Cost Vs. Price of Starbucks Coffee

Despite its simple ingredients, Starbucks charges a premium for its brew, leaving me wondering why. The truth is, the actual cost of making that cup of coffee is significantly lower than what you're shelling out. So what gives? From branding and ambiance to convenience and quality, several factors at play contribute to the seemingly inflated price tag. Is your daily caffeine fix priced higher than expected?

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[thegarybird]

This is a GROSS PROFIT video with labor thrown in at the end. Not a net profit video.

[thehierophant]

Electricity, water, rent, pest control, hygiene and equipment not included.

[dianagonzalez]

As a Director of Restaurants, I can guarantee you that cup, lid, and straw is NOT .08 cents. Lol

[fahdmaatoug]

Here is a more realistic version;

Direct Costs (per drink):
- Espresso (2 shots): ~$0.24
- Milk (12-14 oz): ~$0.30
- Cup, lid, sleeve: ~$0.20
- Napkins/stirrers: ~$0.02
Total direct materials: ~$0.76

Store-level overhead (per drink):
- Labor: ~$0.85
- Equipment depreciation: ~$0.20
- Utilities: ~$0.15
- Rent/facility: ~$0.50
- Basic overhead: ~$0.30
Total store overhead: ~$2.00

Corporate allocation (per drink):
- Marketing/advertising: ~$0.25
- Corporate staff/offices: ~$0.30
- Technology/POS systems: ~$0.15
- Training programs: ~$0.10
- Waste/spillage (3-4%): ~$0.15
- Supply chain/logistics: ~$0.20
- R&D/product development: ~$0.10
- Insurance/legal: ~$0.15
Total corporate costs: ~$1.40

Total comprehensive cost: ~$4.16 per Grande latte

On a $4.95 sale price:
- Gross profit: $4.95 - $2.76 = $2.19 (44% margin)
- Net profit: $4.95 - $4.16 = $0.79 (16% margin)

[savegas]

In this example, the building/ rent / pretty signs, the air conditioning, the electricity, the internet, the uniforms, the cost if the machines, the cost of cleaning the floors, and the cost if sweeping the parking lot, cleaning the bathrooms, providing soap water paper towels are ALL FREE.
Gotta love these examples, !

[pkobe]

He made it sound like it's a lemonade stand, lol.

[nunyabidness]

Apple's profit margin is 25%. Markup on an iPhone is 40%. Walmart's profit margin is under 2% but people love Apple and call Walmart greedy.

[loadedth]

Rent, marketing, merchant fees, corporate admin expenses. You have to layer in SG&A.

[BradleyBoardwine]

As a business owner, this is a misrepresentation of profits. You need to account for other expenses, such as, employee taxes, employee benefits, rent, electricity, water, maintenance, cost of machines and repairs, advertising, cleaning, trash, etc. all that needs factored into the cost of operating and Starbucks needs to add that into each product they sold or they would not continue business.

[karldavar]

I live how this guy’s videos always have perfectly rounded figures conveniently like 1 or 2 dollars😂😂

[joece]

How about tax, rent, depreciation, loan interest etc? To run a business is more than just the cost of raw materials and labour

[ruthf]

You're forgetting insurance, taxes, utilities and wages for when the store is empty or slow

[carmenthompson]

Former Starbucks manager. There is a lot more than those things included in the cost. We paid $36k per month in rent alone. (I worked at other stores that were as low as $8k and as high as $50k): electricity, water, machine amortization and maintenance, pest control, decor amortization, trash collection, taxes…

[wojciechzgodowski]

He forgot electricity costs. Business insurance. Building rental and equipment lease. 😂

[Jubin]

+ heating and cooling + lighting + property taxes + whatever other stupid state taxes

But yeah its still expensive

[alphaod]

What many people don't know is you can get refills if you don't throw out the cup not that many people take advantage of that, but I sure did in college. Now for the price of one specialty drink I buy a bag of coffee means that I use with my own machine at home; best investment ever.

[netdevilzzz]

You forgot to add rent, utilities, insurance etc
Their operating margin is about 38%

[ImposterBraum]

I just love it when people who have no idea how a business operates educates other on how the business operates. Genius, really.

[OmniSoundAI]

Its always funny seeing breakdowns for cost of big corps and how much they make when not everything is taken into account do they still make a shit load of money ofc but its just funny when someone with their own business can have better profit margins but no one complains. I sell stickers that cost me depending on size $0.01-$0.30 each and sell them for $5-$15, only fees i have is 10% from final sale price ez profit.

[joshuaibanez]

Bro covered the base accounting costs without looking at economic costs 😂