Starbucks shares sink 8% as same-store sales fall, quarterly results miss | Hacker News Reader

Starbucks shares sink 8% as same-store sales fall, quarterly results miss

cnbc.com

32 pointsjamarna83 comments

I feel like any article that doesn't mention how much prices have risen is at best lazy journalism and at worse complicity. It even mentions this:

>McDonald’s, PepsiCo and other companies have said this quarter that low-income consumers have pulled back their spending and are looking for deals.

McDonald's prices have doubled in a decade.[1] Across the board, companies are posting profits well beyond what inflation can account for. How much has Starbucks raised it's prices out of pure greed?

1. https://financebuzz.com/fast-food-prices-vs-inflation

Nobody pays the menu price at McDonalds. The high sticker price is an incentive to get you to download the app, which has huge discounts.

On balance the price has gone up - inflation is real - but this kind of analysis is just wrong.

There is no f-king way I'm downloading their app, so in fact the menu price just means I don't go to McDonalds.

The best deals ended over a year ago anyways, so you're not missing much. Not to mention that locations around me have been removing their self serve soda machines one by one, while the remaining ones have had a sharp drop in soda taste quality.

That's an understandable response. My wife loves egg mcmuffins, which are typically double the price if you don't use the app (and take advantage of one of the always-available "discounts"). So I downloaded the app and order there. But I also found a round cookie cutter, which I now use to make egg mcmuffins at home.

"Nobody" is doing a ton of lifting here. I'd be surprised if even 25% of McDonald's customers used in-app discount. The existence of coupons does not imply everyone uses them.

But this report literally show a significant drop in profits.

My point was this drop is a result of past greed.

A coffee and banana walnut bread went from $8 to almost $11.

At some point, it is a more economical option to just make coffee and pastry's at home.

There is no economy of scale under this inflationary environment that would benefit from continued purchases.

Hasn't it always been cheaper to make at home? You can make a VERY GOOD coffee for ~$1. Pastries are cheap to make as well, but more time consuming.

I wonder if this is compounded by the prevalence of work-from-home. After all, I can not only make very good coffee, but don't even have to go anywhere for it. Although, I don't mind a nice bike ride, and I realize that a trip to the coffee shop is more than just for procuring coffee.

As for pastries, toast on homemade bread has no competition.

toast on bread?

Oops I meant toast made from homemade bread.

https://en.wikipedia.org/wiki/Toast_sandwich

Hell, you can make very good espresso with no effort or cleanup on a Nespresso machine for ~$1 a cup. Plus, the aluminum pods are 100% recycled by the company if you send them back.

Sure, if you enjoy the taste of plastic. As much as I like espresso drinks, I’d rather opt for a good press coffee or drip. That said, my wife still loves it so I’ve let it go.

The convenience factor is the killer app for me. Just loading the pod and pressing a button. Done.

I have never had a nespresso pod which was close to "very good". It's marginally better than instant but that's all.

I mean, Starbucks pastries are just not good. If I can pay a buck more and get something good, or go to the corner store and get a donut for $1.5 why would you go to Starbucks?

back in the late 90s, early 2000s Starbucks use to source all their pastries from local bakers.

Quality and taste was much better back then.

Now everything is made at scale with industrial ingredients, frozen, and mass distributed.

Always cheaper, but now really cheaper. The line people draw when making a decision has shifted a lot.

Or $8 for a dozen at the grocery store.

> Hasn't it always been cheaper to make at home?

Of course it was. I make much better coffee at home than I could get at Starbucks. For me it's about something else: hanging out with friends or working on my laptop in an environment that's more interesting that my room or office. This is what I pay $10 of $11 for. (But admittedly, this happens rarely these days.)

I can make a great cup a coffee for about 25 cents. I switch to using a pour over setup. I buy a pound of good quality ground coffee for about $20.

I was surprised to learn that their bread slices are frozen. I bought one and then discovered a sticker on it that was several months old. I took it back and they said that was the date on which it had to be frozen by, and that they had just defrosted it today.

I used to sometimes work at a Starbucks and buy sweets to bring home, since I don't drink coffee. I don't buy sweet treats since discovering they're actually frozen/thawed.

My wife used to work there. She’d bring back leftovers that had expired. Pastries, sandwiches etc that were wrapped (completely sealed) from the factory in plastic. If you didn’t get to it fast enough, fly eggs would hatch in the sealed bag…

How did the fly eggs get into the sealed bag? Does that mean they were in there the whole time (and if so, that you wouldn't want to eat it even straight from the factory!)?

And, after being frozen for months?

Now that I think of it, maybe the sandwich/pastry ones in particular were refrigerated, not frozen.

Yes, my assumption is the were laid at the factory.

Hey, as long as you cook it before they hatch, what's the harm ;)

> I don't buy sweet treats since discovering they're actually frozen/thawed.

But why, though? Are they less delicious? Less convenient? Obviously not. Do you think the freezing/thawing process destroys the nutrition? Seems unlikely, since they aren't exactly a health food to begin with.

A baked good that is meant to last months in a freezer is often made with more preservatives than a baked good meant to be consumed within 48 hours (as is the case with many baked goods: bagels, donuts, french bread).

It was a dubious value at $5 or whatever per slice when I thought it was at least fresh. Knowing it was not remotely fresh, it was a clear loser in my book.

Even a fresh pastry is just a pile of empty calories. If breakfast is the most importantl meal of the day then no dessert for breakfast for me.

I never ate them for breakfast, but brought them home for dessert. But if it's a frozen piece of junk, I'll pass.

Most food you get at restaurants was frozen at some point. And sometimes that makes it fresher than the fresh ones.

I have suspected for a little while now that starting this year we are going to start moving from a state of raising prices to keep margins up and share holders appeased to dropping prices to ensure their is still customers willing to buy.

Profit makes way for survival.

NYC Starbucks on a busy street removed chairs and stools.

People stood at table near windows. Then they removed tables.

Now people stand with their device in one hand and coffee in another.

When did urban retailers forget that customers in glass windows attract more customers?

Noticed the same thing in SF, what's the reasoning here? I loved working at Starbucks and left good money there everyday.

Homeless people usually set up camp at a table and hang out for hours/all day.

Strangely, other NYC coffee shops have tables, chairs, customers and zero encampments.

Or Steve Gibson...

https://www.grc.com/sn/sn-195.htm

Steve Gibson: Well, man about Starbucks.

Leo: Man about Starbucks. Yeah, that's a good...

Steve: I don't really get out on the town. I'm pretty much at Starbucks. In fact, today I was only there for five hours this morning. As I was walking out at 10:00, Jackie, who opened the store at 5:00, and I helped unlock the front door because I'm always there at opening, she said, "You're leaving early."

Leo: So wait a minute. Let me get this straight. You go there at 5:00 a.m.?

Steve: Yeah, every morning I'm there at opening at 5:00 a.m.

Leo: And that's breakfast for you.

Steve: Well, it gets me up and going. And my new deal now I'm so excited about is I've got my Northgate OmniKey 102 keyboard that I have under my other arm. And I've been spending 10 to 11 hours a day there.

Leo: What? Oh, so you're programming there instead of at home.

Steve: Yeah, yeah. In fact..."

2009. Today, someone could put him on a livestream and sell tickets online..

Starbucks initially made a lot more money getting people in and out of their stores quickly, with mobile ordering and drive-thrus, but gutted their position as the "third place" where people hung out, sipped coffee and talked to each other.

https://www.tastingtable.com/1456219/starbucks-uncomfortable...

I'm amused that SBUX and MCD are being used as bellwethers given that they're both targets of a global boycott, divestment, and sanctions campaign, and both have mentioned a hit as a result.

That said, if it gets the media to finally admit that an economy where 20% of Americans are at or facing imminent poverty concerns isn't "booming" I guess I'll take it. ALICE (Asset Light, Income Constrained, but Employed) is the norm, and we're being otherwise gaslit into thinking the economy is "too hot."

What’s the point of going to the coffee shop for coffee anymore? It’s not like you talk to anyone. Might as well just make it at home.

Change of scenery.

From what I can observe, it's being able to say "I want a venti no whip extra hot chai with oat milk, two pumps, and a partridge in a pear tree" and someone having to make it.

There is a greater than ever need for Third Places, https://stories.starbucks.com/stories/2022/reimagining-the-t...

> To help drive innovation, Starbucks has turned to the team of R&D experts and baristas working side-by-side in Starbucks Tryer Center, to help streamline the work behind the counter, and enable more time for genuine human connection.

If a coffee shop needs instructions from a corporate R&D center to build human connection with its customers, something's not quite right.

I wonder what metrics l they will come up with for "genuine human connection".

Community

Mcdonalds missed target too this week.

There's a price point that makes it not worth going to and at some point the profit from price increases will not compensate for the loss of customers.

At some point the allure of premium branding just wears off if the thing you’re selling is now on every corner, I suppose?

Just my speculation but what 20 years was considered a „specialty coffee” now has nothing on the actual barista-run specialty places. And people learned how their coffee can actually taste like.

Not to mention the effect advocates like James Hoffmann must have had on people’s general awareness.

I think it's more that a lot of people are starting to make choices because everything is getting outrageously expensive.

I’m not familiar with what you’re talking about. But in my experience as someone who has gotten mildly into coffee, Starbucks feels like a cheap brand that tries to push sugar crap on people. I had the vague impression that Starbucks was sort of premium and Dunkin’ was trying to become their equal in prestige, but now they both feel like they’ve sunk to the Dunkin’ level.

Starbucks to coffee is what McDonald’s is to food. Nothing premium about it.

McDonald’s is somewhat premium in many countries, the idea that it's poor people food is US-only but isn't even true here. Poor people work at McDonald’s, they don't eat at it.

McDonalds might be premium compared to a roadside food stall, but it's on the low end of the spectrum in first world countries. Anywhere I have traveled, McDonald's was just the emergency option if you just really needed food that wouldn't give you food poisoning.

Also, poor people absolutely eat there. All those poor people working there get free food and employee discounts, others use the app, or they eat there once in a while as an alternative to more expensive restaurants.

Don't know which ones you're going to, but Australia and Japan are very first world countries and they love McDonald's there. (I think US McDs is better than Japan's though.)

Maybe I get that impression a little less in the UK, but that's only because their food isn't bad enough for British people to like it when they could be eating smack barm pey wet.

Also, by somewhat premium I mean in the same category as Starbucks, not a sit down restaurant.

I'm pretty deep down the specialty coffee rabbit hole... but if I'm traveling or camping and don't want to bother with grinding, Dunkin' pre-ground is my go-to. Available pretty much everywhere and tastes good however you prep it.

One thing that's odd about "coffee culture" is that people act like coffee comes from "baristas" and not from coffee farmers. Although the farmers get it from the coffee plants.

I don’t understand what you mean. This could apply to literally any supply chain anywhere. I typically associate a phone with the manufacturer, not a Congolese child mining cobalt ore or the sand that became the silicon wafers.

Starbucks hasn’t been considered specialty coffee since before the war in Iraq. Their secret is that Americans like milkshakes and putting coffee in them makes people feel less guilty ordering one every day. Their dark roasts are designed to still be perceptible over all of the fat and sugar.

That kind of worked back when the competition was Folger’s annealing to the pot at the local diner, but chains like Dunkin’ expanded and McDonald’s et al. upgraded and they all have better tasting coffee you don’t need to sweeten so much to cover the bitterness.

I always order black coffee with a couple ice cubes (so I don’t burn my tongue). I was visiting family in Charlotte this week and was surprised that their Starbucks had replaced the large canisters of drip coffee with some sort of coffee-on-demand machine that made each cup fresh.

The staff told me that this reduced waste of all the drip they’d through out at the end of each shift/day.

Comically though, the coffee the machine put out was so hot that they were double cupping every order. The lids didn’t fit as snug over a double cup, so nearly every one of my orders dribbled down the cup as I walked out. And of course I went from “wait right here I’ll have your order right up” to waiting 2+ minutes for my cup to be made.

I’m not judging if it makes sense for Starbucks or not — maybe someone did all this math already. It was just a funny example of the ripple effects that stem from a seemingly easy decision to reduce waste, make each cup fresh, which would seem like no brainers.

> made each cup fresh

Is that a commercial version of office "pod" machines?

Yes, but with fresh unground beans.

I've switched to pods. It tastes better than starbucks (yes I know, not a high bar). When I'm at a point where I don't care about money and have more time than I know what to do with I'll get an espress machine but I think I'm done with coffee shops for now.

This is exactly the time for upstart competitors to Starbucks.

If you have the skill, connections, supplies (because maybe you started a boutique coffee shop in the past), find ways to seize customers from Starbucks - by advertising LOWER prices. Starbucks cannot compete on prices but an upstart can.

This exact scenario played out in Israel. A coffee chain that advertised coffee for 5 NIS (about $1.20) showed up from out of nowhere and completely took over.

And likely they're either: 1. Dumping into the market to gain market share and decimate competition which is often illegal, depending on your locale in which case that coffee will be a bunch when they own the market (or they go out of business) 2. They have suppliers that are so tainted nobody buys their source and you probably shouldn't either

There are so many coffee shops in Israel, so I doubt they can take over the market. There’s a few major chains, but even Starbucks tried to enter that market and failed miserably.

No surprising at all. Their coffee is expensive (damn near $6 for decent size latte), and if you get something to eat as well you’ve already spent $10-12 pretty much first thing in the morning. Keeping up this habit is a struggle if you don’t have a lot of disposable income.

I bought one of them coffee pod machines and just started buying keurig pods instead. For the price of roughly 2.25 lattes, I can get 10 pods that last me an entire week. It’s easier, cheaper, cleaner, and quicker than going to Starbucks or where ever else. I still miss the very act of going to get coffee, but that’s not enough to justify the cost when I could spend the money on gas for instance.

As usual, investors live in a pipe dream thinking Starbucks can exponentially grow forever.

People only need so many coffees. Be happy with that. No need to sink shares and spoil it for everyone.

> People only need so many coffees.

I think it's more like "people only need so many coffee shops." Now that they've mostly achieved saturation, they want to improve revenue by other means, like increasing prices, and people will only pay so much for their coffee and snacks (although the cutoff seems surprisingly high).

Same-store sales peaking is probably an indication they've crossed past the peak of the price curve. Lower prices = more items sold, but less profit per item, higher prices = fewer items sold, but more profit per item. There exists a price where the items sold x profit per item reaches a maximum. They've raise prices, and sales have gone down.

I’ve noticed that we have many new independent coffee shops that are very busy. I’m sure there was always competition, but it’s certainly a factor where I live. The new coffee shop is always packed, has a better atmosphere and the workers are nice. Can’t say that about Starbucks a block away.

Curious, any alternative data providers had data to predict this eg footfall or credit card spend data?

I can’t afford it

I want something with organic milk and ideally organic beans

I want better quality pastry

I wonder how much the BDS / Boycott action affected this.

Probably negligible, It's just looking good on Media, but a lot of them hanging around there when there are not recording cameras...

Ever since 7 oct, starbucks has been embroiled in controversy. The cafe has had much smaller lines. And the ceo has even claimed that the boycott is hurting.

But I didn’t expect to see further decline quarter after quarter.

Why is the only comment currently mentioning BDS being downvoted? Seems silly to ignore the possibility that it could be a contributing factor.

Too political for hn

Dammit man, they've put too much ice in my iced coffee when I said light ice! The derelicts.

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