The value wars wage on as American fast-food chains introduce promotions and discounts to lure customers back into stores. Now, a new corporation has entered the ring – Starbucks.
New Offer from Starbucks
First McDonald’s, then Wendy’s, and now Starbucks have introduced promo deals in a bid to appeal to inflation-battered customers who are now spending less on fast food and takeaway beverages.
Introducing the “Pairings Menu”
On Tuesday the world’s biggest coffee chain introduced the “Pairings Menu,” which allows customers to purchase a combined drink and food item for a lower price than they would cost separately.
Food and Drink Combo
This could include options such as a tall or iced coffee with a croissant, or a beverage with a breakfast sandwich. These deals will cost $5 to $6 depending on the combination.
Starting June 11
The new menu promotion will take effect in stores across the US on June 11. It is the first time the chain has offered a similar combo meal + beverage deal in recent memory.
A Dramatic Change for Starbucks
Starbucks has never been known for its discounts or bargain promotions, but things have changed dramatically following the chain’s disappointing quarterly earnings call.
Drop in Sales
Last month the beverage company shared that it had seen a drop in same-store sales for the first time since the beginning of the Covid-19 pandemic in 2020. The report led to a 12% decline in share values on the same day following the announcement.
“Our Performance Was Disappointing”
“Let me be clear from the beginning, our performance this quarter was disappointing,” Starbucks’ CEO Laxman Narasimhan admitted on a call with analysts last month.
In-App Deals
Narasimhan has also confirmed that the chain will offer in-app deals for customers making purchases online, and more promotions may be on the horizon.
Broad Strides From Starbucks
Since the earnings call, the company has made broad strides to turn the trend around and bring customer traffic back into US stores. But the going will be tough – after dealing with consistently high inflation for the last couple of years, Americans may take extra convincing to return to these iconic chains.
Charging More, Spending Less
As most major fast-food chains have begun charging significantly more for their menu items to compensate for increased costs, consumers are spending less.
Lower-Income Americans Walk Away
This is especially true of lower-income Americans who make up a large share of the customer base for food and beverage chains.
Much More Expensive
“Fast food has gotten really expensive,” said David Henkes, senior principal at food industry research firm Technomic. “Certainly, relative to where it was 12 to 18 months ago, and also in comparison to casual dining sit-down restaurants right now.”
Bureau of Labor Statistics
According to data from the Bureau of Labor Statistics, menu prices at fast food and fast casual restaurants have increased by 5% across the board, between March 2023-2024 alone.
“An Almost Overnight Pivot”
Starbucks’ new pricing menu signals an “almost overnight pivot to value from some of the largest limited service chains as consumer visits have softened significantly and traffic has essentially flattened over the past several months,” according to Henkes.
Out-Pricing Customers
RJ Hottovy, head of analytical research at consumer foot traffic analyst Placer.ai claims that many major restaurant and fast-food chains, including the likes of Starbucks, have “out-priced their consumers.”
They Have to Find a Way
“They’re going to have to find ways to bring people back in,” he noted. Value meals and promotions are just one of a number of necessary steps.
Comparison to Other Deals
Starbucks’s new pairings menu has already been compared to McDonald’s newest $5 meal deal, which was the first of the discount promotions that sparked a trend in value meals from major fast food chains across the board.
McDonald’s $5 Deal
Last month McDonald’s announced the launch of a $5 meal deal that included a McChicken or McDouble sandwich, four chicken McNuggets, a small fries, and a small drink in a bid to win over customers. It will begin on June 25 and run for a month.
Competitors Follow
Other competitors like Wendy’s and Burger King followed suit, quickly announcing a respective $3 breakfast deal and $5 meal deal of their own.
No Longer Affordable
McDonald’s has struggled with a blow to its “affordable” reputation as menu prices have soared higher than most of its fast food competitors over the last decade. Earlier this year it became a subject of vitriol after the image of a $18 Big Mac deal was circulated online.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
