Brewing up trouble: Starbucks price reduction sparks doubt


Published: 2024-06-23 16:59

Last Updated: 2024-07-16 22:11

Editor: Hana Afram

Brewing up trouble: Starbucks price reduction sparks doubt (Photo: Shutterstock)
Brewing up trouble: Starbucks price reduction sparks doubt (Photo: Shutterstock)

American coffee giant, Starbucks, recently made headlines after slashing its prices by half. While the company cited inflation as the reason behind this decision, skepticism has emerged regarding the underlying motives, particularly amidst ongoing pro-Palestine boycotts.

Also Read: Starbucks stock plummets 16 percent amid sales drop, boycotts

The global coffee chain, known for its premium-priced beverages, announced the reduction in prices across its menu items, attributing the move to rising inflationary pressures. This explanation comes at a time when civilians worldwide are grappling with increased costs of goods and services.

However, some have questioned whether inflation alone is the sole factor behind Starbucks' pricing strategy shift.

While the global economy has indeed faced significant challenges since 2020—exacerbated by the COVID-19 pandemic, the Ukraine-Russia war, disruptions in the Red Sea trade routes, and the Israeli Occupation aggression on Gaza—Starbucks cannot be seen as an innocent victim of these shifting consumer spending patterns.

- What is Starbucks hiding? -

A grande Caramel Frappuccino, typically priced around USD 5.65, is now available to many customers at half that price. Similarly, a grande brewed coffee, originally listed at USD 3.65, now rings up at approximately USD 1.83 with a buy one get one free offer, according to documents reviewed by The Wall Street Journal (WSJ).

After decades of eschewing special deals, Starbucks is now embracing promotions as a cornerstone of its strategy.

The company ran promotions for about half of May and introduced bundled coffee and breakfast food deals starting at USD 5 for the first time in over a decade this month.

In a recent email to customers, Starbucks teased more upcoming deals throughout the summer, signaling a sustained effort to keep consumers engaged.

Some observers suggest that Starbucks' decision to cut prices significantly could be a strategic move to mitigate potential losses from boycotts and maintain customer loyalty amidst a charged geopolitical climate.

By offering discounted prices, Starbucks may seek to appease or retain customers who might otherwise participate in boycotts as a form of protest against perceived alignments or affiliations.

- The numbers show otherwise -

The roots of the boycott stem from the ongoing Israeli Occupation Forces (IOF) aggression on Gaza on October 7.

Starbucks, originally silent on the matter, was thrust into the spotlight when Starbucks Workers United expressed solidarity with Palestine through a social media post. Starbucks swiftly responded with a lawsuit against the union for copyright infringement and distanced itself from the views expressed by the workers.

This move sparked backlash and led to Starbucks being added to the Boycott, Divestment, and Sanctions (BDS) movement list.

The boycott's effects are reflected in Starbucks’ financial performance, with a 22 percent drop in share price over the past year. Revenue fell by 2 percent to USD 8.6 billion in the most recent quarter, and earnings per share (EPS) dropped 14 percent to USD 0.68.

Analysts report a noticeable decline in customer traffic in the US, a trend that is mirrored in other markets. The chain reported a 7 percent drop in US traffic for the quarter ending March 31, the largest quarterly decline in over a decade.

Additionally, active loyalty-rewards users decreased by 1.5 million between Dec. 31, 2023 and March 31, 2024.

In China, Starbucks' second-largest market, the company experienced an income recession, contributing to a loss of approximately USD 11 billion, or around 9.4 percent of its total value.

Furthermore, Starbucks' Middle East franchisee initiated the termination of approximately 2,000 employees, according to Euronews.

The Kuwait-based Alshaya Group, which manages Starbucks operations across the region, confirmed the layoffs.

“As a result of the continually challenging trading conditions over the last six months, we have taken the sad and very difficult decision to reduce the number of colleagues in our Starbucks MENA stores,” the company stated.

Alshaya operates approximately 1,900 Starbucks outlets in Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Turkey, and the UAE, employing over 19,000 staff members before the layoffs, making the reductions just over 10 percent of its workforce.

- Internal strife -

On the other hand, pro-Palestinian sentiments are not entirely the reason consumers are actively boycotting Starbucks, as the coffee giant has been problematic on other fronts.

Starbucks has been embroiled in a prolonged battle with union activists over pay and working conditions, issues that have challenged its reputation as a fair employer despite its progressive branding.

In a statement published online, Starbucks workers stated, “Partners around the country found we are experiencing the same, systemic problems: short staffing and unpredictable scheduling; low wages; unaffordable healthcare; harassment; broken equipment; unfair discipline.”

Additionally, Starbucks engaged in legal battles with unions over issues such as collective bargaining rights and attempts to prevent unionization. These disputes have played out in both the courts and the court of public opinion.

The company's responses to unionization efforts have often been scrutinized, with critics accusing Starbucks of anti-union practices while supporters argue for fair treatment and representation for workers.

In recent months, Starbucks attempted a different approach in its dealings with the union, shifting towards cooperation and issuing joint press releases with claims of progress in contract negotiations.

Despite these efforts, boycott calls persisted and gained momentum, particularly on social media platforms where campaigns continued to proliferate.

Also Read: Global survey: One in three boycott brands that support Israeli Occupation

The boycott efforts intensified in January and sustained traction, reflecting ongoing public scrutiny and discontent over Starbucks' handling of both labor issues and its perceived stance on international matters, according to a Bank of America analysis.