Starbucks faces shortages as coffee demand skyrockets

Myles Udland, Brian Sozzi, and Julie Hyman explain the factors contributing to Starbucks' cup and syrup shortage as the reopening resulted in an unexpected surge in coffee sales and how the company plans adjustments to ease the pressure.
Video transcript
JULIE HYMAN: And even today, as we're talking about bottlenecks in all sorts of things, it seems like Starbucks has some bottlenecks in things like cups and also things like oat milk. Brian Sozzi, you must be wondering how problematic this will be for people who expect certain things when they get to a Starbucks.
BRIAN SOZZI: Well, I have very simple advice for you. Take regular milk. Where was oat milk five or ten years ago? You could add regular milk to your coffee. It's OK. Or just drink it black.
Nonetheless, it should be noted here that Oatly supplies a good portion of the oat milk to Starbucks. Starbucks withdrew the ability to order the amazing oat milk through their app this morning, according to a Wall Street Journal story, which is really one of the most important ways to order from a Starbucks. I contacted Oatly to see what the problem was if production could get back to normal. You have not responded to Yahoo Finance inquiries about this.
But see, it's not just Starbucks. We had Ken Hicks, CEO of Academy Sports yesterday. He told us they are $ 100 million short of inventory compared to where they would like to be, be it because of congestion in the ports, they cannot find enough workers. And Nike and Under Armor can't make enough products because they see strong demand. Whatever it is, there are bottlenecks everywhere, Starbucks, other chain restaurants, retail, it affects everyone, Myles.
MYLES UDLAND: Yes. Just want to note that Oatly stock is currently around $ 27 and it went public at a reference price of $ 17. So you know the stock is fine. And I think a successful IPO is remarkable in this type of market. But, you know, this Starbucks story reminds me a lot of the news that came in the last few days from Chipotle, which was having an intriguing rhythm right now as a member of the business media.
You know, the three of us who know the investment conferences of various investment banks, Sozzi, love investor days and investor presentations. So Brian Niccol, speaking at an industry conference on Tuesday, mentions that menu prices will be increased by 4%. A day later, that's on the Today Show.
And let me tell you, news that happens at industry conferences doesn't end up on the Today Show. So this story of a 4% increase in Chipotle menu prices in response to an increase in their wages that we discussed at length in this program. And they're not the only fast food company that has raised its wages to compete with that work.
It makes me think of how these weird ones go mainstream under the radar economic dynamic. And I think this Starbucks shortage is another great example. Chipotle and Starbucks are two of the most ubiquitous consumer brands in today's economy. And seeing them struggle with the availability of labor, the availability of ingredients, the availability of containers for the drinks and the food they sell is one way to spread that shortage across the economy.
And if we go back to this morning's inflation data, folks, we've discussed how the Fed can explain to ordinary people why these pressures are nothing to worry about. But I think from a monetary policy standpoint, the Fed really gave itself an easy way to explain this. From a regular man's PR perspective on the street, it's a difficult position for the Fed or any other business organization as people know they won't get the drink they want at Starbucks. And they know they'll pay more for the burrito. And people really notice things like that, even if the economic explanation can be pretty easily explained away, whatever.
BRIAN SOZZI: Yes. And you know, again, it's worth noting just tying on the stock market here, Myles and Julie, despite the shortages in the apparently very crowded Starbucks stores, and we have inventory that has only grown 5% a year up today it does worse than the S&P 500, which would tell me that in this inflationary environment, the market is concerned about pricing power for Starbucks and, secondly, about labor shortages. Starbucks has talked about it at length. They are in the trenches right now and are also competing for workers. And there is no evidence that they are getting the labor they need to service that influx of demand.
JULIE HYMAN: You know, I have two thoughts. One is what you just said, Myles, about price increases and how they got so public. I mean, I think the Fed can count on the idea that these will hit hard when they happen. And then people kind of forget about them, right? They get used to paying them, just as we will see these increases.
I mean, if they are temporarily what the Fed thinks they will be, then they won't go up any further. So this is the bet. My second insight is that Brian Sozzi has a lot of sympathy for the millionaire George Sherman. But god forbid you want oat milk in your coffee, man. Angry. All right.
BRIAN SOZZI: Julie, I think Starbucks will see a higher corporate tax rate under President Biden anyway. I mean, you know, whatever, the revenue is going down.
JULIE HYMAN: And maybe that's why prices go up even more, who knows.
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