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Coffee industry is too competitive! Starbucks (SBUX.US) plans to remove extra charges for non-dairy options on November 7

Market IntelWednesday, Oct 30, 2024 10:10 pm ET

1min read

Starbucks (SBUX.US) said on Wednesday it will stop charging extra for dairy alternatives, saving some US customers more than 10% on their drinks. The change will take effect on November 7.

Customers have long called for Starbucks to drop the extra charge for dairy alternatives, especially as they have become more popular. The second-most requested customization, according to Starbucks, is to replace regular milk with a non-dairy alternative, after adding a shot of espresso. “This is just one of the many changes we will make to ensure that customers always get their money’s worth when they come to Starbucks,” said CEO Brian Niccol in a statement.

In some markets, the extra charge for dairy alternatives can be as high as 80 cents per drink. Currently, Starbucks customers can add up to 4 ounces of dairy alternatives to hot coffee or iced brewed coffee or tea, cold brew coffee and American drinks without paying extra, but other standard milk drinks, such as lattes, currently require an additional charge.

After six years as Chipotle’s CEO, Brian Niccol joined Starbucks in early September. His task is to turn around the company, which is struggling to regain profitability and revive its business, especially in the US domestic market. His early focus has included changing the way the coffee chain markets itself, simplifying the menu and setting prices. Starbucks is also said to be launching a holiday menu and discontinuing its olive oil drinks line as it adjusts the extra charges.

Last week, Starbucks reported that same-store sales in its fourth quarter of fiscal 2024, which ended September 29, fell 7% year over year, more than double the consensus estimate among analysts, and the largest quarterly decline in four years. Starbucks also said it would suspend its 2025 fiscal year guidance, saying it would allow Brian Niccol to assess the business and solidify its transformation plan to regain growth. “I think this transition is going to take longer than some investors anticipated,” said Brian Yarbrough, an analyst at investment firm Edward Jones. “The next few quarters are going to be very tough.”

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