Starbucks’ Sales Dip as Customers Seek Better-Priced Coffee Elsewhere

Starbucks is experiencing a decline in sales, with a 3% drop globally at stores open for at least a year, including a 2% drop in its North American market. Total transactions at North American stores open for at least one year fell 6% last quarter, partly offset by higher prices. This marks Starbucks’ second-straight quarter of sales declines. CEO Laxman Narasimhan said that more consumers are buying the brand’s line of packaged coffee at grocery stores, but a “challenging consumer environment” continues to threaten sales at its cafes.

Starbucks is joining a list of restaurant chains experiencing decreased consumer demand due to rising food costs. McDonald’s faced a national debate after a restaurant in Darien, Connecticut, charged a whopping $18 for a Big Mac combo meal, leading to McDonald’s CEO Chris Kempczinski announcing that affordability would be a priority in 2024. McDonald’s has since released several limited-time offers, including a $5 value meal, in hopes of wooing its customers.

In California, Starbucks prices have increased by about 7% on average from February to April 2024, according to Kalinowski Equity Research (KER). The bulk of Starbucks’ sales come from mobile app and drive-thru orders at its approximately 9,500 company-operated stores across the nation. Starbucks is hoping to win back customers with its own value menu, called the “Pairings Menu,” which includes a drink and a breakfast item for either $5 or $6.

Starbucks also introduced the Siren System, new technology that helps eliminate long customer wait times for cold drinks. CEO Laxman Narasimhan said the recent plans “are beginning to work” and that they are rebuilding the operational foundation of their stores and supply chain.

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