Starbucks Says No to Laissez Faire

I do not drink coffee and I have never set foot in a Starbucks. At the same time, I don’t ridicule those who do. As we all do, at times I spend my own money in ways that others would find frivolous.

I don’t think their coffee is overpriced either. People who consume coffee in Starbucks are buying more than a cup of coffee—they are buying the Starbucks experience. Since I don’t consume Starbucks, I won’t attempt to define what the experience is; but needless to say, it is real enough to have become a cultural phenomenon.

While I won’t ridicule those who consume Starbucks, I will ridicule Starbucks. Monday’s Wall Street Journal had an opinion piece by David Boaz of the Cato Institute which details the experience of David and his friend in trying to have printed on their Starbucks gift card the words “Laissez-Faire.” (Starbucks encourages gift cards to be personalized.) David’s friend “was informed that the company couldn’t issue such a card because the wording violated company policy.” David writes:

And so, at my suggestion, my friend went back to the Web site and asked that his card be issued with the phrase “People Not Profits.” Bingo! Starbucks had no problem with that phrase, and the card arrived in a few days.

I wondered just what the company’s standards were. If “laissez-faire” is unacceptably political, how could the socialist slogan “people not profits” be acceptable?

My assistant and I tried to get the company to explain its policy. We started by trying to purchase a card with the phrase “Laissez Faire,” and were rejected as my friend had been. We then asked a company spokesperson why. He suggested that it might be because “laissez-faire” is a foreign phrase. That seemed possible and a reasonable precaution.

So we tried another foreign phrase – “Si Se Puede,” or “Yes we can.” It’s the United Farm Workers slogan, now adopted by Barack Obama’s presidential campaign. That sailed right through. The senator’s political campaign slogan was acceptable.

Since Starbucks finds laissez faire to be offensive, we may speculate a bit about how they might fare in a more regulated environment. First, is it not wasteful that in some major cities, Starbucks are located very close to each other—a few blocks down the street or even across the street? Some might propose strict regulations on how many Starbucks may open in any given area. The free-market protects Starbucks from that interference.

As most of you already know, a specialty coffee costs considerably more than the basic brew at Starbucks. How much more does it cost Starbuck’s to serve a specialty coffee compare to a basic brew? Almost nothing! Of course, customers pay much more for the larger sized servings too. Yet the cost to Starbucks is almost the same regardless of serving size.

So why is the fancy or large drink price so much higher? Starbucks is simply trying to find those consumers who are less price sensitive. If you are a Starbucks’s fan and buy only a basic coffee, be glad the fancy coffee drinkers exist. They help make Starbucks profitable, they help the chain grow, and they help to hold down the price of a basic cup of coffee.

But is this not unfair? Why should consumers buying a grande latte with a shot of amaretto for $4.50 be subsidizing those who drink a plain cup of coffee for $1.50? Why should those who need a bigger size of coffee subsidize those who need less caffeine? If Starbucks finds laissez faire so offensive, perhaps they would agree to have municipal governments setting fair prices for a cup of coffee. If a flavored grande latte contains only 15 cents more of ingredients than a basic cup of coffee—in name of “people not profits”—charge the customer only 15 cents more.

Of course, I am not for any such regulation; and of course, Starbucks isn’t either—which makes their gift card stance more than a bit ridiculous. Talk about biting the hand that feeds you!

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9 Responses to Starbucks Says No to Laissez Faire

  1. Frank v2 says:

    Laissez faire is not politically correct?? You have got to be kidding me! I grew up in Canada and French is one of Canada’s official languages and as such all of us English speaking folks got very exposed to the French language as part of the standard school curriculum. The direct translation is to “leave alone”. And clearly from an economics perspective the term is used globally to parley the concept that the government should not interfere in the realm of the economy: they should just let things happen. Clearly the folks at Starbucks need to invest in a dictionary, or perhaps a web browser, as they neglected to actually look up the meaning of this phrase. Dictionary.com is freely available, and for the folks at Starbucks I have taken the liberty of including the link: http://dictionary.reference.com/browse/Laissez%20Faire

    It might be interesting to find out if someone in Quebec went into a Starbucks, if they too would be turned down, or if this is only a US phenomenon. According to the Starbucks website, there are 37 locations in the Province of Quebec. All of these would be French speaking, and as a result of Quebec law, all written signs and communication must be in French – no English. I wonder what would happen if someone tried to get “je me souviens” printed on a card in the US if they would be successful. It means “I remember” and is on every license plate in Quebec. And it often has political overtones, sometimes being interpreted as suggesting that Quebecor’s remember that they were born under the lily, but have to live under the rule of the British rose (English repression). Or it sometimes is suggested that I remember the dead from all of the wars that we have fought. There are lots of interpretations, and in my mind, this slogan, which is sanctioned by the Quebec government as the Province’s official tagline, could easily be classified as not appropriate on the Starbucks coffee card. Hmmm. Maybe someone should try to get Marie Antoinette’s slogan “Qu’ils mangent de la brioche” (let them eat cake) printed on the card. Starbuck’s does sell baked goods…

  2. igli1969 says:

    This is just another example of corporate hypocrisy, which is only an extension of the hypocrisy of the individuals that run the corporation (which is, of course, a fictional entity as much as is “society.”)

    Even more interesting than the price differences for coffee is my tea experience (I don’t like coffee, but enjoy hot tea). At some Starbucks, they charge a lot more for a larger cup of hot water to go with the tea bag. At others, they don’t. Go figure. Admittedly, we’re talking about a very small sample here – may 5 or 6 locations total, of which only one didn’t charge more. But still, interesting.

  3. Frank v2 says:

    Igli 1969,
    Your example of charging extra for a large tea vs. a small tea (aka – a change in the amount of hot water) in my mind is a great example of the free market at work. Why do they charge more? Quite frankly, because they can! Consumers are willing to pay the price. If they weren’t, large teas would not sell. With that said I can’t help thinking about Pepsi’s Aquafina water. Imagine you are the marketing executive sitting around the boardroom table and you are going to propose taking the same water that you currently using in your soda products, put it in a bottle with a fancy label, and charge the same price as a soda! Food costs are greatly reduced, and as such, margins are improved. I’m sure initially the management team would have looked at you cross-eyed and asked for clarification: “you want to do what?” But voila, success! And of course Coke answered with their Dasani brand. Brilliant marketing! And we consumers buy this product: something that we can get for free from the water fountain.

  4. igli1969 says:

    Frank v2:

    What you mean “we” kemosabe? 😉

    I seldom drink bottled water (I remember W.C. Fields’ admonition regarding water). I have an unfortunate preference for soda, specifically Fresca.

    But bottled water does have a real advantage, and that is convenience. Walking around an amusement park, vacationing in an unfamiliar city or other venue, etc. Like knowing that anywhere in the world you can walk into a McDonalds and get a familiar (if godawful) meal, bottled water is a guarantee of contents vs. a drinking fountain of unknown quality or a local beverage you may or may not like. Variety may be the spice of life, but familiarity is the bread you use to cut the burn of that spice.

    Oh, and I’ll have another beer with that, please!

    Seriously, I agree with your point that the marketing was a brilliant idea, but I really think that bottled water not only filled a previously untapped (sorry!) niche, but that niche has expanded since then. The current concern about plastic contamination may dampen that if it proves out, but time will tell.

  5. E says:

    While bottled water is a scourge to the developed world, and specifically to sports stadium attendees who are forced to pay $2.50 for it, there is some utility to having Dasani brand water on hand. For instance, we used to have to boil drinking water in India. Or drop magic purification pills into our water in Karachi. One might argue that pallets of bottled water is what saves lives in such cases where the Embassy is under distress or assault. In any event, it is magical marketing, because none of the marketing mentions this. It’s all about riding mountain bikes and running miles. I find this conversation to be a distraction however. The real abomination in this instance is the gift card. I once had a store clerk tell me, within ten minutes of purchasing the gift card, “you can’t return it… it’s like a cash advance. Once you buy it, we transfer the money but we can’t give it back to you.” Think about this insult. For good measure, most gift cards expire after a year. They should ideally print on each card, “Thank you Sucker for your money, because you can’t return it for cash, it’ll expire before you even think about it again, and our research shows that most likely you won’t spend the balance of it.”

  6. Frank v2 says:

    E,

    Yes the water discussion is a distraction: I was merely pointing out that the sale of a large tea occurs because the customer is willing to spend extra, which got me pondering on the bottled water topic. And as a side note Europe has had bottled water for years, and a poor marketing exercise on the part of Coca-Cola in England caused their product to be pulled before it even got launched! (http://www.cnn.com/2004/WORLD/europe/03/25/uk.dasani/ ). But that too is a topic of discussion for another time.

    Your point on expiring gift cards is a good one: not all companies have this policy, but clearly some do. But I’m not sure if that is an issue for with Starbucks or not. But that too might be a distraction. I believe the point to Dr. Bownstein’s post was the irony in the fact that Starbuck’s leverages the concept of laissez faire economics by marketing and charging what the market will bear for a coffee experience, yet sees the phrase as offensive and won’t allow its use on their gift card. Clearly that is a silly policy; hence why I thought someone should do a better job in understand what they are banning in the guise of being politically correct.

    Oh, and on the topic of expired gift cards, I thought the following two links were interesting. Enjoy!

    http://www.bankrate.com/brm/news/cc/20060127a1.asp http://www.usatoday.com/money/perfi/columnist/block/2006-11-27-cards_x.htm

  7. Kevin says:

    An interesting note to all this bottled water talk is that when I lived in India back in 2000, bottled water was sold on every street corner in New Delhi and even in the rural Himalayan village of Shimla. The bottle water wasn’t under the consumer branding of American companies. Generally it was either branded as “International” or just regular bottled water; oh and you had to be careful the bottle was sealed and not rebottled. Water quality will always be a driving factor for the need for guaranteed quality. I’ve heard that most American bottled water is simply filtered tap water so I can’t imaging their being a measurable quality difference better bottled and tap here in the US. Maybe we can thank the marketers for convincing us that tap water is bad. Or maybe we can thank government, commercial developers, etc… for building (or allowing to be built) public space without public water fountains. The public water fountain has been replaced with bottled water/soda machines.

  8. igli1969 says:

    I think the fact that most of us are not outraged by Starbucks’ opposition to the term laissez faire is an indication that we all know that most corporations are terrible hypocrites on this subject. Let’s remember that a corporation is a brain-child (and a bastard, at that) of the state; so maybe their attitude toward a free market is not as much hypocrisy as boot-licking.

  9. E says:

    I have no objections to Starbuck’s opposition to the term laissez faire… so long as they have no objections to me purchasing my coffee from my corner office building deli.

    Frank v2, thank you for the examination. I concur with your analysis — if the consumer is willing to bear the cost, someone will offer the product (ie, water, large tea, Gatorade “G2”, etc.)

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