Amidst the scores of global crises to keep track of these days, the soaring price of coffee is one that has us clutching our ceramic mugs like pearls. And we’re not alone.
While emerging rivals seek to move in, Starbucks announced on Thursday that it’s shuttering hundreds of stores along with around 900 non-retail jobs in search of around $1 billion in cost savings.
In other words, the days of jamming a Starbucks into any available piece of real estate seems to be over: Store count across the U.S. and Canada will be reduced by around 1%, with over 500 locations to be closed by the end of the year, CEO Brian Niccol said in a blog post on Thursday. After six consecutive quarterly drops in U.S. same-store sales (most recently -2%), management is culling the herd.
“We identified coffeehouses where we’re unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance, and these locations will be closed,” Niccol wrote.
The changes reflect the tension between a desire to provide the comfortable, inviting “third-place” that customers expect, and optimizing its US stores (18,300 by the end of the year) to drive a corporate turnaround. Speaking to the former, Niccol said the company is on track to revamp (or “uplift”) 1,000 cafes by the end of next year to “introduce greater texture, warmth, and layered design.”
Whether that’s enough to counter the surge in quick-serve coffee – see 7 Brew, Dutch Bros, and as of this week, Chick-fil-A – is the question. We’re eager to see how Starbucks’ new standalone store prototype, which boasts 32 seats, a drive-thru and roughly 30% lower build cost, pans out when it opens next year.
Yet enjoying a latte in a cozy coffeehouse is something of a luxury these days, thanks to eye-watering spikes in the price of coffee; a UBS survey of 1,600 people found that over 70% plan to decrease their visits to Starbucks over the next 12 months because of higher prices. With the price of green coffee up 20.9% just over the past year, even the biggest players are feeling the burn.
Can Congress help? We’ve seen crazier things. This week saw the launch of a bipartisan effort to exempt coffee (including husks, skins, and substitutes containing coffee) from President Trump’s tariffs. The “No Coffee Tax Act” would reset tariffs back to zero, with supporters arguing that , with no domestic coffee producers to protect, putting levys on imports only raises prices for US consumers and encourages exporting countries to do business elsewhere.
That’s exactly what’s happening in places like Brazil, according to industry leaders. Unlike weather patterns, it’s nearly impossible to predict how bad or how long Trump’s tariff policies – in this case tied to his attacks on the Brazilian judicial system – will last. Maurice Contreras, founder and CEO of Volcanica Coffee, told us he’s had to recalibrate his business to be less reliant on Brazil, even as he has delayed one shipment in hopes that the 50% tariff might be lifted.
Yet in Brazil, he noted, coffee producers “are not overly concerned” about the loss of U.S. demand because it’s coming from China, which has authorized 183 new Brazilian coffee exporters to meet surging demand. The aforementioned, much-hyped Luckin Coffee chain threw down the gauntlet last year by committing $2.5 billion to buy 240,000 tons of Brazilian coffee.
“This shift means Brazil is prioritizing markets where demand and pricing power are growing, leaving U.S. buyers in a weaker position,” said Contreras. “For our business, this not only increases sourcing costs but also heightens the urgency to diversify supply and secure stable, tariff-free channels.”