BBC "Struggling Due to Price Increases and Boycott Effects"
As consumers tighten their wallets amid high inflation, Starbucks is struggling, the British BBC reported on the 9th (local time).
On the 10th, Yonhap News, citing the BBC, reported that "Andrew Burkley, a resident of Idaho, USA, decided to quit Starbucks after the price of his favorite mocha coffee recently exceeded $6 (about 8,200 won)." Burkley said about the recent price hike, "That's it," adding that he now brews coffee at home or goes to smaller coffee chains instead of Starbucks.
The BBC pointed out that Starbucks is struggling as consumers suffering from inflation are closing their wallets. Starbucks' global sales in early this year decreased by 1.8% compared to the same period last year, and especially in its largest market, the United States, sales at stores operating for at least one year dropped by 3%. These figures represent the largest decline since the 2009 financial crisis and the COVID-19 pandemic.
It was also reported that not only general consumers but also so-called loyal customers, the 'Starbucks Rewards members,' have decreased. The BBC stated, "The number of active Rewards members fell by 4% compared to the previous quarter."
Raxman Narasimhan, Starbucks CEO, recently said in a conference call, "Recent sales were disappointing," adding, "Especially, 'misinformation' in the Middle East region affected sales."
Starbucks was hit hard by a boycott campaign after allegations spread that it supported Israel and funded the Israeli government and military during the Gaza Strip war that broke out in October last year. At that time, Starbucks sued the union after the union posted pro-Palestinian messages on social media, which led to a flood of customer protests, claiming that the union damaged the company's reputation, sparking controversy. Starbucks denied any connection with Israel, saying, "We became the target of the boycott due to misunderstandings," but it continues to face attacks. The stigma intensified as the company announced plans to cut 20% of its Starbucks employees in the Middle East region.
Bank of America analyst Sarah Senatore said, "Starbucks' price increases were not significantly more prominent compared to competitors," and added, "Other factors besides the boycott are insufficient to explain the recent sales decline."
CEO Narasimhan said he would pursue aggressive marketing such as launching new menus, but CFO Rachel Ruggieri stated, "It will take some time."
Meanwhile, Starbucks announced on April 30th its first-quarter results, showing both sales and net profit significantly below market expectations. Sales decreased by 2% compared to the same period last year, net profit dropped by as much as 15%, and the number of visitors to Starbucks stores in the U.S. in the first quarter fell by 7% compared to the same period last year, marking the largest quarterly decline since 2010.
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