FREE NEWSLETTER
HERE I SIT IN MY local Starbucks, sipping an overpriced iced tea comprised of 50% ice. As I am prone to do, I’m observing the customers in line and what they’re ordering. Yeah, I’m that suspicious-looking old man in the corner with iPhone in hand.
What I observe is a line of young, really young people—like less than age 25. What I see is consistent with many other stores where I’ve loitered, that is, lingered.
I anecdotally conclude that a younger demographic is Starbucks’s target. In fact, 49% of Starbucks’s revenue comes from 25- to 40-year-olds, while 18- to 24-year-olds account for another 40%. Starbucks considers its core customer to have an average income of $90,000. I’m not so sure. Neither the average nor the median income for Americans under age 45 is anywhere near that.
I’m pretty sure a big chunk of Starbucks’s customers can’t afford what they spend on their drinks. Yeah, I said it, can’t afford. But, of course, they buy them anyway. They just don’t realize what they can’t afford. Maybe I should give them a break. After all, the under-25 crowd’s brains aren’t fully developed.
How people spend their money fascinates me, especially when I hear that 42% of Americans are struggling financially, that many can’t afford their prescription copays and that they’re unable to save for the future. The average American household spends some 18% of its net income on things like pets, hotels, eating out, equipment for their hobbies, and entertainment fees and admissions.
I’m convinced—using my fully developed and hopefully still sound brain—that at least 80% of households could have a better financial future if they changed their spending habits. In your 20s, it’s easy to conclude that $5 for a drink is affordable, but viewing spending and saving over a lifetime presents a different possibility. Problem is, who thinks that way in their 20s?
The most popular Starbucks drink seems to be the iced caramel macchiato, which on average costs $3.75 to $4.95. Just 80 or so of those Venti-sized drinks would allow the 40% of Americans who can’t come up with $400 to get back in the game. Imagine that: Forgoing the caramel macchiato may be the answer to a financially secure retirement.
I really like Starbucks coffee, but make my own at home and always get it on sale at grocery store. The only time go to a Starbucks is when I am traveling. That has stopped because they no longer make decaf. I did not understand why until I read who their target audience. I will have to find another coffee shop when traveling. Oh well, I never liked Starbucks cultural views anyway.
Starbucks’ success astounds me. I used to work on a very large university campus dotted with Starbucks. I was always amazed how long the lines were for such overpriced drinks. I’ve never had a high income and lead an even more frugal life in retirement. Like others, I will frequent them while traveling, but I often buy just coffee. Perhaps once a month while at home, I’ll splurge on a latte. However, their customer numbers are likely accurate. My son is in his late 20s and works in a fast-growing Sunbelt city. Most of his friends make at least $90k a year. They don’t think a $5 drink is anything to worry about.
It’s the lack of teaching financial literacy in schools and at home that cause young people to behave like this.
I suspect the average Starbuck customer is doing just fine. I don’t think the majority of people in our society that are struggling financially are Starbuck customers. I would be more likely to believe Starbucks regarding their customer base than your limited & uninformed observations.
I suggest that you try to be more civil when commenting.
That said, I do agree that a company the size of Starbucks is highly unlikely to have erred in identifying its target market. I think it is safe to say that a company with a market cap of $96 billion that spent over $300 million on advertising last year goes to great lengths to ensure that it has correctly identified its customer base.
I don’t doubt that their base in terms of age, etc. is right, but there is nothing I could find anywhere that indicates those age groups earn an average $90k
Per the link you referenced:
Who is Starbuck’s target demographic? Its target demographic is urban and affluent, often on-the-go white-collar professionals looking to take their caffeine fix with them to the office. The company considers its core customers to be educated, with an average age of 42, and average income of $90,000.
Note that Starbucks considers its target market to only include the above-described subsets of the age groups you identified.
Well, it’s comforting to learn that so many 18-24 year olds have $90,000 incomes, even forty year olds for that matter. I guess Starbucks will be happy when they no longer have loans to pay as well. I’ll take a venti.
Although it’s true, many folks under 25 still take offense when I tell them their brains aren’t fully developed. I lack your charm.
By the way, off topic, but what the heck is it with iphone owners? They can never just say my “cell” or “mobile”…always have to say “my iphone”. lol
I’ve never heard Android users do this unless referring to something specific about their phone. I wouldn’t say “I was sitting in starbucks with my Pixel 4” or “my Samsung 12.”
Cracks me up.
While you might not say Pixel 4, you probably use at least one of the following generically: Kleenex, Band-Aid, Chapstick, Frisbee, Popsicle, Scotch-Tape, Bubble Wrap (all trade-marked brands).
iPhone used to be THE cell phone before all the others. I see iPhone as synonymous with smartphone. I don’t know if it is better overall, but I’ve had five and I’m just loyal. Five or six iPads too over the years, but I don’t call them tablets.
Here’s a Humble Dollar Reader way to do Starbucks:
My coworkers make approximately $40,000. They purchase lunch EVERY SINGLE DAY. Luckily, my income is much higher. Regardless, I bring my lunch every day. It’s delicious, inexpensive and healthy. Between their lunches, lottery tickets and tattoos, I’m quite sure they aren’t saving much for their future. Hopefully their lucky numbers hit one day!
Michelle, like you I was a “brown bagger” most of my career. Not only was my lunch more nutritious than fast food, but those brown bags helped me save more.
Plus I enjoy the ritual of making my lunch! Not to mention, I don’t waste my entire lunch break in a drive-thru line waiting for food.
Wow, that sounds like something I’d write. You’re not 78 are you?😎
I’m not 78 but hopefully I make it there one day!
Was reading an article that “founder Howard Schultz has returned for a third time with the task of restoring growth to the struggling powerhouse.”
I’m curious, besides observing the age of the customers and the type of preferred flavor of coffee, what kind of vehicles they were arriving in? Tesla’s or EV’s? SUV’s? I believe there was at least one Mercedes. 🙂
I’ll add that to the list, but it may be tough as you typically can’t see where they park. On the other hand I could move outside and stalk the drive through. My bet is on pickup trucks.
If you’re seeing pickup trucks, then it might be an anomaly at the location where you visit. Of the two states you’ve mentioned having a residence in past articles (NJ & MA?), this article may disagree with you.
https://www.iseecars.com/which-states-drive-the-most-pickup-trucks-study
I continue to be amazed at how many things in mainstream USA go from being wants, to being needs. Expensive vehicles, destination weddings, and fancy barbecue grills come quickly to mind; perhaps they are not unlike expensive coffees (but isn’t a small luxury every so often OK?). The new commonplace has the power to reshape societal expectations, too. Take veterinary care. Multi-thousand dollar surgeries, chemotherapy, and extended end-of-life care for pets is the norm in at least some of the circles I frequent; anything less is to be questioned. I’m not arguing against one’s will to care for a beloved pet — just against the expectations placed on others to do the same (and, sometimes, against a drawn-out decline in the pet’s standard of living).
On the other hand, as standards of living rise, we should expect to see folks spending in ways that earlier generations view as extravagant. That higher spending doesn’t seem so terrible to me — as long as folks are also taking care of their financial future.
Yup, but if you look at the saving and retirement accumulation and debt data, I’m thinking the non necessity spending is taken care of before the future.
I agree, as times change so do circumstances and what we deem important. I say this as I type in my iPhone and cannot live without my internet service provider, while paying for multiple streaming apps to allow for family happiness. If it were up to me, I would just watch free TV, not because it’s not affordable, I just try not to get caught up in what consumption deems a necessity.
I found myself making that same decision for a dachshund 8 years ago. Paid 3k for a back surgery. Being that it extended her life several years and was best, I paid for it. Fortunately it was not beyond my needs, however, it occurred once again a few years ago and then had her put down. To each their own. I no longer own a pet even-though my wife insist on buying another dog.
Very interesting. On the one hand you have people buying what they cannot afford, and on the other you have jobs being created by that consumption. A scary quandary indeed in our 70% consumption economy that is designed this very way. The same can be said regarding tobacco, alcohol, shopping in general, cell phones, and other addictive mechanisms. It’s the consumption economy. Reason why we continuously watch 30 minute shows full of advertising for 18 minutes worth of actual television.
One of our extravagances is cable tv. My time is worth too much to watch ads. I’d like to watch Resident Alien, but there’s a whole universe of non-ad filled entertainment.
It isn’t just Starbucks.
Since retiring, I work one or two days a week as a volunteer homebuilder for Habitat for Humanity. A couple of years ago they had a group dedication of 6 houses, with the new homeowners and us volunteer builders mingling together. One new homeowner worked at a nearby McDonald’s and commented to a second new homeowner that he had not seen her going through the drive-thru for breakfast lately. She told him that as a result of the Habitat financial training for partner families she realized how much that morning drive-thru cost each month, so she was now eating breakfast at home and using a travel mug in her car for a second cup of coffee on the way to work. McD’s may not cost as much as Starbucks, but depending on your income level it may be a higher percentage of your earnings than for the Starbucks drinker.
Get off my lawn!
You lost me on that comment
It is a joke referencing our old age. As we age our preferences change in regard to what is important.
I learned something new as to the meaning. I’ll have to remember that. It may come in handy.
A little history,
https://en.m.wikipedia.org/wiki/You_kids_get_off_my_lawn!#:~:text=to%20notable%20levels.-,Popularization,it%20has%20gained%20general%20currency.
I suppose we can forgive a twenty-something spending $4.95 on a Venti-sized Iced Caramel Macchiato if they did so only occasionally, say as a birthday or Christmas treat. But if they indulge themselves five days a week, now we’re talking serious money.
Imagine forgoing 80 macchiatos in your twenties and investing that $400 saving in a low-cost stock index fund. Compound growth over decades would turn that sacrifice into a handsome sum. Of course, how many twenty-somethings know, or care, what compound growth is?
Overspending on indulgences will certainly make it more difficult to meet your other financial obligations. The other side of the coin is the opportunity cost of not investing small sums early in life. Warren Buffet grasped the concept of compounding at a young age. But few young people are Warren Buffet.
If you could satisfy your daily caffeine craving with a simple cup o’ joe, you’d be much better off.
By the way, what’s a Venti-sized Iced Caramel Macchiato? (I don’t frequent Starbuck’s.)
I’ll defend Starbucks on one front – they are good for travelers. We just returned from a 2800 mile road trip through the SE. I was surprised (pleasantly) how many small towns had Starbucks. I appreciated the consistently good coffee (straight coffee isn’t a bad price) and clean, private bathrooms. When I was frequently traveling for work in the DC area Starbucks provided a comfortable temporary office for me, and I even help many business meetings in one.
I also have observed that many of the morning customers are school age children. We stopped at one in Apex, NC recently where I observed a brother and sister in school uniforms getting their morning $5 frozen drinks.
And I second Mark’s comments – the delicious frappacinos are loaded with sugar and calories. You can find something that meets your dietary needs, but you have to ask and be specific. Most stores
I don’t fault Starbucks, you have to give them credit for marketing and creating the need for their product. I enjoy Starbuck’s coffee, but that’s it just plain coffee. The ice tea was unusual and a rip off. There is a YouTube video showing that if you pour coffee from one size cup to another, they are all actually the same amount of coffee because of the way the cups are tapered. I haven’t verified it, if it’s true, we are all more gullible than I imagined.
That is incorrect.
Their Pike’s Place regular coffee is not that good IMO. It is too acetic for my taste. I just brew my favorite medium roast coffee in my Keurig for around 42 cents per cup. Starbuck’s is a big ripoff, good for investors, bad for customers, if you frequent that place often.
I agree that Starbucks can come in handy on a trip, as can other fast food places, but I don’t drink coffee there at home. I drink real macchiatos (not SB’s abomination – just espresso and foam) and SB’s espresso is too thin and too harsh. Once a week I have a macchiato while playing Scrabble at a local independent. The rest of the time I use a Nespresso machine at home, which is also more expensive than home-brewed American-style coffee, but nothing like as expensive as SB.
As another old geezer, and one who lost 30 pounds through WW a little over a year ago, I can report that those foofoo drinks at any coffee shop are loaded with calories. Stick to flavored sparkling water if you must drink something more flavorful than water. The generic brand I get at the grocery store has a zero for everything on the chart. Even zero sodium.
As another old timer in total agreement with Mr. Quinn, my observation is wait and see, in a year or so of more rapid growth in inflation, what the retail landscape will look like.