Shelby Clark
Now that fall is in full swing the trees have changed colors, the weather has gotten colder, and of course, the unveiling of the prestigious Pumpkin Spiced Latte (PSL) from Starbucks has got people all over the country jumping with joy. Starbucks gave Pumpkin Spiced Latte’s their first debut back in 2003 and nearly 200 million have been sold since (Forbes). In fact, PSL’s are so popular they even have their own Twitter page with nearly 120,000 followers. Those who have not experienced the PSL delight often question what makes this espresso so popular. The answer lies in the economic qualities that accompany the PSL’s. The scarcity, seasonal trends, and company popularity are all facts play a part in making Starbucks Pumpkin Spiced Latte an extremely successful espresso.
The scarcity of Pumpkin Spiced Lattes definitely add to its extremely high demand. Being that there is not a lot of pumpkin during majority of the year, consumers are only able to enjoy their favorite drink for a couple of months. This low supply creates a very high demand as, following the eight month drought, PSL lovers are at their peak withdrawal, and are willing to purchase a higher quantity at a higher price. While the average year round venti latte at Starbucks costs $4.25, Pumpkin Spiced Latte’s are currently priced at $5.25 (Starbucks Menu). Buyers don’t seem to mind the raise in price because they know they are only able to enjoy PSL’s for a short period of time. In fact on average, PSL consumers spend more with each transaction, and pay on average $7.91 with each visit, while non-consumers spend on average $6.71 per transaction (Forbes). If Starbucks were to sell PSL’s throughout the entire year they wouldn't be as special and consumers would get bored after a while.
While scarcity is one factor that increases PSL’s demand, the seasonal characteristics also play their part. Starbucks chooses to release Pumpkin Spiced Lattes during the fall season because the sales of pumpkin flavored foods and pumpkin household products are also being exercised, and this latte fits right in with the theme. In fact, sales of pumpkin foods, beverages, and products has increased by almost 80% since 2011.This has to do with the demographics of America since nearly 46 million people celebrate Thanksgivign (Thanksgiving) and 42 million celebrate Halloween (Halloween) --both of which often accompany the purchase of pumpkin foods and products. Starbucks decides to take advantage of the fall pumpkin trends because buyers are already on the hunt for autumn oriented decor, foods, and beverages. Not to mention, the seasonal sale also allows Starbucks to use its resources to go towards other popular beverages during other seasons. For example, Starbucks peppermint mocha latte would probably be more popular than a PSL in the middle of winter. It’s one of the many trade offs Starbucks creates as they assess the potential opportunity costs surrounding the timing they sell these popular beverages.
Along with the PSL’s scarcity, and timing, having them sold by Starbucks also helps to increase their sales. Currently Starbucks resembles a name brand style, such as Nike or Under Armour, in the coffee business. Other companies offer very similar products, but Starbucks is the popular choice which affects where people choose to spend their money, and alters their consumer expectations. Generally consumers expect higher quality from Starbucks because it is such a popular name brand, and sells its product for higher prices. When compared to Dunkin Donuts in a survey (as shown below), consumers were much more willing to get lunch at Starbucks instead of Dunkin Donuts, even though Dunkin Donuts is more widely known for its food (Civic Science). Not to mention, as displayed in the graph below, Starbucks has had a greater comparable sales growth by over 3% than DD in the past six years (Dunkin, Mickey D’s, or Starbucks?). Being that consumers generally prefer Starbucks over other companies, it’s no wonder their PSL’s has become a latte sensation.
All in all, due to the scarcity, seasonal cravings, and company popularity, Starbucks Pumpkin Spiced Lattes have become an extremely popular fall beverage. It is estimated that Starbucks will sell over $100 million of PSL’s this autumn as consumers rush in to get their next Pumped Spiced Latte fix (Forbes).
Works Cited
By November 2005, London Had More Outlets than Manhattan, a Sign of Starbucks Becoming an International Brand. "Spots ArchiveWeekly Spots for August 30." Weekly Spots for August 30. N.p., n.d. Web. 11 Oct. 2016.
"CivicScience | Meet You for Lunch... at Dunkin' Donuts. Or Starbucks." CivicScience. N.p., 2014. Web. 11 Oct. 2016.
"Dunkin', Mickey D's, or Starbucks? The Surprising Winner of the Coffee War." Time. Time, n.d. Web. 11 Oct. 2016.
Kell, John. "Panera Promises a ‘clean’ Pumpkin Spice Latte for This Fall." Fortune Panera Promises a Clean Pumpkin Spice Latte for This Fall Comments. N.p., 2015. Web. 11 Oct. 2016.
"Thanksgiving by the Numbers." CNN. Cable News Network, n.d. Web. 11 Oct. 2016.
"The Most Delicious Drinks Are Starbucks Drinks." Starbucks Coffee Company. N.p., n.d. Web. 11 Oct. 2016.
"The Pumpkin Spice Economy: How Starbucks Lattees Fueled a $500 Million Craze." Forbes. Forbes Magazine, n.d. Web. 11 Oct. 2016.
The Pumpkin Spice Latte is a nationally adored, autumnal drink here in the United States. Many Starbucks and PSL lovers gleam with excitement in the final days of August knowing their beloved drink is soon going to make an appearance. I, too, am a PSL supporter. I follow the Starbucks page on Facebook and every year, I always keep my eyes out for the announcement of the return of the PSL. In conjunction with Shelby, PSL lovers are willing to pay whatever price necessary to obtain this sugary drink because they know they can only purchase it a few months of the year. Personally, I did not even check the price before I ordered my first PSL this year, I just placed my order and focused on how excited I was to drink it. The scarcity of the PSL is the main reason fans pay a whopping $5.25. Such a low supply of this drink creates a very high demand, thus the reason Starbucks charges so much for it and the reason why fans are willing to pay that price. However, if I knew this drink was going to be available all year long, as opposed to just a few months, I would not be as excited for it, and I definitely would not be okay with paying such a high price. Starbucks employees and executive consider the trade offs and opportunity costs that go into play when deciding when exactly to release this drink.
ReplyDeleteI also love the pumpkin spice latte and I don't care what the price of it is I would buy it anyway because its only available for a limited time. I think that's why people love it so much because it is a scarce product. This is also the reason the drink is so expensive because Starbucks knows that people will be willing to pay this much for a PSL because it is not available all year round. I also agree that if this drink were available all year round I would not pay that price for the drink.
ReplyDeleteFall is considered a favorite season to many people, especially those teenage girls waiting to take their annual pumpkin spice snap story or Instagram post. However, after reading this and learning how much people truly spend on these lattes, it brought up a question in my mind. Starbucks offers numerous other fall drinks such as Caramel Apple Spice, Pumpkin Chai,and many more according to: http://jolt24.com/2013/11/24/15-new-secret-starbucks-drinks-for-fall-and-winter/. So why is it that the Pumpkin Spice is the most popular? There are numerous other pumpkin flavored drinks not only at Starbucks but at other places such as McDonalds, Culvers, and probably for a much cheaper price. So what is it about this type of latte that attracts so many people? You'd think the higher price would drive people away, however, I agree that the limited time it is offered and the popularity of the Starbucks brand are what keep people coming. The change in demand really plays a big role here. It's interesting because I feel as if the blow out of money the company makes off of fall drinks, is much more than the revenue they make off of Christmas drinks. But why? They're both seasonal drinks. Fall just puts people in the spirit to start drinking warm drinks and that is where the Pumpkin Spice latte comes into play.
ReplyDeleteShelby, I couldn't have written this better myself. You used excellent economic vocabulary in explaining the high demand for this needed product during fall. I know personally I can’t get enough of this drink and always feel the need to get one since I know they will soon be gone. It’s interesting that you discussed the price raise because I never noticed that! It all makes sense now. The crazy passion for this joy in a cup. It’s because of the sacracy in pumpkins that we can’t have this drink option all year. Although it is irritating that the company would raise their prices, it’s smart. They know that people are coocoo for this beverage and are willing to pay any price. This was the perfect topic to write about as it correlates with our recent lesson in Econ. For now, we must embrace the PSL and wait until winter comes so we can one again drink the peppermint mocha as well!
ReplyDeleteThis was a very interesting topic and overall I really liked your piece. I never knew that the Pumpkin Spice Latte and the economy were so closely related. I found it fascinating that over 200 million PSL’s have been sold. I never thought about how the PSL’s are priced a dollar more than a regular latte, and yet people don’t even mind spending it. I believe that it is the scarcity that gives people the peace of mind to buy one more PSL. If the drink was available all year round people would probably lose their zeal for the Pumpkin Spice Latte.
ReplyDeleteKnowing that the pumpkin spice latte only comes around in the fall, many people get excited for the delicious drink and forget about the cost. Personally, I did't realize Starbucks drove the price up for this drink, but I now understand why. Since the drink and pumpkins are scarce and only come around in the fall, their strategy was to drive the price up. Why? Because they know many coffee lovers will get the limited latte as many times are possible before it can no longer be order until next year. Even with the higher price, the demand for this drink is so only getting stronger as more and more people want the warm latte. The drink also increases the total revenue for Starbucks and their brand recognition. This is why Starbucks will continue with the seasonal drinks as it is really benefiting the company and popularity of the pumpkin spice latte.
ReplyDeletePumpkin spice latte is a seasonal good at Starbucks, which causes the demand for the drink to be much higher than their other drinks that can be purchased all year round. Personally, I was unaware that Starbucks decided to increase the price for this drink, but increase in such demand allowed for them to stealthily increase the price consumers must pay. Many would think that a price increase would cause a demand decrease, but the demand does not seem to be changing nor will it be any time soon. On top of Starbucks increasing their price for the latte, the Pumpkin Spice latte is also noted to have always been a higher price than their competitors Pumpkin Spice Latte, yet their brand recognition for the drink is able to keep consumers from switching to other company's. When people think of a Pumpkin Spice Latte, it is most noted that Starbucks in the King of the market, so increasing the price is no problem for sales.
ReplyDeleteDue to the seasonal offering of pumpkin spice, demand is always able to be very high, especially during the fall, when actually pumpkins are set out for holloween. Because of this high seasonal demand, Starbucks and other companies are able to charge more, as pumpkin spice latte is a normal good without any real substitutes. No matter the price change, people will still want and buy their pumpkin spice latte from Starbucks.
ReplyDeleteWhile it is now fall and Starbucks is offering their Pumpkin Spice Latte's, the demand for them have increased due it's seasonal formality. People are willing to spend the $5.25 on it, and enjoy it for the short while it lasts, however for me, I am not a follower. It is not that I have anything against the drink itself, however with social media and consumer tastes, many people buy it to follow trends and go along with everyone else. There have been multiple times where you see these Starbucks cups with PSL on the side on snapchat, facebook, etc., people buy this drink to follow everyone else. Sometimes I wonder how many people actually like the drink. Whether or not people actually do enjoy the pumpkin spice latte, the demand during the fall and winter for this seasonal drink definitely increases.
ReplyDeleteWhile it is now fall and Starbucks is offering their Pumpkin Spice Latte's, the demand for them have increased due it's seasonal formality. People are willing to spend the $5.25 on it, and enjoy it for the short while it lasts, however for me, I am not a follower. It is not that I have anything against the drink itself, however with social media and consumer tastes, many people buy it to follow trends and go along with everyone else. There have been multiple times where you see these Starbucks cups with PSL on the side on snapchat, facebook, etc., people buy this drink to follow everyone else. Sometimes I wonder how many people actually like the drink. Whether or not people actually do enjoy the pumpkin spice latte, the demand during the fall and winter for this seasonal drink definitely increases.
ReplyDeleteI fully agree that people are willing to spend more on the PSL because they know it is only here for a limited time. The consumer expectations of how long there are going to last impacts how many are purchased. In our area of Wisconsin, I feel like the cliche things to been seen with/wearing for girls are sweaters, Uggs, and having a PSL. It's a look the autumn look that people want to go for so they go to Starbucks and purchase PSL to complete it. Starbucks choosing this time of year to serve PSL's is very smart because of the popularity of pumpkins during this time of the year. All over my neighborhood, people are reminded of them every time they walk or drive due to the orange and black facial feature pumpkins that wrap around everyone's light posts. People have a craving for pumpkin once the weather starts to get cold, and Starbucks is there to supply the consumers with what they want.
ReplyDeleteWow Shelby, I agree that the enthusiasm surrounding the PSL is just unmatched. Even by other seasonal Starbucks drinks! Although their Winter beverages are typically very popular, in recent years Starbucks has tried introducing springtime drinks as well, such as the birthday-cake frappuchino. But spring is just not as happy a time as fall is, with its sleet-covered streets, and the accompanying frustration as everyone waits for it to hit 60 degrees. Fall is just a happy time, and people are more willing to spend more money during this season simply because everyone is in a good mood since school is still manageable, we all have Halloween, Thanksgiving, and Christmas to look forward to, and there are pretty colors everywhere.
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ReplyDeleteThe pumpkin spice latte is the perfect example of a seasonal good that is in high demand right now, and soon there will be a new trend to come along in the winter, and another in the summer. Starbucks is pretty genius because they create something as good as the pumpkin spiced latte, or peppermint mocha, or the sangria tea, and then they take it away for a while so next time it comes back around it is more popular than ever. If they were to leave all of these things on the menu then they would not be in high demand when their specific season came around, and then starbucks would not be able to sell as many of them every year. Therefore, creating seasonal drinks is one of the smartest things starbucks have ever done, even if it is annoying that you cannot buy a pumpkin spice latte in the middle of March.
Seasonal products definitely thrive due to consumer tastes. I have always been one to enjoy a good pumpkin spice latte in the autumn weather and a peppermint mocha in the winter. There is something so compelling about the seasonality of the products that makes consumers want to purchase them. Similarly to the pumpkin spice latte at Starbucks, McDonald’s launches its shamrock shake around every St. Patrick’s day. There have been demands for the product to be sold year round, but McDonald’s just won’t do it. McDonald’s knows more than anybody that the reason the shake is so successful is because of the scarcity and consumer taste during the season. Everybody goes out to buy their shakes because they know the shake will not be available to them shortly. The reality of it is, if the shake was provided year round the demand curve would shift left because the consumers wouldn’t be as drawn to it, because of consumer taste.
ReplyDeleteThe pumpkin spice latte is by far one of the most popular seasonal drinks at Starbucks. The demand is very high during this season particularly because people feel the need to get into the fall spirit. I really enjoyed reading this post because I found out things that I was unaware of before. Raising the prices of the drink because their is a higher demand is a smart decision because people are willing to pay a lot to get this limited time drink. At any other time of the year, most would find it very unreasonable to pay so much for a drink, but because the supplies is limited and only available during this season, people are more willing. There is also very few substructures to the PSL as most other drinks are the same ones you can buy all year. I also found it interesting how most are attracted to Starbucks rather than a normal coffee shop. Due to the popularity of the shop, it draws people in with many different advertisements. Other shops, such as Dunkin Donuts, have similar qualities, but an overwhelming amount of people prefer Starbcuk's over Dunkin Donuts simply because it is so widely talked about and liked. PSL sure do bring in a lot of money for this company and they take advantage of the limited supply by pricing the drink high, due to the high demand. Overall, this is a very smart business decision because no matter what the price change, people will still be willing to pay any amount for their favorite fall beverage.
ReplyDeleteThe pumpkin spice latte at Starbucks is probably one of the most famous seasonal Starbucks drinks. Every year people look forward to having their pumpkin spice latte simply because it is in the season that pumpkin is very popular. Since the PLS is only around for a couple of months people feel they need to get as much as they can before it is no longer in season. This allows Starbucks to increase prices on the PLS because the demand is so high they are not worried about people who think the price is too expensive. Starbucks is being smart and taking this seasonal drink to their advantage to get more money.
ReplyDeletePersonally, I have never had a Pumpkin Spice Latte, so I was able to agree in your post that I don’t know what the big hype about this drink is. Although the statistics are staggering about how much consumers are willing to pay for a drink that will only last about 20 minutes, I agree on the reason why. It’s like Christmas decorations--everyone loves Christmas, so they want to make the outside of their house light up, as well as the inside to enjoy the holiday while it lasts. Like you stated, the holiday doesn’t last forever, so people want to buy the items now before they are gone. In a way, Starbucks has a very strategic plan when it comes to their drinks because when their seasonal drinks like the PSL’s come out, that’s when their profit is at its all time high. If Dunkin Donuts wants to get more money and compete against Starbucks, they should start making a seasonal donut or something. But honestly, after reading your post, I may go out and try a PSL to see how good it is.
ReplyDeleteIn addition to my comment, Dunkin Donuts makes seasonal coffee drinks, but instead of selling them in their restaurant at a high price, they sell them in the stores like Pick N' Save at a much smaller price. They may not be as popular, but Dunkin Donuts is not smart in the sense that these 11oz coffee bags that are sold in the store at a lower price can make up to 4 cups of coffee. Per 4 cups of coffee that are made at home, Dunkin Donuts makes $6.40 less. Think about how much that will add up over the years. And that's why Starbucks succeeds. They are very strategic and smart as to how much their drinks will cost and what season they are sold in.
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