Pumpkin Spice Latte – Jesieniary increased Starbucks' profits

Pumpkin Spice Latte is always associated with autumn. The arrival of this flavored coffee means a 20 percent increase in customer numbers and higher profits for Starbucks. This year, autumnary helped increase the company's net profit by as much as 40%. In Poland, a pumpkin latte costs about PLN 22 this year, while in the USA it is only slightly more expensive and costs PLN 26.

Pumpkin Spice Latte brought in a tidy profit

Autumn people love autumn, and therefore they love it too Pumpkin Spice Latte at Starbucks. This legendary drink appears in the company's offer at the turn of August and September. This year marked the 20th anniversary of its introduction to the offer. Over this time, it has gained a whole set of associations (usually positive), and it has brought millions of dollars of profit to the company. Starbucks itself is not only a global coffee chain, but also a publicly traded corporation. The company's capitalization is currently USD 121 billion. The company has approximately 37 locations worldwide. cafes, and by 2030 there will be 55 of them. In Poland, Strarbucks operates 72 premises under its brand.

This year, autumn drinks helped the company a lot - when the Pumpkin Spice Latte appeared in the offer, the number of customers in the US automatically increased by 20%. In the third quarter of this year, the company generated a net profit of USD 1,2 billion, which means an increase in profits by 40%. compared to the same period a year earlier. It can be seen that the company managed to attract more customers to the cafe, and their spending on lattes and other drinks is increasing - the revenues of cafes operating for at least a year increased by 8%. y/y. All this at a time when consumers in the US and Europe are limiting their spending.

Resistance to date recession allows the company to offer more expensive coffee drinks, based on various types of syrups or additives, which ensure a higher margin. Over 40 percent customers in the USA also buy sandwiches or other snacks along with coffee. Since November 2, i.e. since the publication of the third quarter results, the company's shares have already increased by over 17%. The shares are trading at 26 times the profits that analysts forecast for the company for the coming year (according to the P/E ratio), which is lower than before the pandemic (29 times the profit at the end of 2019).

CHECK: How to invest in coffee? [Guide]

Personalization is a big advantage of Starbucks

Starbucks' competitive advantage is the very wide possibility of personalizing purchased coffees and drinks. Some combinations ordered by customers are so complicated that employees and even trade unions complain about them. Currently, 9 people are associated with trade unions. company employees in the USA. They are currently fighting for wage increases to compensate for the higher inflation in recent years. So far, only employees with over 5 years of experience have won a 5% salary increase. For comparison, the last strike of the United Auto Workers union ended with the announcement of salary increases at General Motors by 25%. over a period of 4,5 years, i.e. over 5%. per year. The difficulty in fighting for raises may also result from the fact that Starbucks plans to reduce its costs by a total of $3 billion over the next three years.

Pumpkin Spice Latte in Poland this year costs about PLN 22, which is slightly less than in the USA, where it costs about PLN 26 ($6,5). Labor costs remain the most important element of price. Coffee beans, however, constitute only a fraction of the price of the final drink served. Starbucks uses only Arabica beans, the price of which has increased by 18% since the beginning of October, which may herald higher cost pressure in the fourth quarter. Arabica, which is more delicate and more difficult to grow, dominates the ground coffee market, while Robusta plays first fiddle on the instant coffee market. Brazil is the leader in the coffee trade as the largest producer of Arabica, accounting for 40%. world exports. The largest producer of Robusta is Vietnam, with a 16% share in exports.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.