Breaking Down Starbucks’ 2022 Revenue: How Much Really Goes Towards Coffee Beans?
Each morning, millions of people across the world flock to their local coffee shops for their daily doses of caffeine. Some choose to go to Dunkin’ Donuts, while others prefer coffee from Mcdonald’s, but with $32 billion dollars in revenue in 2022, Starbucks is the world’s largest coffee chain. With over 35,000 locations worldwide and more than 10 million customers each day, many would think that Starbucks spends a good amount of their yearly revenue purchasing coffee beans, but they would be wrong.
I asked 5 of my friends the same question about how much they think Starbucks spends on coffee beans, and I got a wide range of answers.
Question: Out of Starbucks’ yearly revenue, which was around $32 billion in 2022, how much do you think goes towards buying coffee beans?
People 1 and 2 answered $15 billion (47%)
Person 3 answered $3.2 billion (10%)
Person 4 answered 19 billion (59%)
Person 5 answered $1.6 billion (5%)
Out of all the people I asked, you are probably wondering whose answers were the closest to the actual value. You might be surprised to find out that Person 5, with the lowest answer, was actually the closest.
Answering My Question:
Each year, Starbucks buys 800 million pounds of coffee beans from farms in Latin America, Africa, Asia, and the Pacific. Starbucks only pays around $1.20 per pound of coffee, so if you do the math, Starbucks spends around $960 million dollars a year on coffee beans. Even if you assume that Starbucks pays $1.50 per pound of beans to meet Fair Trade minimums, that would only be a total of $1.2 billion dollars spent per year on coffee beans. $960 million dollars is 3% of Starbucks’ yearly revenue, and even $1.2 billion dollars is only 4% of their yearly revenue.
The Big Question:
4% of Starbucks’ yearly revenue goes to buying coffee beans from farmers across the world; let’s compare this to how much Starbucks spends on barista salaries.
The average salary of a Starbucks barista is just above $25,000 a year, and Starbucks employs around 350,000 baristas worldwide. This means that Starbucks spends around $8 billion dollars each year on barista salaries- about 25% of their yearly revenue.
If you combine the amount of money that Starbucks spends on coffee beans and barista salaries, it would make up 29% of their total revenue, so where does the rest of Starbucks’ money go? Let’s break it down.
The Break Down:
All public companies publish 10-K reports at the end of their fiscal year, and these reports outline all of their profits and expenses. By looking at Starbucks’ 10-K report for 2022, I was able to figure out what they spent the other 71% of their total revenue on.
Starbucks’ main expenses in 2022 were their store operating costs, and this category included things like salaries for store employees and space rents. Store employee salaries cost them $8.1 billion dollars, rents cost them around $2.7 billion, and things like machinery and furniture cost them another $2.7 billion dollars. Across the world, Starbucks spent $13.5 billion dollars on store operating expenses, which is around 42% of their total revenue.
Their next biggest expenses are product and distribution expenses, which include shipping, milk, syrups, packaging, and, of course, coffee. Coffee beans account for $1.2 billion dollars of revenue, and all of their other product and distribution expenses amount to $9.1 billion dollars, which, in total, is around 33% of Starbucks’ revenue in 2022.
A good portion of Starbucks’ revenue goes to their shareholders, and in 2022, their shareholders received $3.3 billion dollars, which is around 10% of their total revenue. Note that this amount is almost three times what Starbucks spent on coffee beans!
Outside of Starbucks’ stores, they have another 14,000 employees who work behind the scenes in corporate support, store development, roasting, manufacturing, and distribution operations. These administrative expenses cost around $2 billion dollars worldwide, or 6% of their revenue.
After this, depreciation is their biggest expense. Depreciation is when the value of an asset decreases over time due, and in the context of Starbucks, this could include assets like coffee machines, cash registers, computers, and furniture. In 2022, Starbucks spent $1.5 billion dollars, around 5% of their total revenue, on purchasing new assets for stores.
All companies have to pay income tax, and Starbucks is no exception. In 2022, they paid around $1.1 billion dollars in income tax, which was around 4% of their revenue.
Finally, Starbucks spent $416.7 million dollars on marketing campaigns and advertising in 2022, and this was around 1.3% of their revenue.
Bringing It Back to Coffee Beans:
Even though coffee companies like Starbucks put a huge emphasis on fair trade practices and ethical sourcing, they only spend a small percent of their yearly revenues on buying coffee beans and often pay under Fair Trade minimums.
Most people would guess that a good portion of Starbucks’ yearly revenue would go towards buying coffee beans, but this is far from reality. Like most other companies in the food and beverage industry, very little money actually goes to the producers and agriculturalists who make it all possible.
Sources:
https://www.thecommonscafe.com/how-are-starbucks-coffee-bean-farmers-paid/
https://starbmag.com/how-many-employees-does-starbucks-have/
https://www.comparably.com/salaries/salaries-for-starbucks-barista
https://www.sec.gov/Archives/edgar/data/829224/000082922422000058/sbux-20221002.htm
