Starbucks $3.65 Cup Of Coffee Is Too Expensive

The cost of a Starbucks Corp. (NASDAQ: SBUX) “short” cup of coffee, which is 8 fl oz, is $3.65. It comes in four versions: Blonde Roast – Sunsera, Pike Place Roast, Featured Dark Roast, and Decaf Pike Place Roast. Each has five calories. No matter what else Starbucks does to improve its tattered fortunes, it needs to charge less.

The price of a cup of coffee brewed at home is $0.40. Factoring in electricity and water adds a few pennies. A coffee brewing machine costs as little as $15. The value of that machine per cup can be measured over years and thousands of cups.

Another comparison is the cost of making a cup of Starbucks coffee at home. A box of 22 Starbucks K-Cup pods costs about $21, making each cup around $1.00. The cost of the machine also needs to be factored in. Over several years, that will amount to pennies.

What the Starbucks CEO Has Done

Starbucks CEO Brian Niccol has transformed the company into a new entity, he says. He has closed hundreds of stores and fired the people who work in them. He has laid off over 1,000 corporate staff. The latest slogan for his plans is “Project Bloom.” He also had a “Back to Starbucks” plan.

Niccol created a uniform for baristas. He established a process that enables Starbucks products to reach customers more quickly. He has made the menu smaller.

According to a message reported by The Wall Street Journal, Niccol is lurching from one decision to another. “The reality is the business has not performed and we needed to recognize that aspect.” No matter how strong his optimism has been, his plans are not working.

While Niccol decides which stores should turn out their lights, stockholders have become impatient. Starbucks shares have declined by 11% over the past year. The S&P 500 is up 16% over the same period. McDonald’s stock is flat.

Niccol went to the University of Chicago Booth School of Business. At some point, they must have told him what a “value proposition” is. No matter whether the stores look better inside or if the baristas have uniforms, a $3.65 very small cup of coffee isn’t a value under any circumstances.

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