Is the Price of a Starbucks a Rip off?

The price of a small (illogically called the ‘Tall’) Starbucks Cappuccino is now £2.05. The Venti now costs £2.65 (2008 prices)

This year the price of Starbucks drinks have increased by more than the rate of inflation.

Costa Coffe and Cafe Nero have both kept their prices below £2, but, industry analysts argue that it is highly likely they will be tempted to increase the price of their drinks.

Unlike alcoholic drinks, coffee is not subject to excise duty. Therefore, how can coffee companies such as Starbucks justify such as high price?

The Price of a Cup of Coffee

  • Milk 6%
  • Coffee 2%
  • Labour 18%
  • Rent 13%
  • Admin 26%
  • Cup / sugar / lid e.t.c 4%
  • V.A.T. 15%
  • Profit 14%

It is interesting that the smallest part of the price is the actual coffee beans. Even if the price of coffee doubled, it would only have a negligible impact on the final price of coffee.

In recent months the wholesale price of milk has increased significantly. This is due to both growing demand (including demand from China) and a shortage of supply from the British milk industry. Therefore, this has contributed to higher costs.

Rent is a big factor, especially in city centres. Also one feature of coffee drinking is that there is quite a low volume. People may buy 1 coffee and sit for other an hour.

In my personal experience, I find Starbucks coffee a little disappointing. (though on a recent trip to US, I had a really great dry cappuccino – so quality does vary) Generally, in UK I prefer the taste and quality of Costa Coffee and Cafe Nero. I don’t object to paying £2 or even £3 for a cappuccino, but, I would like higher quality standards.

Buying Office Space

In this era of laptops, one of the main attractions of a coffee shop, is that it makes a break from working at home. Often I take a laptop, and write for an hour. As much as buying a coffee, I’m renting office space. I’m particularly fond of a nice Blackwells cafe (Cafe Nero) in the centre of Oxford. It’s a great cafe because it’s in a bookshop; there isn’t irritating music and there is a literary vibe which helps with writing.

To be honest, if the price of a cappuccino increased from £2.30 to £3.30, I’d probably still go there.In that context the price of a starbucks isn’t a rip off, if you’re getting a nice environment.

25 Responses to Is the Price of a Starbucks a Rip off?

  1. Heather November 26, 2007 at 4:33 am #

    Get better coffee? Have you ever had Cafe Verona or Gold Coast? Get a life….and a better palate.

  2. Tony Montana June 26, 2008 at 1:16 am #

    Is the price of Starbucks coffee a rip off you ask… I have seen on this website you have written some article on supply and demand and therefore the answer should be quite obvious.

    Starbucks coffee as sold from their many outlets which need to cover the cost of each shop, packaging, staff, etc etc.

    Remember when buying their coffee you are also buying a brand and also their experince – that costs money so no it is not a rip off they have simply put a value on their product to distinguish themselves in the market.

  3. Vernom December 26, 2008 at 10:46 am #

    lets see how many of these coffee outlets are left at the end of 2009. Of course these joints are a rip off and as for their “experience”, half of em didnt exist 10 years ago. they set up primarily because a cup of coffee is peanuts to make, you employ cheap minimum wage young people, give the places a snazzy name and feel and just watch the suckers queue up for their overprice cup of coffee. all these joints are a luxury no one needs, just want. I predict fewer of them by the end of 2009 when people truly do wake up and smell the economic coffee.

  4. D.F. May 15, 2009 at 3:13 pm #

    Vernom,
    Yes, I agree, Starbucks is overpriced in terms of the cost of the actual product they sell — medium-quality coffee and materials produced cheaply in third-world countries. However, you have to remember that the customer is not always a “sucker”. They know Starbucks is expensive, but they pay for the ambience, for the experience. Not only that, but an emotion. Whether the pleasure be “real” (they genuinely enjoy the taste and experience of drinking a Starbucks coffee) or “fake” (they are driven to a store because of peer pressure, advertisement or for prestige), they, to some extent, are buying their happiness. Can you honestly say that genuine happiness can only be bought at less than £2 a cup?

  5. laura May 18, 2009 at 11:15 am #

    Adding my pennyworth to the floor…I agree that Costa coffee tastes better…but you dont have all the options that Starbucks offers. For those of us who want the latte without the calories … I am perfectly content with a tall, skinny latte with sugar free hazelnut syrup extra hot….and I just can’t seem to get that anywhere else. However when it comes to a basic coffee Costa wins hands down every time.

    I’ve also just bought one of the Starbucks cards. I get a free first drink and I get all my syrup shots or extra coffee shots free. Keeps the cost down that teeny tiny bit. Just dont get suckered into buying more just because you have a card!

  6. Andy Haslam July 8, 2009 at 4:55 pm #

    Anyone who pays £2.50 for a coffee gets what they deserve.
    For goodness sake buy a flask and make your own.
    Starbucks just pander to lazy people who say they haven’t time to make a flask of coffee but will spend hours on Facebook.
    Get a flask and GET A LIFE

  7. geoff August 16, 2009 at 10:21 pm #

    Check out the coffee at javabean coffee in gloucester road arcade, london – they roast their own beans – fresh, make a big deal that the perfect espresso is fresh aribica beans (whatever they are) and the extraction is always 25 seconds. I tell you what – there coffee is the best I’ve ever tasted – unbelievable

  8. sajid September 22, 2009 at 9:16 am #

    yessssss yesssssss

  9. Paul October 4, 2009 at 1:04 pm #

    starbucks trying to establish itself of being trendy and cool while ripping off the young people with it’s over-prised coffee. Now they are getting political with their commercials.I would tell young people that they are being ripped off by starbucks.
    F-u starbucks you corporate pigs.

  10. Ron de Mbowa October 13, 2009 at 8:45 am #

    I am not even so sure whether they (Starbucks) pay VAT on all stuff…coz most beverages are Zero-rated for VAT…I know some hot ones incur some VAT but it depends on which…any clarification on this, editor???

  11. tejvan October 14, 2009 at 9:54 am #

    VAT is charged on Coffee if the shop is VAT registered. A cafe has to register for VAT if if has a turnover of more than 75K. So at Starbucks, Costa e.t.c. VAT is applied to coffee.

  12. James January 10, 2010 at 11:27 pm #

    Can I point out that the prices have recently gone up because VAT has returned to its 17.5% rate. A tall latte was £1.99 during the 18 months in which VAT was 15%.

    In your ‘breakdown’ of the costs you have quoted 15% for VAT, rather than the 17.5%.

  13. Tyler January 26, 2010 at 12:44 pm #

    What is the actual price of all the Drinks from Starbucks?

  14. Kerry January 26, 2010 at 4:53 pm #

    I’m a former Starbucks employee and it definitley takes more than just filling up a flask. The starbucks frappuccino cannot be replicated at home unless you have managed to get the specially made bases they use.
    Also, milk steamers are expensive but if you only want a filter coffee, then a home made batch does just fine.
    I agree that I’ve found espresso I preffer. That doesn’t extend to all their coffee types though. Also, it is so far the only place I’ve found that has a sugar free syrup.

    It is also worth noting the amount of loss a Starbucks store will go through a day. If the milk falls below a certain temperature, then it cannot be reheated and must be thrown away. A lot of smaller coffee shops won’t practice this. Also, if a Barista makes a mistake, or the customer is unhappy, or the wrong drink has been taken from the end of the bar then another one must be made.
    At the end of the night the food waste (muffins, pastrioes etc cannot be sold the next day) can be very significant. I’ve previously thrown away £60 worth (that isn’t the most, either). It can’t be donated or even taken home by staff due to health and safety (claim attempts if someone was ill).
    Staff are allowed as many drinks as they like (within reason obviously) when they are working, including 30 mins before and after their shift. Also 50% off food on their breaks. I think it’s 25% the rest of the time.
    Each day there should be 2 coffee tastings carried out by baristas which equals a minimum of 2 cake pairings.
    Also, after every hour the coffee in the filters much be thrown away and a new one made in order for it to be kept fresh.
    Every day there is a minimum amount of venti cups that must be made into samples and offered out.
    They pay higher than minimum wage and are generally good employers, they’ve even won employer of the year awards.
    Note that in the uk at least stores are aiming to increase their community involvement and so if you would like to ask for volunteer help or the donation of filter coffee for a fate etc then go and ask.
    Their prices don’t vary that much from Costa etc, not when you consider the difference in cup sizes (a lot of places don’t offer 3 sizes) and I’m not sure anywhere offers a size as big as Starbucks’ Venti.
    Did you also know that if you bring your cup back and you have had an espresso based drink or a filter coffee you can have a free tall cup of filter coffee?
    Anyway, hopefully that’s been a bit of an insight.

  15. Andy.K.CC October 8, 2010 at 3:49 pm #

    What would you define as “Starbucks”?

    Just the CEOs, or the workforce that makes and serves too? Of course you would include them.

    So you have profit (for all) at Starbucks = (18+26+14) % = 58% (68.2% excluding VAT).

    Isn’t that rather large? I mean sure everyone needs to be paid, but 68% of what they charge forgetting the compulsory tip to the government?

    I guess its due to the number of customers that go to starbucks, that they could sit there for 1h or 1h30.

    How many coffees are bought per hour/day/whatever at a Starbucks in a major place?

  16. Edteach January 14, 2011 at 7:51 pm #

    I agree, the coffee at SB is horrible. Dark and bitter and 40% more than local coffee shops. I prefer Paneras bottomless cup of coffee and free internet and 99 cent bagels. The coffee at Paneras is 1.89 for a bottomless cup and they don’t care if you sit there and use the Wi-Fi for an hour. Starbucks and the mind numb brand loyal idiots can keep the 3$ one time fill coffee that makes your mouth pucker when you drink it. I think they make an intentional bad cup of coffee to get people to buy the higher end products, [higher profit products]
    Many of the smaller places like Scooters and one of a kind local coffee houses that have great atmosphere and offer music and other amenities for free. You can keep the corporate whore and its bitter toilet water.

  17. Shaz July 14, 2011 at 12:07 pm #

    Heather, you are telling someone to ‘get a life’ because they prefer a different brand of coffee to you. You are a retard.

  18. richard August 24, 2011 at 7:39 pm #

    such snobbery,just posing outside coffee houses,kippers and curtains,these are the idiots that wonder why they are in debt on their credit cards.your not even thirsty,if you are drink tapwater.

  19. Taryn September 19, 2011 at 6:29 pm #

    Both you and Richard have used ‘your’ in the wrong context – it should be you’re, your means something belongs to someone. Perhaps you should skip the cup of coffee and buy yourself a dictionary…

    • kris October 7, 2011 at 3:16 am #

      LOL @ TARYN. I always find it hugely amusing when people correct punctuation and spelling of peoples posts online and completely just ignore the forum topic. Taryn, did you ever stop to think that maybe most people have better things to do than to worry if they’re (or is it their) using the right type of ”your” and the most people dont give a s%&@ if they have used the correct the wording, as long as the message is understood/delivered.

      Anyways, being a business owner myself, i think the price of coffee in the uk is more than fair, if you want a cheap coffee, stay at home and make it yourself. When your in a cafe, your paying for the environment that your in, not just the coffee. Enjoy life :)

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