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 thoughts on “Is the Price of a Starbucks a Rip off?”

  1. 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.

  2. 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.

  3. 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?

  4. 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!

  5. 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

  6. 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

  7. 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.

  8. 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???

  9. 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.

  10. 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%.

  11. 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.

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