Yesterday evening I walked to the local coffee shop (Temple) to find enlightenment. Well, okay, they have a drink called “enlightenment” which is green tea, steamed soy milk, and honey. The beverage cost $5.00, plus $0.75 for tip bringing the total to $5.75. There was only one visible employee at the time. I observed her make the drink, handle the cash register, and check tables outside.
Later that evening I had a conversation with a friend about Starbucks price increases. He mentioned that after raising prices three times he went out and bought his own coffee machine. I am not sure if he meant three times this year alone. At a minimum, Starbucks raises prices every year from what I gather from Google searches. On one hand I hear the argument that SBUX (and businesses in general) must raise prices to cover wage, rent, and other cost increases. On the other hand, wasn’t there more than one person working at Temple before?
The price of coffee is down nearly 50% over the past year. True, coffee is probably a small percentage of a vente caramel latte. Nevertheless, I encourage consumers to establish the right view of price increases. If you are told price increases are necessary to cover costs, feel free to ask which costs: labor preparing your product, executive bonuses, both, or neither? Didn’t the business sign a 5 or 10 year lease?
I haven’t even scratched the surface on executive compensation or the executive to laborer pay ratio over time. Everyone should have a pretty good sense that the ratio of executive pay to average worker has done nothing but increase the past several decades. Nevertheless, in line with my recommendation to “minimize high margin exposure” in my Cadence of Finance presentation, I am going on a stroll this morning. I’m going to stop by Temple, Peets, McDonald’s, and Insight to see the price of a plain cup of coffee and a cappuccino. I’ll repeat periodically when I am bored and report back to you.
Meanwhile, I am drinking my own green tea (Gen Ma chai actually) at home now. It cost me $0.17 plus hot water and “labor.”
 Oddly enough, I can’t think of a Starbuck’s in my immediate walking area. This is surprising. Perhaps I just missed it due to ubiquity.