Lines will be forming on August 28 at many of the 14,000 or so
In June 2018, Starbucks announced that it was closing 150 stores in the U.S., about three times the number it normally eliminates. Its comparative store sales have been flat because of several factors, including accommodating mobile sales, which seems to have slowed down getting in and out rather than speeding it up.
In the first quarter 2018, CEO Kevin Johnson noted that the chain's new specialty drinks weren’t “resonating” with consumers. He also acknowledged, “We must move faster to address the more rapidly changing preferences and needs of our customers.” Its stock price has been flat, rising a mere 1% over the last year, when the market has risen.
But the pumpkin spice latte has struck a chord with Starbucks aficionados, to the tune of 350 million sold since it was introduced in 2003. Maggie Jantzen, a Starbucks spokesperson, says it consist of “real pumpkin, espresso, steamed milk, and fall spices like cinnamon, ginger, nutmeg and clove.” Starbucks tantalizes customers, suggesting it’s only available “while supplies last.”
Asked how much the pumpkin spice latte delivers to Starbucks’ bottom line, Jantzen said she was not at liberty to share that information.
Bruce Clark, a professor of marketing at the School of Business at Northeastern University in Boston, says the pumpkin spice latte offers customers what they want: “Fat, sugar and salt, plus the additional boost from caffeine. Finally, the smell of the drink is important as scent is an important trigger for memories and emotions.”
Starbucks is introducing it a week earlier than usual, which Clark terms “seasonal creep. Think of the Christmas decorations we now see before Halloween. Milking an extra week or so of sales out of the promotion” is the desired outcome.
But Stephen Anderson, a New York-based senior restaurant analyst at the Maxim Group, says Starbucks is keeping pace with its competitors. Since Dunkin’ Donuts introduces its pumpkin spice latte a week before Labor Day, so must Starbucks. Furthermore, he notes, Starbucks can capture many students returning to school, prevalent outside the Northeast.
Though Anderson can’t address how pumpkin spice latte sales specifically affect the company's bottom line, he calls it a “halo product and a cult product. Starbucks kicked off pumpkin spice sales about 15 years ago, and many people still associate it with Starbucks.”
Anderson downplays Starbucks’ having to close 150 stores. “They were more aggressive about expanding since the financial crisis,” he says.
He attributes Starbucks’ flat sales to its increasing prices more than its rivals. Since 2015, Anderson says Starbucks’ price rose 3% compared with 1% at McDonald’s and 1.5% at Dunkin’ Donuts. Those price hikes drive customers away.
Starbucks is hoping that their yen for pumpkin spice lattes will help bring them back.
