Jenna Kaczmarski
Mr. Reuter
Economics
October 14, 2014
The Pumpkin Spice Latte Effect
The Pumpkin Spice Latte was created by the Starbucks Coffee Co. in the fall of 2003, since then sales have increased drastically, calling common white girls everywhere to get their fix. It’s ingredients include clove, cinnamon, nutmeg, and real pumpkin pie spices along with milk and whipped cream. While I personally would rather stick to hot apple cider during the crisp autumn months, it’s no wonder people look forward to this latte every year. This is called demand, the want or desire to possess a certain good. Starbucks has realized that it can supply this good for a very high price and people will still buy it year after year. This is because when it comes to this specific product, they are a monopoly- a company without competition. No other company can produce a drink as popular as the Pumpkin Spice Latte, even popular coffee shops such as Caribou have been steadily put out of business recently due to lack of sales in the holiday months. When we think coffee, we think Starbucks, and although their prices are outrageously high people constantly return because of these famous drinks.
Recently, social media has been tied to this drink allowing it to go viral. According to http://news.starbucks.com/news/starbucks-first-pumpkin-spice-latte more than 3,000 tweets are sent out daily with the hashtag Pumpkin Spice Latte and with twitter accounts such as the Common White Girl this drink has gotten lots of attention. The typical price for a grande Pumpkin Spice latte is $4.55 with the average price for a normal, non holiday drink being $3.95. This is how Starbucks makes its revenue, in the holiday season with thousands of tweets going out daily and with a high demand for this good, Starbucks is able to make a huge amount of money. Also, many people see this drink on social media and want to fit in with the crowd of, “common white girls”, so they go out and buy the drink. Not only does social media advertise the product, but it pressures girls psychologically to buy the Pumpkin Spice Latte. These are known as determinants of demand, or elements besides price which affect the overall demand of a good such as social media, season, and peer pressure. With this drink being sold in nearly 50 countries, it is readily available for purchase thousands of times daily in the fall season.
The following graph shows the net income margin, net income, and revenue over time which have all increased except during the years 2007-2010. As you can see, all of these factors increased after the creation of the Pumpkin Spice Latte; proving that it was a beneficial good for both consumer and supplier. Also the above tweet relates to the impact social media has on sales; it has over 2,000 retweets and over 1,000 favorites meaning that Pumpkin Spice Lattes are a trending topic throughout fall. Clearly, people love this drink and it has a positive effect on the economy as well as Starbucks Co.
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I thought this was a very interesting piece to read! Being a teenage girl myself I can relate to this fad. Starbucks is a very successful company that knows exactly how to increase consumer's demand for their special drinks, even at high prices! By doing this, the total revenue will increase because you are increasing the price. As you mentioned, consumers still want these drinks and will continue paying a high price until the price becomes absolutely crazy. Consumer's taste is one of the determinants of demand. By advertising and other ways to promote their pricey yet delicious drinks, this increases demand! Although Starbucks isn't the only coffee company to make pumpkin spice lattes, they are the most famous for this holiday drink that drives their profit up! Overall, I thought you made some really good points and I liked the graph that you included. This is something that many teenagers can relate to and helps put our economic terms in everyday life!
ReplyDeleteStarbucks is lucky that social media sites like Twitter picked up on advertising their product. This helps them out because they don't have to spend as much money on advertising the product and get some free rep for the product they sell for a small amount of time. People can see the tweets and want to go out and try it and so Starbucks increases sales.
ReplyDeleteI have never had a Pumpkin Spice Latte or coffee in general, but I see sales go up in the fall and carry on through the winter. Having something like the Pumpkin Spice Latte most likely boosts the sales throughout the winter as well. Fall, is the end of summer and in summer, people prefer cold drinks and what not. I feel as though kicking off the fall will get people hooked for the winter as well. They could probably even up the price a tad bit more and sales would not decrease. It would boost there revenue even more and throughout the winter they could come back down to normal prices as demand for Pumpkin Spice Lattes decreases.
ReplyDeleteBeing your common white girl, I’ll have to admit that I do like to drink the popular drink of a pumpkin spice latte. It’s not surprising how much revenue Starbucks makes by selling these drinks and bringing in so many consumers. There’s no competition for them and they can sell the coffee for a high price and people will still continue to buy the product. It’s a little sad that other coffee companies can’t keep up with Starbucks and are losing business because of it. But, that’s just how the modern times work.
ReplyDeleteWould the drink have the same effect if it was not a holiday special? In my opinion, it would not have the same effect because the demand would not be nearly as drastically high now as it would be just any other day. Because of this, Starbucks is able to increase the prices to insane heights, however because of its high demand, people are willing to buy it.
ReplyDeleteI thought this was very informative and funny at some parts. Although Starbucks is one of the only companies to product this specific beverage, I wouldn't call them a monopoly. There are most likely other places that sell knockoffs of this drink and you could probably get something similar at pick'n save or at Costco. You did really well explaining how starbucks used the drink as a primary source of revenue during the holiday months and highlighting the amount that this drink is talked about. Stink to your apple cider. Keep doing you!
ReplyDeleteThe Pumpkin Spice Latte appears to be becoming more of a cultural joke, than a drink itself. Ask any teen, and they will tell you that the stereotypical “white girl” likes leggings, iPhones, and Pumpkin Spice Lattes. As a person who has ever had one before, I do not understand the insane attraction to this expensive drink. I, personally, cannot see myself spending $4.55 on a drink, when I could spend $1.00 or even less for something similar. Granted, I understand that Starbucks in itself is an experience, and the drinks they make are not the same as “normal coffee”. Overall, I just don’t get the seasonal fad of the Pumpkin Spice Latte.
ReplyDeleteI think this is an excellent way for starbucks to make money. not only are there not a lot of competing companys they can raise their prices to whatever they want and people will still by it. people want the coffe the way they want it and fast. and starbucks is really the only known company to do that. yes you could go to mcdonalds and wait in the 45 minute line to get a coffee and cream. Now i myself am guilty for drinking the pumpkin spice latte (was delicious by the way) but only because there was so much hype surrounding it and also the time of the year. i also know 3 locations of Starbucks by heart to where i can drive to, to the only competitor caribou which only has 1 store squeezed in between jimmy johns.
ReplyDeleteAs me not being such a big fan of Starbucks because there high prices. I see the economy going back everyday just to get there star bucks. As the price was raised no one noticed the spike in price. i feel as tough this is a very good writing very well done as i see this article i notice more and more people still love Starbucks and will always go back.
ReplyDeleteIt is awesome to see how far Starbucks has gone. And to see how successful their products have been with the new trend. To when Starbucks first created the Pumpkin Spice Latte in 2003 the numbers are through the roof. This blog post also brings up a great point that there are no other competition to the Pumpkin Spice Latte. This is going to make a huge demand for their Pumpkin Spice Latte because there is no other restaurant that is going to have any competition.
ReplyDeleteI really liked the fact that you chose this topic because it's pretty funny to me. Before reading your article, I had never heard of a Pumpkin Spice Latte. I never really use Twitter or other social medias to often, and I could care less about Starbucks as well. its funny to me that this elastic good has such a high demand. Also, its hard to believe that the company makes that much money off this beverage. All in all, great article, great use of vocab, and nice tweet!
ReplyDeleteEvery season, Starbucks has different drinks that only come out during those seasons. People get so hyped up about them so they go and buy one; regardless of the price. Starbucks makes so much money doing this that no other company can really do this because it would be kind of stealing their idea. So really, Starbucks won't go out of business for a long time because of these seasonal drinks. If other competitors want to compete with this, they need to come up with an amazing idea that will blow everyone's socks off, and they should do this soon
ReplyDeleteI would agree with everyone else that this topic was a good one to chose in that a lot of people (mostly girls) can easily relate. I will admit that I’m guilty of indulging Starbucks once or twice a week, and that I bought the PSL the first day it came out this year on August 25th. But even though 99% of the time, people relate coffee to Starbucks, I think Collectivo has it in the bag. I cannot tell you how many times I’ve received my Starbucks drink and it’s either had too much syrup in it, the barista put way too much seasoning in it, or it’s flat out tasted like coffee grounds. But it is very convenient in that they’re every two blocks! I do think that that’s why Starbucks has thrived. So, just last week I tried Collectivo Coffee for the first time. I think it’s maybe just a little bit more expensive than Starbucks, but when you only go once a week, it’s really not that bad. But either way, I do have to say that it was 100% BETTER than Starbucks. If a Collectivo was in Pewaukee, I’d be going there rather than Starbucks. But again, Starbucks is more convenient making it easier for people to get their coffee quick and easy, and for Starbucks to make a profit.
ReplyDeleteHi Jenna, I really liked how unique your post was. I do agree that there is a lot of hype about Starbuck’s pumpkin spice latte but I think it is for different reason’s. I don’t believe that Starbucks truly has the monopoly on pumpkin spice latte’s. There are many other places that sell pumpkin spice lattes. Even McDonald’s has a pumpkin spice latte. The reason Starbuck’s pumpkin spice latte is so popular is because they have and oligopoly. They are most likely responsible for at least 70% of pumpkin spice latte sales. I would not say this has anything to do with their pumpkin spice latte, in fact, being one of the biggest coffee selling companies in the world they most likely have this same percentage for most other drinks as well. The reason they are able to control the market so well, relates to their image. Starbucks has worked hard to build a cool sophisticated reputation. Many people will get coffee from Starbucks not because they like it but because it makes them look cool.In fact I believe they could create a mint orange drink and people would still buy it just because it is Starbuck’s.
ReplyDeleteI thought this piece did a great job of incorporating vocab in. The analysis of the economic aspect of Starbucks was spot on and the Pumpkin Spice latte is a great example of an inelastic good. Though I don’t drink coffee that much I know many people do and I would agree that people are usually drinking some sort of starbucks drink.
ReplyDeleteThis was a really interesting post to read about, because it relates to the season were in, as well as the popularity of certain drinks at starbucks. As you mentioned throughout your piece, consumers are still willing to pay drastically high prices for the product that they want, showing how much Starbucks is demanded in the market. As a common white girl myself, I see Pumpkin Spice Latte’s all over social media, whether it be on Twitter, or Instagram, but either way, there is attention being brought to it. But this is how Starbucks receives its revenue, with advertising these seasonal drinks everywhere that they can, and it’s not a bad idea. Especially if your main consumers are these “common white girls”, why not go to their second home, social networking sites, and spread the word even further. I was also really surprised at how much this drink increased the net income margin, the net income, and the revenue. That by just this one drink, our economy can gain more than what meets the eye, but also benefit the consumer and supplier as well. Overall, good job on this post Jenna, I really enjoyed reading it and you brought up some great points regarding this popular fall drink at Starbucks!
ReplyDeleteJenna I definitely agree that right now is the perfect time for common white girls to splurge on some pumpkin spice lattes, which definitely benefits Starbuck's revenue. I personally do not include myself under this stereotype, in fact, I probably only get starbucks four times a year tops. From an economic perspective, however, I just can’t understand how girls are able to spend so much money on coffee when making it at their house can be just as good and economical. I’m not condemning the individuals that get this drink once during the fall, but to me, buying this or any other starbucks coffee every morning seems very excessive. The opportunity cost of spending that money on the coffee means that that money cannot be used or saved up for more meaningful purposes. In fact, a CBS study showed that an average American spends an estimated $740 on Starbucks! Wtih $740 one is able to buy a ticket to South America. I definitely enjoyed your blog but hope people start making wiser decision when it comes to spending so much money on coffee.
ReplyDeleteThe price difference is pretty crazy but everything goes up in price around Christmas because there is more demand for products to be given as gifts. If it's special and isn't something that comes around all the time, people are willing to pay more for it because it isn't something that they can have all the time.
ReplyDeleteI definitely would agree that these seasonally drinks have a positive impact on Starbucks revenue. I myself never really go to Starbucks unless these seasonal drinks are there for me to order. These drinks draw in people who are not regular coffee drinkers. These regular coffee drinkers are what Starbucks probably advertises to whenever it isn’t the holidays, but around this time of year they take advantage of the holiday festivities and plan out their marketing that way. Very smart of them, and seeing how much the revenue has increased over the past couple of years, you can tell their strategies are working.
ReplyDeleteJenna, your topic raises a lot of good points and is in tune with the current season. I think that Starbuck's is a very successful company and they are well aware of what brand's their name like the Pumpkin Spice Latte. Starbucks has the ability to raise the prices of this popular drink because of it's limited availability only being during fall. I think that Starbucks now should work towards creating a popular Christmas drink besides the peppermint mocha that can create a monopoly and attract more consumers.
ReplyDeleteJenna, absolutely love this collumn. Call me a "basic white girl" but I love pumpkin spice lates. You couldn't have picked a more perfect time to write this and I think a lot of people will enjoy this. I think you definatly brought up a good point about how people will be willing to pay drastic prices for things they want, including this drink. I don't think starbucks is in danger at all of going out of bussiness. On the other hand, I dissagree with what you said about no one else producing this drink. Panera and McDonalds have both released PSL this year. I'm not saying those ones are better but for a cheaper price alot of Americans will make them work. Overall great article, I really enjoyed it!
ReplyDeleteJenna, your post was very interesting and very relevant to the season of the year we are currently in. Personally, I wouldn't consider myself a part of the Pumpkin Spice Latte craze. Since it has become so popular, Starbucks could spend virtually nothing on advertising and still attract business because of the free marketing from social media. Friends tell their friends, who post it on Facebook or Twitter, it's shown on TV and in stereotypical cartoons, and suddenly the drink is a sensation. Since Starbucks has a monopoly on the product they can raise prices as much as they want, so I don't really see how the consumer benefits as you mentioned in your post.
ReplyDeleteThis piece was very interesting to read and was relative to the time of year we are in. Overall you did a good job of using graphs to your advantage to show the insane amounts of money people will spend do drink Starbucks, and in addition the profit Starbucks makes of off this trend. Personally I cannot understand how economically people are able to drink Starbucks everyday with the cost being so high and the benefit not outweighing it. I enjoyed your post a lot and you had a lot of strong arguments.
ReplyDeleteThis topic is very timely, because it is fall and Pumpkin Spice Lattes are at the peak of popularity. I know to some it might seem a bit dramatic that these drinks define the "white girl" stereotype, but the day the drink came out this year I saw three starbucks cups at school with the label PSL. It seems a bit ridiculous that Starbucks can jack up the price to 5 bucks for a grande, but with the amount of social media they have been getting the demand is obviously great for this product. I know as far as starbucks drinks goes, I would much rather wait for the seasonal peppermint mocha, but in general cheaper substitutes suit me fine when I need a coffee fix.
ReplyDeleteI think this was a great topic for you to chose! I also think that Starbucks decision to sell special season drinks is extremely smart for their income! The more seasonal drinks they offer, the more drinks people wait and look forward to, therefore more demand. I never knew that Starbucks increased their prices for the Pumpkin Spiced Latte, which is very smart for their company! However, I find it silly for customers to spend so much on a drink, even if it does only come around once a year. Your blog was very interesting to read and I think Starbucks is making smart decisions but customers need to seriously re-evaluate their purchases.
ReplyDeleteI enjoyed reading your topic and I definitely agree that all common white girls look forward to the new drink that Starbucks creates for each season and so the pumpkin spice latte is a huge hit for them right now. Even though Starbucks has such high prices, people constantly are going there, trying their new drinks they have each season and loving them. People get so excited about the new drink that Starbucks has to offer each season no matter what the price is they will still buy the drink. The majority of people think Starbucks when they think about coffee so Starbucks is a very popular coffee shop and is doing well in business just because of their seasonal drinks they offer.
ReplyDeleteLike you said, the holiday’s really help starbucks because as soon as fall starts it’s pumpkin spice everything. Plus this latte is only served during a certain period so demand goes way up because of the scarcity of the product. Starbucks is also a sort of monopoly, sure there are other coffee places but Starbucks has the ability to put them out of business like you said, Caribou Coffee went out of business due to lack of sales, sales that Starbucks is making. I also agree that the determinates of demand that you listed really help the company, social media sites are becoming one of the main ways businesses promote their products and Starbucks has certainly taken advantage of it. Your post has really shown how there is so much hype over a simple coffee drink, hopefully people will realize it’s not worth the $4.50 a cup.
ReplyDeleteIts hard to believe that no other coffee shops have tried selling a pumpkin spice latte like Starbucks. When see how much Starbucks has made from this seasonal drink you would think that somebody else would try to sell a similar product in order to help compete with them. Starbucks did a really good job of creating a seasonal drink like this to set it apart from the other coffee shops. They also did a good job of knowing that they could raise the price and still have about the same amount of customers buy the product.
ReplyDeletePeople have a higher demand for a product when they are forced to go a long time without it. Since certain seasonal drinks are only available for a set number of months during the year, people feel the need to get in their entire fix before it is gone. Consumer expectations about a product in the future, is a major determinant of demand. If pumpkin flavored food and drink items were available all year long there would not be as high of a demand for them. For example in the spring, because they would have already been consuming them for many months and would get sick of them.
ReplyDeleteIt really was great to read a piece as fresh as its topic (ba-dum-tiss). In all seriousness, this piece is very good in connecting vocabulary with a relevant part of this year. It was a truly interesting read, especially when you related social media to demand.
ReplyDeleteThe piece was interesting to read and relevant to the time of year. Especially on social media, pumpkin spice lattes are given an excessive amount of attention. Starbucks must be patting themselves on the back by monopolizing the Pumpkin Spice Latte, and making so much money from that. Although there are some other companies that try to make an off brand or knock off of a pumpkin spice latte, Starbucks still is the go-to coffee shop for Pumpkin Spice Latte.
ReplyDeletePersonally, I hate any aspect of pumpkin in any food or beverage so I can't stand the taste of the pumpkin spice lattes, but whenever I am waiting in line to order my Starbucks fix, there is typically one or two people that is either behind or in front of me that is ordering a pumpkin spice latte. Starbucks is lucky that they can create this kind of seasonal demand -- because they have this product for only a few months, people everywhere that enjoy the product visit Starbucks more often so they can indulge in as much pumpkin spice as the time period will allow them to. Although I disagree with the fact that you said Starbucks is a monopoly, the argument that you had was well put together.
ReplyDeleteWow! This topic attracted me right away, because I too know how much of a big deal this is to the “typical white girl.” I actually don’t like the pumpkin spice latte, but I can’t say that I don’t like starbucks. I haven’t really thought about the competition with starbucks, because like you said, people generally only think about starbucks when the conversation topic is coffee. This is a really good representation of all the vocab and understanding of the economy. It was really interesting to look at it through the economic way instead of the “typical white girl way.” Overall, you did a great job with representing your topic and relating it to economy. Very efficient and a pleasure to read. Good job Jenna!
ReplyDeleteI really enjoyed reading your take on this topic. Being a proud lover of a good pumpkin spice latte, I found your writing to be kind of humorous, but still very relevant to the world of econ. That being said, I can't say that I've ever really thought of the pumpkin spice latte in an economical sense, but it really does fit. My favorite part of your blog post, however, was the fact that you drew a relationship between social media and the demand for a product. While I'm sure we've all seen our fair share of social media type "advertisements", we don't always realize the impact that they really do have on sales. Overall, this was an interesting and funny read. Nice Job!
ReplyDeletePersonally I am a fan of the drink. Which indeed does make me a common white girl. It is crazy how popular the PSL is and how many people are constantly conversing about it. Sure, Starbucks has seasonal drinks for every season, so what makes this drink so popular? Is it really as good as everyone claims it to be? Maybe. But the biggest thing is the hype. The 3,000+ tweets about this drink every single day shows that social media now dominates what consumers are willing to purchase.
ReplyDeleteJenna this is a really interesting piece, and it is also a very good time for this topic to come up. Clearly we see the high demand for this product all over social media constantly, and everybody turns to see the mainstream thing to do and goes along with it. Because it is only around a certain window of time everybody is willing to pay that much more for the product, and is also more likely to purchase more during that time period because they will have to wait another year once it is gone. I like your reference to this product being a monopoly because clearly Starbucks is not one, but they are the only ones that get this much hype over one item that only they have. Overall I never really thought of how carefully thought out Starbucks is with their arrival of this drink because if the time for it is too limited they wont reach maximum sales, and if it is too large sales will begin to decline greatly.
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