Since today's economy is always increasing, people are finding ways to change their businesses to increase as well. Many have noticed that when gas prices go up, other sales go up too.
Starbucks is looking to increase their sales by adding another size to their menu. "The bigger-is-better concept seems to be striking a chord among some Starbucks customers," according to the Starbucks Corporation. The new cup, Trenta, meaning 30 in Italian, will be introduced in the following states: Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana, Texas, Oklahoma, New Mexico, Hawaii, Nevada, and Arizona. This nationwide rollout will be completed by May 3. The Starbucks owners are making this switch in order to keep up with today's rapid sales. If people have the option to buy a larger Starbucks drink, they will. The Starbucks owners will have to have some type of opportunity cost though. This may consist of various things such as a loss of supplies or other drinks becoming scarce due to the desire for the new drink. This new drink will only be for iced beverages including coffee, teas, and lemonades which will allow the hot drinks of Starbucks to still be a demand. Coffee cravers will love this new switch if they're feeling like the old "grande" just isn't enough for them. Therefore, Starbucks will receive an increase in profit for this new 31-ounce drink.
http://www.star-telegram.com/2011/01/17/2774440/starbucks-expanding-rollout-of.html
12 comments:
Do sales truly increase when gas prices rise? Also, why did they only release it in those states? What was their reasoning?
What is the true opportunity cost for Starbucks? What was the next best option for the company's utilization of resources (labor, capital, advertising, etc.)
The marginal cost of putting an extra 10 oz. of product into a cup is probably very low. What does this do for Starbuck's marginal revenue?
Sales do not truly go up when gas prices rise. Starbucks released the new drink in these 14 states because they are making small switches to adapt to the new changes instead of allowing all 50 states to try the new drink and possibly lose profit. Starbucks could have spent more money on advertisement, like commercials, to promote themselves more. Starbucks' marginal revenue will decrease due to the marginal cost of the extra ounces.
As the quantity demanded for Starbucks drinks grew, so did the prices. This was a smart move by the franchise because of the amount of profit that they could see in the future. But what would happen if the 31-ounce drink became less satisfactory for people? Or if the competitors came up with the same product but for a lower price, how would the substitution effect affect the Starbucks Company?
As america gets fatter, Starbucks finds new ways fulfill the demand for larger portions. Of course Starbucks revenue will increase by selling a 30 ounce coffee for six dollars but in my personal opinion I find it dumb. Who needs a 30 ounce iced coffee? You could buy a whole meal for the price of one drink from Starbucks.
I agree with Payne that spending money on fancy coffee is pretty wasteful. Now they can buy an even more expensive bigger drink? I'm surprised that people are still willing to pay this much for a drink. With the way gas prices are and the fact that most people rely on gas so heavily why would they spend their money on something they want instead of something that is more of a necessity.
The thing about a 30 oz drink is that it doesn't apply to hot coffee. Granted, it would be ridiculous, wasteful, and foolish to make a 30 oz hot coffee drink, but that's not my point. My point is that the majority of people go to Starbucks for hot coffee, especially during the winter months. This might make more money in the summer time, but for now it might just be wasteful.
I agree with Alison's comment. It is true that the majority of people who go to Starbucks go for hot coffee. Depending on when the 30 oz drink comes out in Starbucks could really depend on how this effects them. As Alison mentioned, the new size would make more money in the summer time than in the winter, but Starbucks could really maximize their potential income if they release this size in the summer. With all the people getting excited about drinking their cold drinks at Starbucks again, the would be more likely to buy an oversized cup. If they release this drink size in the winter people may not be as likely to buy it when they won't be able to buy their favorite winter drinks, and they might not really buy it as much in the summer.
I think that this new addition to Starbucks' menu will be more harmful than beneficial. Starbucks thrives off the sales of their hot drinks and although sale the larger drink size may increase during the summer, numbers will go way down in the winter and will hurt Starbucks' overall income. I think that the money Starbucks will spend on these new drink cups will be more than the money they receive. Hopefully in hard economic times, people will decide to spend their money on something more necessary than a 30 oz. drink that is ridiculously priced. Starbucks is taking a huge risk in adding this new drink size and made a smart decision in only trying it out in these 14 states.
While drinks such as lemonade and tea are definitley in demand during the summer,the main customer of Starbucks goes for the hot drinks and coffee, which is what they are best known for. By introducing this new drink, they are definitely taking a risk. Short term,I believe the drinks will go over well due to the fact that it is almost summer, but in the long term the supply will excess the demand for these drinks, ultimately hurting the company. It is smart of them to only test drive it in the select fourteen states first. I believe these drinks will only appeal to consumers for a short while before people return to their original orders again in the fall and winter months following. Personally, I think Starbucks would be smart to have these drinks be seasonal and only in supply during the summer months.
Starbucks in America is an addiction. The addictive powers of Starbucks attracts all forms of Americans. For years the coffee industry has been using slogans like "The best part of waking up if Folger's in you cup" to brainwash Americans into believing they need coffee just to do everyday tasks like getting out of bed. It's genius and this new 31 ounce drink is just what many of these addicts are looking for. They need something more potent because their bodies have gotten used to the average grande.
I think that this is a great idea for Starbucks they will gain more attention, and more customers because of this. The reason for only releasing the drink in these states is because in all of these states iced drinks are a boom, and from experience I have noticed that people in the south want a big cup so they wont have to refill as often. You can see this in other stores such as 7-Eleven where there they offer the Big Gulp in which the largest size is 128 oz, which is a ton. 7-Eleven has noticed that the bigger is better and they have profited off this tremendously. Now you see other stores offering a bigger size too, which Starbucks has noticed, and they want to get on the bandwagon. Overall with Starbucks name and brand being so great as it is, you will see them profiting huge from this new sizes cup.
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