Starbucks CEO Defends $9 Coffee: ‘A Really Affordable Premium Experience’
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As Americans struggle with the price of gas and groceries, Starbucks CEO Brian Niccol made the case for a $9 cup of coffee while speaking with The Wall Street Journal's What's News AM podcast.
"We're doing really well with Gen Z and millennials, and then really had strong performance across all income cohorts," Niccol said. "It can start with as little as $3 for a traditional cup of coffee. And then obviously you can build your way into all sorts of customized drinks that people love that move that ticket up."
Podcast host Luke Vargas asked, "You mentioned sort of strength across income cohorts. We've heard so much this week about the K-shaped economy. Fortunes for some Americans, very different than for others. Is that not really something that's coming up in your sales?"
"You know, we're not seeing that in our business," Niccol said. "What we're seeing is people, you know, they want to have a special experience, and regardless of what your income level is. In some cases, you know, a $9 experience does feel like you're splurging. And then, what that means is we have to make it worthwhile, right?"
"And then in other cases, certain people believe, 'Well, this is a really affordable premium experience.' Because they're saying like, 'Well it's less than $10 and I get a really premium experience,'" Niccol said. "So, regardless of where you're stationed in those income cohorts, we want to make that experience worth your while. And what we know is what's definitely something that drives that value is to be able to have a great seat, have a great moment of connection with a barista."
"We just saw on Friday, I'm sure you've seen the US consumer confidence reading, perceptions of the economy are worse than they've been since the '70s, since '08, since the pandemic," Vargas said. "These are some pretty bad reference points here. Just how do you market to that consumer?"
"Yeah. Look, when we've spent the time talking to customers, 'What is it that you're looking for in your experience?' They do talk about how they use their Starbucks experience as a moment of escapism. And my hope is we get more than our fair share of all those occasions," replied Niccol.
"Part of that is you're not playing the value game," Vargas suggested.
"Well, I think we're just playing it in a different way, which is the way we're going to play the value game is you're going to feel like it was worth it," said Niccol. "And it's not going to be a game of discounting or one-off promotions. I think people actually really do appreciate knowing, "Hey, if this is a $3 cup of coffee or a $5 latte, I know I'm going to get a great experience for that $5 experience, I'm in."
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