How Coffee Quality Shapes Starbucks Pricing Power

Starbucks charges more than many chain competitors and still keeps steady traffic, because the price reflects brand positioning, spatial value, and target customers rather than bean cost alone. The primary audience is business professionals who want a place to work or talk, not the coffee itself, so the company avoids low-price promotions that would undercut that positioning.

Cutting prices carries a specific risk: customers read it as a sign that coffee quality has fallen, or that the brand is losing ground in the Chinese market. Rent, labor, and store design are hidden costs behind each cup. The third space concept, from open seating to meeting rooms and the 1971 Living Room, is what separates it from fast-moving consumer goods chains.

Starbucks' coffee prices have always been higher than many chain brands, yet it still maintains a stable consumer base. Behind this is not simply a matter of material costs, but the combined result of brand positioning, spatial value, and target customer groups. Starting from Starbucks' strategy of adhering to a high-end route, this article analyzes why it does not engage in low-price competition, how it retains business and leisure crowds through the "third space" concept, and explores the diverse motivations behind consumers choosing Starbucks. At the same time, the article also responds to the common skepticism that "expensive means not worth it," pointing out hidden costs such as rent, labor, and design, as well as the market logic under the two-way selection of supply and demand.

However, from a holistic perspective, Starbucks actually has its own reasons for sticking to this approach. If it were to get involved in various "low-price" promotions, it would instead drag down the brand's own growth: on one hand, it would fall into an endless war of attrition with other chain coffee brands; on the other hand, it would adversely affect the brand image. When a coffee brand long positioned on a high-end, business-oriented route suddenly cuts prices, customers' first reaction is often: Has Starbucks' coffee quality declined? Or: Has Starbucks finally failed to hold its ground in the Chinese market?

Therefore, for Starbucks, even if its sales volume cannot match other chain brands, and even if the public constantly complains that it is expensive and not worth it, it still must maintain its consistent "aloof" posture. Because its primary customer group is business professionals, and what these consumers truly need is a place to work or converse, not the flavor of the coffee itself. As for people who truly care about the taste of coffee, why would they choose to drink coffee at a chain coffee shop?

"You go your fast-moving consumer goods route, I'll go my third space." In this fast-paced era where most are unwilling to rent large spaces to provide dine-in service, Starbucks still adheres to the "third space" concept: from setting aside seats in stores for customers to rest and work, to providing business professionals with independent meeting rooms for private conversations, to launching the "1971 Living Room" to meet more personalized spatial needs such as gatherings, meetings, work, and study.

Starbucks' goal is to retain those who need a third setting to assist with work, relieve life's pressures, or gather for leisure, allowing those in need to catch a slight breather "in between hanging themselves" (from work pressure, life pressure, etc.). There is a Cantonese saying, "If you eat salted fish, you must endure thirst" (if you want to eat salted fish, you have to put up with being thirsty). If Starbucks can do its utmost to provide everyone with a comfortable space, then wanting drink prices to be low is an impossibility.

Mass consumers think Starbucks is expensive because its prices far exceed material costs, so they feel it is not worth it. But have you ever considered Starbucks' other costs? Rent for large stores, utilities, taxes, financing costs, equipment, labor (including designer fees for each store), and possibly franchise fees, etc. If you want a comfortable space, you must pay the corresponding price—this is inevitable. It is just like the beef chow fun at a dai pai dong versus a five-star restaurant: why does the five-star restaurant sell it for so much more, yet people still go to the five-star restaurant to eat it? It is for the environment.

Although everyone is a working person, each individual has their own different pursuits and spending levels. For what purpose consumers choose Starbucks is their own business; as long as the consumer feels it is worth it, that is enough. Starbucks does not force anyone to spend. There is absolutely no need to feel that others have a higher spending level than you and assume they are showing off... That is a spending level they can afford. Whether it tastes good is for the buyer to decide, and they will not give up their pursuits or their favorite coffee flavors because of a sour remark or two from you.

Beyond supply and demand, the market is like a marriage—it is a two-way choice. Consumers have the right to choose the coffee shop they accept, and Starbucks can likewise choose the customer base it wants. Starbucks also has no need to cut prices to attract some customer base it does not want. Consumers should also choose their consumption venues based on their own needs, rather than knowingly spending despite the high price and then proclaiming everywhere that it is not worth it.

Image source: Internet

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The above content is compiled by CoffeeHunters, a coffee news website.