Starbucks looks to young, rich consumers to weather recession

Starbucks Corp topped Wall Street estimates for quarterly comparable sales and profits, stating it will bear any coming recession by selling customized cold drinks through its rewards app to grow among younger, richer customers.

Demand in North America for expensive drinks remained strong and the decline in China was not as heavy as projected in its fourth quarter ended October 2, 2022. Earnings were $0.81 per share, versus analyst predictions of $0.72, according to Refinitiv IBES.

Shares in the Seattle-based Starbucks increased nearly 2% in after-market trading.

Amid record inflation and fears of a global economic downturn, restaurants Yum Brands Inc and McDonalds’ Corp have drawn lower-income consumers with cheap meals. Even so, wealthier customers keep buying pricier food and drinks from Starbucks and Chipotle Mexican Grill Inc.

Starbucks interim CEO Howard Schultz said younger and Gen Z customers tend to have significantly more discretionary money at their disposal and their loyalty to Starbucks was predictable and quite significant.

However, some investors and analysts have questioned how Starbucks can meet its global sales guidance of 7% to 9% growth for 2023, especially amid worsening economic conditions.

New product launches and mixes of new store formats that include drive-throughs and carry-out counters will help the brand to survive.