From Tall To Venti: The Impact of Rising Dairy Costs on Your Starbucks Coffee
Got milk? As seen in this infographic, dairy accounts for 5-10 percent of Starbucks' overall costs of goods. But an increase in dairy costs will be "meaningfully higher" for the coffee chain, as Starbucks' Chief Financial Officer Troy Alstead said in a conference call this summer. You might be surprised to learn that coffee isn't the costliest item for the chain. Starbucks' use of arabica coffee beans only accounts for 15-20 percent of its overall cost structure. Rent and paying for things like packaging, packages food and teas incur the most costs among it sales and occupancy components.
So why are dairy costs rising? You see, after this summer's extreme drought, the price of feed for cows went up. many farmers weren't able to afford that price increase, so they sent their cows to the slaughter house - leaving the U.S. dairy market with its smallest herd in about a decade. But less cows equals less milk, which means higher prices. And that price increase is filtering down into the costs of the types of food you eat and what you drink.
10-12% - freight/dist.
15-20% - coffee.
15-20% - food.
5-10% - dairy.
24-27% - occupancy.
24-27% - packaging, bar supplies, food/tea, misc. costs.
Credit: 2010 Starbucks Analyst Conference.