Caitlin Bulacan
Economics
10.29.2019
Pumpkin Spice Lattes
As we transfer into the winter season, new data on the beloved pumpkin spice latte is rolling in from this 2019 fall season. Starbucks iconic seasonal drink was released back in 2003, which gained popularity quickly because this latte provided a new type of drink into the coffee realm. The ingredients that play a role within this latte are real pumpkin spices, cinnamon, clove, nutmeg, milk, and whipped crew to top it off. A recent Forbes article claims that over 424 million cups has been sold since the release back in 2003, and the direct effect is revenues and profits for Starbucks. As well, one analyst estimates sales of the pumpkin spice latte brought in more than $100 million in 2015 alone. With data showing how the demand for coffee will increase more than 25% between 2016 and 2020, this will shift the demand curve to the right because there will be more consumers buying this popular drink.
Because this seasonal drink is only offered for a couple months, pumpkin spice latte lovers have to face the rest of the year without the ability to consume this drink. But once the PSL hits the market the following year, consumers are willing to pay more money for this product because there is a scarce amount of pumpkin lattes. Which this allows Starbucks to make a larger profit, due to this product bring of a monopoly - a company with no competition. Although competing brands have tried to recreate this latte, no one has come close to bring in the revenues Starbucks has made off this product. For the typical sized pumpkin spiced lattes, customers pay a total of $7.81- $8.30, but those who purchase non-holiday drinks only have to pay part of that price.
In addition to this popular holiday drink, Starbucks also has a twitter page for this infamous drink. This drink has gained popularity nationwide, and Starbucks is hoping to add more pumpkin based drinks to the menu next year. Which will only provide a bigger revenue for Starbucks. According to Nielsen, annual sales of pumpkin flavored products in 2019 totaled nearly $489 million – up nearly 16% from the year before. These numbers are expected to only increase every year.
Works Cited
Bull. “Pumpkin Spice Latte Is Just One Part Of Starbucks' Growth Story.” Seeking Alpha, 27 Sept. 2016, seekingalpha.com/article/4008787-pumpkin-spice-latte-just-one-part-starbucks-growth-story.
Callahan, Molly, and Molly Callahan. “Welcome to the 'Pumpkin Spice Economy'.” News Northeastern Welcome to the Pumpkin Spice Economy Comments, 30 Aug. 2018, news.northeastern.edu/2018/08/30/welcome-to-the-pumpkin-spice-economy/.
Friedman, Megan. “Sorry, Autumn Lovers: It Looks Like Pumpkin Spice Is On Its Way Out.” Redbook, Redbook, 23 Oct. 2017, www.redbookmag.com/food-recipes/news/a39677/pumpkin-spice-flavor-trend/.
“Yes, Pumpkin Spice Season Is Creeping Earlier Every Year - and This Chart Proves It.” Google, Google, www.google.com/amp/s/www.marketwatch.com/amp/story/guid/5F88512E-C43E-11E9-9281-1A808DCFBD71.
I think that this topic, despite being on a simple coffee drink, is super interesting because of the economic impact it has on Starbucks as a company. The fact that since 2003 there have been over 400 million cups sold is crazy to me. Starbucks is a great example of a financially successful company because of its persuading ways. Having this product for a small portion of the year is also a smart tactic due to the fact that customers who love this drink crave it all year,and the minute it is released again they are the first to buy it.This is a great blog post and topic!
ReplyDeleteI very much enjoyed this blog post, being a PSL lover myself. I can definitely see how their revenue rises during this time of the year because of the pumpkin drinks. As a consumer, I allow myself to buy more coffee during this time of the year as the drinks are seasonal and therefore limited time. Although many people like to make fun of the Starbucks chain and roll their eyes at the overpriced beverages, you can't deny that they are the most successful coffee business in the nation. Their work with marketing and reaching out to their age group through twitter shows their success as a company.
ReplyDeleteAs someone who works at Starbucks as a barista, I can usually see first hand how this trend affects business. I've already seen the climate at Starbucks completely shift due to it being during the school year, with teenagers there studying all the way until close. I think the timing of this drink also affects the market: while I see plenty of more middle-aged people order the drink, the vast majority of our sales of pumpkin spice lattes (and most of our teas) go to teenagers from 5:30 and onward. I am curious how the latte would do if it were released some other time, before or after teenagers get into the habit of studying outside of their home. Would it affect anything at all?
ReplyDeleteIt is not shocking how much money Starbucks brings in because of their holiday drinks, especially in the fall. As a customer, I do find myself buying more coffee and Starbucks products around this time of the year because of the seasonal drinks and because it is cold outside. Although many complain about the beverages being overpriced, customers are still willing to pay for these drinks which allows the company to have the success that it does as they are the most successful coffee business.
ReplyDeleteI have never enjoyed a PSL myself, but I understand the hype. I myself love the McRib, and everytime it comes back on the menu at Mcdonalds i'm willing to pay 4.79 for it. This strategy seems to work in every market, if you build anticipation the customers are willing to pay for the "special" product.
ReplyDeleteI personally don't like the PSL, but I can understand why Starbucks makes so much revenue off of this drink. With it being a seasonal, annual item, anticipation builds throughout the year, only increasing demand. Also, the fact that Starbucks holds a "monopoly" over this drink is interesting...yes, it is true that no one comes close to replicating the PSL, but it is interesting to consider this a monopoly...anyway, it is true that Starbucks faces little competition in terms of the PSL. All of this, including the recent trends, shows that the PSL is a very stable item on the menu with high demand. Thus, Starbucks can continue to cash in on this consumer trend for quite some time.
ReplyDeleteI like that you took a very relevant and kind of controversial topic and turned it into a topic of discussion. I never would have thought to do something so minimal as an economic effect but it really does effect our economy due to the pure cost of pumpkin spice lattes.
ReplyDeleteThough I’ve never had a pumpkin spice latte it sounds like it’s full of flavor and if you had to choose one thing to embody the fall season it would have to be the pumpkin spice latte everyone knows the name and even if you’ve been living under a rock for your whole life you can instantly know what a pumpkin spice latte entails
ReplyDeleteI expected the number of sold pumpkin spice lattes to be so high because pumpkin spiced lattes have so much hype during the fall season. It has become such a trend that hasn't died because the taste of pumpkin beings the same nostalgic joy that peppermint or even regular hot chocolate does during the christmas season. It's more than just coffee, it gets people excited for the seasonal changes and so since we wait all year round for it consumers take advantage of the scarce good. The only thing that didn't make much sense to me was the rise in pumpkin production related to pumpkin spiced lattes because I assumed it was all unnatural pumpkin-tasting spices and had really nothing to do with actual pumpkins.
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ReplyDeleteI am not surprised that this drink is producing so much money. When companies have limited time offers everyone seems to go crazy, as if they would never taste pumpkin again. If the latte was offered all year I can guarantee that it wouldn't be producing as much money because it’s not in “season”. But you can have pumpkin whenever you want. This marketing strategy works so well because everyone wants to get the latte in season. Because it is cold outside and the drink is warm everyone seems to be intrigued in the drink. It is a good thing for business.
That’s crazy to think that since 2003 over 424 millions cup of Pumpkin Spice Latte has been sold! I wonder how many cups they sell each day during the season. I can’t believe how expansive one drink costs, but it makes sense since pumpkins itself are only a holiday product and there is only a certain amount of pumpkins coming in for a short period of time, so consumers will have to increase the price. Starbucks is probably very busy during this time of the year considering the seasonal drinks that people wait all year for and school starting in the morning. Starbucks is also an easy access for Pewaukee students to go to since there is one locally by our school.
ReplyDeleteI thought it was really interesting that pumpkin-spiced products were able to bring in this much profit. As someone who doesn’t enjoy anything pumpkin-spiced, it was weird to see how much Starbucks was economically benefiting off of it. I really liked your economic standpoint of how it wouldn’t be beneficial to sell it all year long because of the “hype” they are able to generate; that if they were to sell it all year long it wouldn’t be that much of a deal. I think this also applies to when Starbucks introduces its peppermint coffee or even their “red cup” season. That people want it more when it's there for a limited time or limited supply. I wonder if Starbucks were to increase the price, even more, would people finally turn to supplements or would they pay ridiculous amounts for it? Also how much does it cost for Starbucks to make these pumpkin-spiced drinks and what percentage of growth do they have over time?
ReplyDeleteStarbucks jacking up the price of the seasonal drink shows what we have been learning in class on the supply and demand curve. Starbucks only releases this drink for a brief period each year and know people will be willing to pay more for it. There is less of this good meaning the cost is higher, it is an elastic good.
ReplyDeleteI'm not a huge coffee drinker myself but i know a lot of people really like these drinks. Making them seasonal is a great tactic. Nice job. Coolio. I wish I would've thought of this.
ReplyDeleteI had no idea that pumpkin spice lattes were so popular. I knew they were popular but I had no idea they were this insanely popular. Next time I go to Starbucks I'll make sure to try one and see what all the hype is about.
ReplyDeleteI love pumpkin spice lattes, but I get mine at kwik trip for $1 instead of going to starbucks since they overprice their lattes. I think it's clever of starbucks to only have pumpkin spice lattes around once a year and overprice them in order to make lots of money because people are willing to pay the price due to the scarcity of the lattes.
ReplyDeleteA perfect example of how the social hype around Starbucks is the pivotal money maker for the company. The drinks are seasonal which just makes it that much easier for Starbucks to take people's money. The demand for the drink is not just based on taste, but also the pull of customers to the trends of social media.
ReplyDeleteProducts centered around a limited time event are a great way for a company like Starbucks to bring in large amounts of revenue. Other companies need to find their own special product in attempt to try and replicate some of the success found by Starbucks.
ReplyDeleteI never realized how much Pumpkin Spice Latte impacted the economy. Knowing how much starbucks makes off of these and that people are willing to pay more than they need for this drink. People these days are buying these off of what they want not what they need. I think it is smart of starbucks to only sell Pumpkin Spice Lattes in the winter so it keeps people waiting. Then people are willing to way whatever to have one.
ReplyDeletePersonally pumpkin isn't my favorite, I've never gotten into the PSL drink at Starbucks, but both my sisters and my mom love it. I think that you took a really interesting approach for your blog topic. I like the fact that you focused in on one product in particular, and how much that one thing can have such a big impact on a company. Like what Kendall said in his topic, I think that the timing of this drink really does make a difference, obviously for the season, but once school starts there is a high chance that more teens are spending their money there. If it's before school, after school, or studying with friends on the weekend, teens are stopping in all of the time. And I know this for a fact because in the summer I never find myself at Starbucks but as soon as the school ear starts that's where I am every morning on my way to school.
ReplyDeleteIve never had a pumpkin spiced latte in my life, but I do know that msot people are obsessed with going to starbucks on a daily basis, and starbucks makes a lot of money pricing these drinks high. I remember when the unicorn frappacino used to be all the rage. I think people are more likey to buy a drink at starbucks and waste their money than go to another coffee shop with the same drink, because it is a more popular shop. I personally can'tgo to starbucks that often, and usually get coffee at Mcdonalds cuz its much cheaper.
ReplyDeleteI really like the seasonal drinks but I never thought about how it would impact the economy. I do think that they are a little over-priced but I do realize that they are a seasonal special. Since so many people love it it is very smart that it is only sold in fall/winter so people get excited about it every year. When they think fall they think PSL.
ReplyDeleteI love that you chose this topic going right into the fall season. One of my favorites part of the season is everything being pumpkin and orange. I personally so not like coffee, but most people love coffee and pumpkin so the pumpkin spice latte from Starbucks is definitely going to be popular. Another main reason why Starbucks sells so many of these lattes is because they are only available for a short period of time and people will spend a lot of money and will buy a lot of them to make the most of the season. Starbucks is also very popular overall, so I see why they would be so successful with these lattes and I can't think of a better coffee than one at Starbucks. In the end, I think that Starbucks is amazing and though sales of their drinks have already dramatically increased, I think that will continue and this season might just be one of the biggest ones yet for those pumpkin spice lattes!!
ReplyDeleteI think it is insane how much customers are willing to pay for those PSL. Like yes, I like many others love to drink those but I would never pay 7 or 8 dollars for a drink from Starbucks. Honestly, I usually don't get Starbucks that often because of how much they charge for just everyday drinks. It can be a waste of money and can really add up if you go multiple times a week.
ReplyDeleteI would like to start of by saying that it is mind-blowing to me, I mean, MIND-BLOWING to me that Starbucks made $100 million in just the year 2015 because of a drink that is pumpkin flavored. There's no health benefits, no added nutrition, it is a normal coffee drink. I have had a pumpkin spice latte before and it's nothing special, but it has become such a phenomenon.
ReplyDeleteIt was well done how you were able to add economics vocabulary into a seasonal drink. I think its crazy how much people are willing to pay for a cup of coffee when in general coffee is very cheap to make. Those who choose to pay such a ridiculous amount for the latte should consider spending their money elsewhere, or save it to buy a home brew coffee machine.
ReplyDeleteit's interesting that you chose to do your blog post on something so trendy but were still able to put a financial management spin on it.
ReplyDeleteI knew that seasonal drinks make Starbucks a lot of money, but I did not realize that it made them that much money. It is true that because the drink is only around for a couple of months a year, that consumers make an effort to make sure that they get one. The pumpkin spice latte also has a lot of culture surrounding it, and people believe they have to drink one to have the fall experience. But, I think Starbucks needs to make sure they do not raise the price too high, otherwise consumers may not buy it. I try to never pay more than $5 for coffee, and I would never buy a PSL if it ever went above that.
ReplyDeleteThis is one of the many reasons I don't go to Starbucks. Because I don't support monopoly and I would rather have a nice Lipton tea. One thing you could do is show a graph on how average people in pewaukee spend their money on Pumpkin spice lattes to show how is better connects with the audience.
ReplyDeleteI always thought of the pumpkin latte as recent craze but I still had no idea how popular it was until now. It was surprising to find out that this has been around since 2003 as well as how many latte's have sold and the revenue Starbucks has earned because of it. Its cool to think about the financial impact of something that is only around for a few months a year.
ReplyDeleteI think that this data is crazy because of how expensive these drinks are. It is crazy to think that people are willing to pay so much money for a drink when it isn't going to fill you up and is very small in size. I was also surprised to hear that the drink came out so long ago. Alone, this drink has been making Starbucks more money than the entire rest of their menu. I don't know why no other companies have tried to make this drink as well in order to bring in profit. I don't think that Starbucks is able to patent the recipe because they don't want anyone else to know how it is made. Overall the numbers Starbucks is putting up is crazy and will continue to rise each year.
ReplyDeleteThe idea that one latte is holding such importance in the market sounds ludicrous but seasonal items do have major impacts on what is the most sold items, at Panera the strawberry poppyseed salad is only a summer thing, and if you work on the salad line for a single day in a summer rush you get to the point where everything in that salad is memorized and you can make it in 30 seconds or less.
ReplyDeleteI think it's interesting to see how much people want these season drinks. They are very good and everyone likes them, but are only out a few month out of the whole year. This is a good way to keep customers in the loop and wanting to come back year after year for a product that they love. This makes Starbucks a lot of money, and is smart that they only have them for a limited time.
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