What you could have bought with a £10 note in 2016 will now cost you £13.05, this is due to inflation. In the UK, inflation reached an all-time high of 11.1% in October of last year. This steep inflation rate is affecting our daily purchases, including items like my beloved daily iced coffee. While I can't forfeit this addiction, I've decided to take a closer examination at how much my Starbucks visits have increased in cost and if they might be charging more than what's justified by the UK's inflation rates.
Firstly, the question which is probably occupying a few of your minds, what on earth is inflation? Inflation, in simple terms, is the increase in prices over time. It occurs when people's incomes and wages rise, leading them to have more money to spend, leading to higher demand (desire to purchase things). This allows suppliers (companies producing and selling things) to raise their prices without impacting the quantity they sell. Also, if supply (i.e. the production and availability of goods) is lowered, then people are willing to pay more to make sure they get some of the goods they want. In the end, things cost more, and the rate at which the prices go up is called inflation. Inflation decreases the amount of things you can buy for a given amount, so in effect, it makes the value of money decrease.
Recently, you have probably noticed the world inflation cluttering your news. Whilst a steadily increasing inflation rate of around 2-3% per year is a normal occurrence, the inflation rates recently reached all-time highs. This is largely due to the impact of COVID-19 on the global economy. The pandemic caused disruptions in the supply chain (workers stayed home and any goods being produced were slower in getting distributed), leading to shortages and higher prices worldwide. Additionally, the Russian-Ukraine war contributed to an oil shortage, further hiking up inflation rates to 11.1% in October last year. As of right now, they are at 6.7% which is still abnormally high.
Inflation affects the prices of daily commodities, the one which I will be examining is the price increase of a simple latte from the well-known corporation Starbucks. In 2016 the average price of a Starbucks grande latte in London was £2.60. This might seem astoundingly low in comparison to where it stands right now at £3.85. This is a 48% increase in price since 2016. In other words, if you had purchased a Starbucks every day in 2016 your sum would be £949 (still not the most economically responsible decision) yet in 2023 this would cost you £1,405 which is a £456 difference.
This sounds like a drastic price increase, but is it fair? When looking at the inflation for the same period, the answer is no. Inflation went up only 30% for the same period. Therefore, a year of drinking Starbucks Grande Latte should only cost you £1,234. This is an extra £171 per year Starbucks is charging you.
However, to give Starbucks the benefit of the doubt I decided to see if their cost of production rose as high as their prices leaving them with no other choice. The key ingredients in a latte are coffee and milk. Firstly the price of coffee per pound back in 2016 November was £1.30 and in September 2023 was £1.21. This is shockingly a 6.9% decline. Secondly, the price of milk back in November 2016 was 43p per pint of pasteurised milk yet in August 2023 it stands at 66 p. This is a 53% increase. There are many other costs of production such as shipping which for the sake of this article I have had to exclude yet are important to recognise. To average these results Starbuck's average cost of production increased by 23.05%. This is still significantly less than the 48% increase in their prices yet more than the 30% inflation increase.
In conclusion, there is no doubt that Starbucks prices have significantly increased since 2016, more than the inflation rates and the cost of production. Therefore I must wonder why people are paying this obscene sum, yet, then again I am one of those people!
By Annika Bjerregaard, Edited by Aurore Lebrun and Annika Bjerregaard
riveting
really light and fun read
loved This
Nice work! Well done.
amazing!