Why Starbucks Coffee Is Cheap

Starbucks gets a lot of attention in the pricing world for their ability to charge $4+ for coffee. There are good reasons they can do this (selling something physically addictive doesn’t hurt), but that’s a different post. This post is about why their coffee is so cheap.

“Cheap?” you ask. How can that be? Even their drip coffee is expensive, at about $1.70 for a “grande” (never mind that “tall”, “grande” and “venti” all mean “large”). According to The Caffeine Database, that grande coffee delivers a whopping 372mg of caffeine. That’s 219mg per dollar. A 20oz Diet Coke for $1 at a vending machine, has 75mg of caffeine, or 75mg per dollar. In other words, if caffeine is what you want, and you want it in volume, Starbucks is your low-cost provider. If you can figure out what your customers value and then figure out a way to offer them more of it than competitors, you should be able to command a higher price.

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