CEO Brian Niccol Defends $9 Cup of Starbucks Coffee
(AP Photo/Richard Drew)
As Americans struggle with the price of gas and groceries, Starbucks CEO Brian Nicol pleaded for a $9 cup of coffee while chatting with What’s new from the Wall Street Journal AM podcast.
“We’re doing really well with Gen Z and millennials, and then we’ve done really well across all income cohorts,” Niccol said. “It can start with as little as $3 for a traditional cup of coffee. And then, obviously, you can work your way up to all kinds of personalized drinks that people love that drive that price up.”
Podcast Host Luc Vargas asked: “You mentioned some sort of strength in the income cohorts. We’ve heard so much this week about the K-shaped economy. The fortunes of some Americans are very different from those of others. Isn’t that really something that shows up in your sales?”
“You know, we don’t see that in our business,” Niccol said. “What we see is that people want a special experience, regardless of your income level. In some cases, you know, a $9 experience feels like a splurge. And then that means we have to make it worth it, right?”
“And then in other cases, some people think, ‘Well, this is a really affordable premium experience.’ Because they’re saying, ‘Well, it’s less than $10 and I’m getting a really premium experience,'” Niccol said. “So regardless of where you fall in these income cohorts, we want to make this experience worthwhile.” And what we know is that what drives that value is being able to have a good seat, having a good time connecting with a barista.
“We just saw on Friday, I’m sure you saw the U.S. consumer confidence index, that perceptions of the economy are worse than they’ve been since the ’70s, since 2008, since the pandemic,” Vargas said. “These are very poor reference points here. How do you market to this consumer?”
“Yeah. Look, when we spent the time talking to customers, ‘What are you looking for in your experience?’ They talk about how they use their Starbucks experience as a moment of escape. And I hope we get more than our fair share of all those opportunities,” Niccol responded.
“Part of it is that you’re not playing the value game,” Vargas suggested.
“Well, I think we’re just playing a different way, which is this is the way we’re going to play the value game, that you’re going to feel like it was worth it,” Niccol said. “And it’s not going to be a game of discounts or one-off promotions. I think people really appreciate knowing, ‘Hey, if it’s a $3 cup of coffee or a $5 latte, I know I’m going to have a great experience for that $5 experience, I’m in it.’
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