Starbucks: Drop the Upcharge
WELCOME!
Since you’re here, you’re probably a Starbucks Partner or a frustrated customer. Read the letter we sent Starbucks’ entire leadership team, demanding they DROP the non-dairy UPCHARGE!
There are THREE BIG PROBLEMS with Starbucks’ non-dairy upcharge:
Price Gouging
Starbucks is milking their customers, not just covering their costs.
Starbucks usually charges at least $0.80 extra to substitute non-dairy milk in a coffee beverage—sometimes even more! They claim they only charge extra to recoup the additional cost of sourcing plant-based milk—but this is patently false.
Here is Starbucks’ current milk pricing for the US market:
We obtained this data directly from Starbucks’ operations. Shockingly, it clearly shows that the minimum $0.80 upcharge for almond milk (the most popular non-dairy milk) is a 788% markup!
The markup for soy milk is 566% and 185% for oat milk. That’s not covering costs—it is blatant price gouging.
The pricing matrix shows that the most expensive non-dairy milk Starbucks offers is oat milk—primarily because they buy this product on the open market (from a variety of sources) whereas they make their own soy and almond milks.
So, although oat milk is the worst-case in terms of COGS (cost of goods sold), the incremental cost for oat milk is still only $0.31 for a Grande Latte (Starbucks’ most popular milk-based beverage). And yet they charge at least $0.80 extra for an oat-milk Grande Latte—an additional $0.49 over and above the incremental cost for the oat milk. Remember, that’s an extra $0.49 for every single oat-milk Grande Latte sold in over 17,000 US stores.
This is naked price gouging, made even more despicable by the fact that it is profiting from their customers’ involuntary and debilitating afflictions—from lactose intolerance to (potentially fatal) dairy allergies.
In fact, this is the basis of class action lawsuits which claim Starbucks has made over $1 billion in the US alone by overcharging lactose-intolerant customers, in violation of the Americans with Disabilities Act.
But Starbucks’ hypocrisy and exploitation doesn’t end there.
For instance, Starbucks claims they must charge extra for non-dairy milk to cover their costs, yet they literally give away millions of gallons of cow’s milk for free–in carafes on the service table at the back or each store.
Their unprecedented (if not desperate) current BOGO campaign for Grande Frappucinos is costing them millions of dollars in free cow’s milk.
All those markets have remained profitable. So, why can’t Starbucks do the same here in the US? Is Starbucks’ European business simply managed more efficiently—or more ethically?
We know Europeans have less disposable income than Americans. So, has Starbucks made a strategic decision—like Big Pharma—to fund international expansion on the backs of hard-working American consumers?
Greenwashing
Starbucks is missing all their 2030 Sustainability Targets and covering it up.
Starbucks has made numerous bold claims about their sustainability goals. But their actions and strategic business decisions have not led to the sustainability improvements they promised.
We know they like the color green at Starbucks. But from where we stand, it looks like “greenwashing” and “greenbacks” outweigh any authentic commitment to sustainability that companies usually mean when they talk about being “green.”
At their 2020 Biennial Investor Day, (then) president and CEO Kevin Johnson affirmed the company’s Planet Positive Future, formalizing their 2030 environmental goals to reduce carbon, water, and waste footprints. Specifically, Johnson said Starbucks would:
- Reduce greenhouse gas emissions from Starbucks operations by 50%
- Reduce water withdrawal by 50%
- Reduce the waste sent to landfill from stores and manufacturing by 50%.
On the Sustainability section of their website, they listed 5 Areas of Focus to achieve those laudable 2030 sustainability targets.
Number 1 on that list was add more plant-based items:
On the face of it, this all sounds great.
Non-dairy milk is undoubtedly part of the sustainability, environmental responsibility, and climate crisis solution. Industrial dairy production pollutes waterways, increases greenhouse gas emissions, and destroys local ecosystems all over the world. If you compare the production of oat milk to cow’s milk, it takes 80% less land and 90% less water with less than one-third of the CO2 emissions.
Problem is, Starbucks is ignoring the cow in the room. Put another way, they are simply greenwashing.
In reality, non-dairy plant milk has become just another revenue stream for Starbucks—and an extremely profitable one at that (see #1: Price Gouging).
So, it’s not surprising that:
- In the last four years, Starbucks’ total greenhouse gas emissions actually increased by 8%. Dairy is undoubtedly a leading contributor to this backward trend.
- Starbucks actually reduced the number of certified plant-based food items on US menus by 66% since 2019.
- In 2022 and 2023, they literally changed the 2019 baseline for reporting greenhouse gas emissions which made their failure to come even close to the target look less embarrassing—even though it was still pretty damning.
- Instead of making progress on increasing the availability, accessibility, and affordability of non-dairy, plant-based milks by 2030, Starbucks paid $10 million to the “Dairy Net Zero” initiative—a dairy industry-led lobbying group with no measurable or accountable pathway to net zero. They are calling this their “Sustainably Sourced Dairy” initiative. BTW: There is no such thing as “sustainably sourced dairy.” That is a literal oxymoron.
- Starbucks also recently appointed former Saputo Dairy executive Lyne Casonqua as EVP/ head of global product strategy & growth. This is the exact opposite of “expanding plant-based menu options.”
In recent quarters, we have noticed Starbucks has quietly dropped sustainability rhetoric from its corporate talk track. We believe this is because they have realized they cannot hit their 2030 climate commitments without addressing the cow’s milk at the heart of their menu.
And since dairy is a sacred cow—and a cash cow—at Starbucks, they are clearly not willing to reduce their dependence on cow’s milk in any meaningful way.
On their “Planet” page, they say; “Our vision for the future is to become resource positive—giving back more than we take from the planet. And we know we can’t do it alone. It takes all of us.”
You’re right, It does take all of us.
But when it comes to sustainability at Starbucks, shouldn’t it at least start with you, Starbucks?
One final note—the stakes for corporate greenwashing were raised significantly in February of this year when New York State Attorney general, Letitia James, sued the “world’s largest beef producer for misrepresenting (the) environmental impact of their products.” Specifically, the suit claims “JBS USA misled consumers and claimed that the company would achieve net zero greenhouse gas emissions by 2040.”
Obviously, we don’t know how and when this lawsuit will unfold. But we do know Letitia James is smart, strategic, and tenacious. If nothing else, it will put companies on notice that they can’t just make bombastic claims about sustainability targets—plaster them all over their website—then just conduct business as usual, environmental consequences be damned.
In other words, if a company advertises its 2030 Sustainability Goals, but has not articulated a clear and credible pathway for reaching those goals, that will become increasingly problematic, after the JBL USA lawsuit.
Take Starbucks, for instance.
Not only have they not laid out a clear and credible path for 2030, they have all-but ignored the main obstacle—the one thing, above all else, that makes it impossible for Starbucks to achieve “resource positivity” by 2030. Namely, their continued reliance on cow’s milk as the default ingredient of choice for all milk-based beverages.
Charging customers more—a lot more–for non-dairy milk is the exact opposite of what they should be doing—and what Starbucks said they would do—i.e., “expand plant-based menu options.”
Dietary Racism
Starbucks’ non-dairy upcharge targets people of color who are disproportionately lactose-intolerant.
Starbucks fancies itself a progressive company that prioritizes racial and social equity on behalf of their Partners (i.e., employees) and the “communities they serve.”
But their non-dairy upcharge penalizes customers and Partners of color who are disproportionately lactose-intolerant.
Starbucks’ Global Chief Diversity and Inclusion Officer, Dennis Brockman, should have seen the irony (i.e., hypocrisy) of Starbucks’ pricing policy on non-dairy milks as he talked about Jim Crow and quoted Gloria Jean Watkins, in his 2022 Letter to US Partners:
“What we do is more important than what we say, or what we believe.”
At least we can agree on that.
Approximately 36% of Americans are lactose-intolerant—meaning they cannot digest dairy. That’s an average of one in three Starbucks customers.
However, more than 90% of people of color are lactose intolerant.
So, Starbucks gives customers of color two unacceptable options:
- Pay the non-dairy upcharge.
- If they can’t or won’t pay an extra $0.80 (or more), they opt for a beverage made with cow’s milk which inevitably makes them sick.
Whether that is economic racism, dietary racism, or a twisted blend of both, it is definitely hypocritical, exploitative, and discriminatory.
In short, Starbucks’ non-dairy upcharge is racist.
People of color are disproportionately and unjustly penalized by Starbucks’ minimum 80-cent upcharge for drinks made with non-dairy milk.
When most people of color have to pay extra—or make themselves sick by consuming regular dairy milk—charging them more for non-dairy milk is a form of dietary racism.
Indeed, noted nutrition and health policy expert Dr. Milton Mills says; “dietary racism clearly parallels environmental racism, and often creates financial barriers that exclude people from making healthier food choices. Dietary racism impacts potentially every person of color in America.”
Starbucks has a checkered history with race relations—but they have proven themselves capable of rising to the occasion and doing the right thing. After the 2018 fiasco in a Philadelphia Starbucks with Rashon Nelson and Donte Robinson, Starbucks stepped up, declared the incident “reprehensible,” and mandated meaningful interventions like the May 29 all-hands racial bias training.
That was a bold move.
However, eliminating the non-dairy upcharge throughout Starbucks’ global network of stores would be an even bolder act that would move the market and send a potent, empowering message to Starbucks’ Partners and customers of color.
In his 2022 Letter to US Partners,” Dennis Brockman lamented: “While I wish I had the antidote to dismantle systemic discrimination, I do not.”
While Mr. Brockman’s comment is undeniably true, it is equally true that Mr. Brockman, Mr. Narasimhan, Ms. Ruggieri and the rest of Starbucks’ leadership can play a very significant part in dismantling systemic discrimination at Starbucks.
All they would have to do is eliminate the hypocritical, exploitative, and discriminatory non-dairy upcharge NOW!
In Conclusion
As Starbucks surely must know, there is a generational shift away from cow’s milk that came to a very frothy head with the Aubrey Plaza “got wood” fiasco.
Starbucks’ fate and its continued reliance and success as a beloved brand is inextricably tied to consumer sentiment and customer loyalty.
Starbucks cannot afford to lose Millennials and Gen Z.
And what does this generational cohort care about? Genuine inclusiveness, authentic sustainability, and economic security. They want to buy from brands that respect, reflect, and share their values.
We have seen Starbucks’ rationalizations for the historically terrible Q2 performance metrics—but they don’t ring true. Otherwise, every other competitor in Starbucks’ sector would have had the same abysmal quarter—which did not happen.
Even more troubling for the company—especially this early in Mr. Narasimhan’s tenure as CEO—the stock price declined precipitously.
Add to this the mounting consumer outrage with corporate greed, class action lawsuits in multiple states, and Howard Schultz (“Mr. Starbucks) sniping from the wings, Starbucks needs a big win with customers. Something surprising, affirming, and directly related to Starbucks’ value equation in its customers’ minds.
That’s why Starbucks should DROP their hypocritical, exploitative, and discriminatory non-dairy upcharge NOW!
