on each order. 

And customers are neither staying away from Starbucks despite the higher costs nor do they seem to be opting for a less-expensive coffee retailer. Schultz said with so many people still enjoying what Starbucks has to offer, he doesn't anticipate "discounting heavily" their suite of signature drinks, though he mentioned that prices will come down so long as inflationary pressures do. The extras like syrups and foams, which other coffee shops may not specialize in, remain popular at Starbucks and continue to be one of the main reasons people show up, per The Wall Street Journal

The outlet reports that Starbucks has tried to meet demand better and curb long lines by increasing its to-go sales. The company has also recently begun working with DoorDash as it explores growth in that realm.