Date: 2024-12-21 Page is: DBtxt003.php txt00021627
STARBUCKS
THE PROFITABLE PART OF THE COFFEE SUB-SECTOR
Starbucks Profits Soar by 31%—But It's Raising Prices Anyway
One critic said the company's explanation for the coming
price hikes amounts to 'word salad to hide corporate greed.'
THE PROFITABLE PART OF THE COFFEE SUB-SECTOR
Starbucks Profits Soar by 31%—But It's Raising Prices Anyway
One critic said the company's explanation for the coming
price hikes amounts to 'word salad to hide corporate greed.'
Starbucks CEO Kevin Johnson is pictured at an annual shareholder meeting in Seattle on March 20, 2019. (Photo: Jason Redmond/AFP via Getty Images)
Original article: https://www.commondreams.org/news/2022/02/02/starbucks-profits-soar-31-its-raising-prices-anyway
Burgess COMMENTARY
CEO Kevin Jones is sitting at the top of a very successful profitable company. Most people on planet earth are struggling to live, let alone to live well. The majority of people have not shared in the benefits of productivity during the last 40+ years, but stockholders and executives have been rewarded mightily during this time.
Some of the recent inflation has been casued by cost push inflation, but most of the inflation has been caused by the cost of profit embedded in prices. This is a marvelous profit opportunity for big complex corporations ... and indeed any company with any messaging competence.
In the 1980s and 1990s I worked a bit within the coffee industry helping the World Bank to improve the supply chain from farm-gate to the retail marketers. The sources of profit in the supply chain are huge near the final consumer, and pretty small for the growers, the harvesters and all the early processors. The big traders, the big processors and the big retailers do very well because of coffee.
I am appalled and disgusted that the issue of 'profiteering' is almost never referenced when talking about the recent surge in inflation. Bsed on my understanding of the economic situation, there is little chronic 'cost-push' inflation but there is a huge potential to increase profit margins because of the imbalance between immediately available supply and impatient demand. Those that benefit from 'ownership' are loving it ... and not stressed very much by inflation.
For those who already had difficulty paying their bills, any inflation in their cost of living is a problem. Too many people are in this position and there are many essential items that have been priced at higher levels. Not many of these are legitimate 'cost-push' situations but are opportunistic and result in higher profits. Higher wages that result in higher costs that require higher prices would be a positive outcome of the current disruptions ... but higher prices merely because of the pressure of the supply and demand imbalance is problematic. The media is not being very clear about which is which.
Peter Burgess
One critic said the company's explanation for the coming price hikes amounts to 'word salad to hide corporate greed.'
JAKE JOHNSON
February 2, 2022
Starbucks on Tuesday reported a 31% increase in profits during the final three months of 2021, but the massive Seattle-based coffee chain nevertheless announced plans to further hike prices this year, drawing outrage from critics who say the company is pushing higher costs onto consumers to pad its bottom line.
'Corporations are jacking up prices on consumers and using concerns about inflation as cover to do so.'
Starbucks CEO Kevin Johnson—who saw his compensation soar by 39% to $20.4 million in 2021—told investors during the company's earnings call Tuesday that 'supply-chain disruptions' and rising labor costs are to blame for the coming price increases, of which he suggested there will be several.
'We have additional pricing actions planned through the balance of this year, which play an important role to mitigate cost pressures including inflation,' said Johnson, who also touted the company's 'strong revenue growth' in the quarter.
Starbucks' revenue grew to $8.1 billion at the tail-end of 2021, a 19% jump compared to the previous year.
To progressive observers, Starbucks' announcement of price hikes fits a pattern of U.S. corporations—in sectors across the economy—raising costs for consumers while raking in record profits, boosting executive pay, and squeezing regular employees. Starbucks employees nationwide are increasingly fighting back against their low wages and poor working conditions by launching union drives.
Historian Andy Lewis argued that Starbucks' explanation for the impending price increases amounts to nothing more than 'word salad to hide corporate greed.'
The consumer advocacy group Public Citizen, for its part, responded with outrage to Starbucks increasing prices for customers after giving its CEO a nearly 40% raise last year.
During testimony before the House Energy and Commerce Committee on Wednesday, Rakeen Mabud of the Groundwork Collaborative noted that 'in sector after sector, in company after company, corporations are jacking up prices on consumers and using concerns about inflation as cover to do so.'
'We see that in Kimberly-Clark taking advantage of the pandemic to raise prices on masks,' the economist said. 'We see Proctor & Gamble using the fact that they sell essential goods that families depend on like diapers to raise prices in this moment of crisis. And we even see companies like McDonald's raising prices on consumers even as they enjoy massive increases in sales.'
'So in short,' Mabud added, 'this is a really broad-based problem—it's unfortunately not limited to a specific sector of the economy.'
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