Prices, wages up at Starbucks

July 13, 2016 | by Cherryh Cansler
Prices, wages up at Starbucks

Updated: 11:38 a.m., EST

Although some customers are feeling slighted by Starbucks' increased menu prices, employees are happy about the raises CEO Howard Schultz promised them in an open letter posted Monday on Facebook.

"Effective Oct. 3 all partners and store managers in U.S. company-operated stores will receive an increase in base pay of 5% or greater," he wrote. "The range of increase will be determined by geographic and market factors and is intended to ensure Starbucks remains a retail employer of choice in all the markets where we operate."

In an email to FastCasual, a Starbucks spokesperson said the wage increases and beverage price increases are separate decisions based on distinct factors and long-range planning.

"The wage increase is incremental and a reflection of our ongoing commitment to invest in our partners (employees)," wrote the spokesperson. "This kind of an investment will help us remain competitive, achieve our growth aspirations, and attract and retain the best talent in the industry."

The email also said the company had previously announced it would  spend over $275M in incremental partner and digital investments in 2015 and 2016, with a significant amount of this investment going directly to partner wages.

A 'small price adjustment'

When it comes to the menu prices, the company admitted on its website customers would see a "small price adjustment." Depending on the market, that means increases of 10 to 20 cents on select sizes of brewed coffee and 10 to 30 cents on espresso beverages and tea lattes.

"We expect the average customer ticket to increase by about 1 percent as a result of these beverage adjustments, however, 65 percent of beverage prices have not changed," the website said.

The price increases aren't expected to deter coffee drinking, according to Euromonitor International, which predicted U.S. per capita consumption of hot coffee will be 3.1 kilograms (6.8 pounds) in 2016, up from 3 kilograms in 2015, and matching a record achieved in 2013. Bloombergreported last month total domestic consumption will be up 1.5 percent in the 12 months that start Oct. 1 to its highest ever, according to the U.S. Department of Agriculture.

Starbucks has raised its prices for the past three years in a row. 

Investing in the US

In his letter to employees, Schultz went on to say the company has always been dedicated to earning employee trust, offering comprehensive health benefits and equity for partners who work 20 hours or more a week and setting up the Starbucks College Achievement Plan.

"We have always tried to innovate around the partner experience while being sensitive to your diverse needs, as well as the needs of our customers, marketplace realities and the complexity of the world beyond our own," he wrote. "Striking the delicate balance between profit and a social conscience is a responsibility I take personally.

"Over the years, we have viewed our total compensation approach as the best way to create long-term opportunity for partners. We believe strongly in this philosophy but also recognize we must do more to help partners take advantage of all the company has to offer. Today I want to stress our ongoing commitment to make investments in our partners and share some new developments that reflect that commitment."

Schultz, in his letter, also said the company would be adding a future annual enhancement to its Bean Stock program to recognize the contributions of its tenured partners.

"Specifically, we will be doubling the annual Bean Stock award for U.S. company-operated hourly store partners that reach two years of continuous service with the company," he wrote, pointing out that the combination of the changes would result in compensation increases between 5 and 15 percent for all our U.S. company-operated store partners in good standing.

Lastly, the chain is evolving its benefits program and online benefits platform so partners may shop, compare and choose health coverage with the similar convenience and personalization people experience when they shop, compare and choose airlines and airfare. New interactive tools on the site—mysbuxben.com—will allow partners to personalize their health coverage, select an insurance carrier, and choose a coverage level that fits their needs, as well as a competitive price that fits their budget, he said.

"In simple terms, the new health care options allow partners to only pay for the coverage they want and will actually use," Shultz said. "We estimate that eligible partners could save as much as $800 annually by moving to a plan that better meets their needs.

"For partners selecting family coverage, savings are potentially more, perhaps as much as $2,600 annually. Whatever plan you choose, any savings go right back into your paychecks."


Topics: Coffee / Specialty Beverages, Operations Management

Companies: Starbucks



Cherryh Cansler
Before joining Networld Media Group as director of Editorial, where she oversees Networld Media Group's nine B2B publications, Cherryh Cansler served as Content Specialist at Barkley ad agency in Kansas City. Throughout her 17-year career as a journalist, she's written about a variety of topics, ranging from the restaurant industry and technology to health and fitness. Her byline has appeared in a number of newspapers, magazines and websites, including Forbes, The Kansas City Star and American Fitness magazine. She also serves as the managing editor for FastCasual.com. wwwView Cherryh Cansler's profile on LinkedIn

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