The Pumpkin Spice Latte Effect
Jenna Kaczmarski
Mr. Reuter
Economics
October 14, 2014
The Pumpkin Spice Latte Effect
The Pumpkin Spice Latte was created by the Starbucks Coffee Co. in the fall of 2003, since then sales have increased drastically, calling common white girls everywhere to get their fix. It’s ingredients include clove, cinnamon, nutmeg, and real pumpkin pie spices along with milk and whipped cream. While I personally would rather stick to hot apple cider during the crisp autumn months, it’s no wonder people look forward to this latte every year. This is called demand, the want or desire to possess a certain good. Starbucks has realized that it can supply this good for a very high price and people will still buy it year after year. This is because when it comes to this specific product, they are a monopoly- a company without competition. No other company can produce a drink as popular as the Pumpkin Spice Latte, even popular coffee shops such as Caribou have been steadily put out of business recently due to lack of sales in the holiday months. When we think coffee, we think Starbucks, and although their prices are outrageously high people constantly return because of these famous drinks.
Recently, social media has been tied to this drink allowing it to go viral. According to http://news.starbucks.com/news/starbucks-first-pumpkin-spice-latte more than 3,000 tweets are sent out daily with the hashtag Pumpkin Spice Latte and with twitter accounts such as the Common White Girl this drink has gotten lots of attention. The typical price for a grande Pumpkin Spice latte is $4.55 with the average price for a normal, non holiday drink being $3.95. This is how Starbucks makes its revenue, in the holiday season with thousands of tweets going out daily and with a high demand for this good, Starbucks is able to make a huge amount of money. Also, many people see this drink on social media and want to fit in with the crowd of, “common white girls”, so they go out and buy the drink. Not only does social media advertise the product, but it pressures girls psychologically to buy the Pumpkin Spice Latte. These are known as determinants of demand, or elements besides price which affect the overall demand of a good such as social media, season, and peer pressure. With this drink being sold in nearly 50 countries, it is readily available for purchase thousands of times daily in the fall season.
The following graph shows the net income margin, net income, and revenue over time which have all increased except during the years 2007-2010. As you can see, all of these factors increased after the creation of the Pumpkin Spice Latte; proving that it was a beneficial good for both consumer and supplier. Also the above tweet relates to the impact social media has on sales; it has over 2,000 retweets and over 1,000 favorites meaning that Pumpkin Spice Lattes are a trending topic throughout fall. Clearly, people love this drink and it has a positive effect on the economy as well as Starbucks Co.
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