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Despite menu price increases, Starbucks Rewards members keep coming back

Dive Brief:

  • Active Starbucks Rewards membership grew by 3.2 million members to 27.4 million, up 13% year-over-year in the company’s fiscal Q3 2022, interim CEO Howard Schultz said. The company’s earnings call is Tuesday.
  • Rewards members accounted for 53% of US company-driven revenue, while mobile ordering and payment, drive-thru and delivery drove 72% of US revenue, Schultz said.
  • Loyalty members provide greater insights into consumerism and tend to engage more with a brand, executives said. Schultz added that it could also use its rewards program to provide discounts and value if the economy takes a significant downturn.

Dive Insights:

Starbucks’ rewards program helped drive traffic across Starbucks’ North American business. Company-operated stores delivered record average weekly sales, including five of the top 10 grossing sales days in company history and a $410 million sales week, Schultz said. Licensed stores in the continent, at 7,000, grew revenue by 24%.

While customer counts hit a record in the quarter, customers racked up more rewards than non-members, Starbucks said. EVP and CFO Rachel Ruggeri He said. Member spending is bigger than non-members, at an all-time high. Ruggeri Accredited strategic pricing, additional premium beverages and greater personalization driving increased member engagement.

“We think this will benefit us in the long run, especially as we continue to personalize the experience more uniquely so we can have a deeper relationship and engagement with customers.” Ruggeri He said.

While consumers continue to order soft drinks, for example, which now account for 75% of beverage sales in US company-operated stores, unlimited customization options for guests provide Starbucks with a competitive advantage, Schultz said.

According to Schultz, the growth in consumer engagement also comes despite prices rising 5% over the past 12 months.

“We are currently not seeing any measurable reduction in customer spending or any evidence of customers trading up,” Schultz said.

Net income in the continent was up 13% overall, driven by strategic decisions on premium soft drinks, customization, food and beverage pricing and a 19% boost in food sales, Schultz said. And in the US, comp sales increased 9%, primarily due to an 8% increase in average ticket.

Growth in different formats, especially drive-thru, helps increase convenience. In May, Schultz told investors The company accelerates store growth with 90% of new stores continuing to be drive-thru. He said the company will undergo a reinvention in July that will include creating more personalization for customers, although during a call on Tuesday, he said more details about the plan will be revealed at the company’s investor day in September.

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