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The cost of Starbucks’ products has gone up. However, people continue to purchase more despite the price increases.
The coffee chain increased the cost of its beverages due to inflation. Despite facing challenges, Starbucks still saw monthly sales growth. The company’s earnings reports show that it outperformed forecasts for the quarter. Sales for the company reached record heights in the report, which ended in October. For instance, Starbucks chains in North America saw an 11% increase in earnings during the same time last year.
The average ticket at Starbucks increased by 10%. This indicates that consumers spent 10% more this year than last. Starbucks’ executive vice president and chief financial officer, Rachel Ruggeri, reported that the company’s sales increased by 15% during the most recent quarter compared to last year. To put it numerically, Starbucks increased its sales by more than $6.1 billion. However, compared to last year, the profit dropped from $1.3 billion to $1.1 billion.
According to David Reibstein, a professor at the Wharton Business School of the University of Pennsylvania, price increases ought to occur more frequently. These are brought on by inflation. Starbucks and other coffee shops in the US are not an exception. According to Reibstein, customer loyalty for many of these businesses alters the narrative.
“As they raise the price, they’ve got so much customer loyalty that they’re still able to keep those particular customers,” he said.
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Starbucks facing challenges
The company’s profit division is rising, but it needs help managing its human resources. The company is trying to fight off the unionization occurring concurrently in all of its locations nationwide. Starbucks closed a location in Ithaca, close to Cornell University, earlier this year. However, the coffee chain reopened the store as a result of union pressure. Unionization eventually persuaded federal labor officers to order Starbucks to open the store after hearing the union representing Ithaca workers’ demands.
Due to the unions’ success in advancing workers’ rights, other groups of Starbucks employees decided to vote in favor of unionization. As a result, three hundred stores have already decided to unionize. And in just over a year, 250 of these have already consented to unionization. The first Starbucks location to unionize was in Buffalo, New York.
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Operating the company
The management said it would continue to run its more than 9,000 chains in the nation despite the tension it felt due to the workers’ unionization. This turns into a union issue. Only about 3% of all the stores that Starbucks owns are unionized. Additionally, the negative publicity generated by unionization efforts lessens the incentive for other stores to follow suit.
Howard Schultz, Starbucks’ acting CEO, disclosed that the company would open more than eight new locations daily. The choice supports its objective to open about 45,000 locations by 2025.
“We continue to manage the business through today’s challenging operating environment. Right now, we’re at a stage where everybody is expecting inflation and not overly put out by the fact that Starbucks is doing it,” Reibstein said.
