Starbucks faces shortages as coffee demand skyrockets

Myles Udland, Brian Sozzi, and Julie Hyman breakdown the factors contributing to Starbucks shortage in cups and syrup as reopening has led to an unexpected boost in coffee sales and how the company plans to make adjustments to ease pressures.

Video Transcript

JULIE HYMAN: And also today, as we talk about shortages on all kinds of things, it seems as though Starbucks is experiencing some shortages in things like cups and also things like oat milk. Brian Sozzi, you have to wonder how much of an issue this is going to be for people coming in to expect certain things when they come to a Starbucks.

BRIAN SOZZI: Well, I have very simple advice for them. Go use regular milk. Where was oat milk five or 10 years ago? You could put regular milk in your coffee. It is OK. Or just drink it black.

Nonetheless, worth keeping in mind here, is that Oatly supplies a good portion of the oat milk to Starbucks. Starbucks, according to a Wall Street Journal story this morning, has pulled back the availability of ordering the amazing oat milk via their app, which is really one of the key ways that ordering does take place at a Starbucks. I reached out to Oatly to see what the issue was, when production might get back to normal. They did not return Yahoo Finance requests for comment on that.

But look, it's not just Starbucks. We had Academy Sports CEO Ken Hicks on yesterday. He told us they are $100 million short in terms of inventory versus where they would like to be, whether that is because of congestion at the ports, they can't find enough workers. And Nike and Under Armour can't make enough products because they're seeing strong demand. Whatever it is, there's shortages all over the place, Starbucks, other restaurant chains, retail, it's impacting everybody, Myles.

MYLES UDLAND: Yeah. I just would note, Oatly shares, they're about $27 bucks right now, and went public at, what, $17 was reference price. So you know, stock has done OK. And I think a well-performing IPO is notable in this kind of market. But you know, this story with Starbucks, it reminds me a lot of the news that came out of Chipotle over the last couple of days, which just as a member of the business media, had a fascinating rhythm to it.

You know, the three of us, well aware of investment conferences hosted by various investment banks, Sozzi, you love investor days and investor presentation. So Brian Niccol is speaking at an industry conference on Tuesday and mentions that they're going to raise menu prices by 4%. A day later, that's on the Today Show.

And let me tell you, news that happens at industry conferences does not end up on the Today Show. So that story with a 4% increase in Chipotle menu prices, which is in response to an increase in their wages, which we have discussed at length on this program. And they are not the only fast food business that has been raising their wages to compete with this labor.

It makes me think of how these weird under the radarish kind of economic dynamics are becoming mainstream. 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 to see them struggling with availability of labor, availability of ingredients, availability of containers for the drinks and the food that they're selling, is a way that this shortage all across the economy has become mainstreamed.

And if we go back to this morning's inflation data, guys, we've discussed how the Fed can explain to normal people why these pressures are not something to be worried about. But I think, really, from a monetary policy perspective, the Fed has given themselves an easy way to explain this. From a regular man on the street PR perspective, it's a challenging position for the Fed or any economic body to be in right now, because people know they can't get the drink they want at Starbucks. And they know they're paying more for the burrito. And people really notice that kind of stuff, even if the economic explanation can be fairly simply sort of explained away, whatever.

BRIAN SOZZI: Yeah. And you know, just worth noting here too as well, just tying it back to the stock market here, Myles and Julie, despite the shortages in what appears to be very packed Starbucks stores, and we have a stock that's up only 5% year to date, it is underperforming the S&P 500, which would tell me that the market is concerned about pricing power for Starbucks amidst this inflationary environment, and then also, secondarily, labor shortages. Starbucks has talked about this extensively. They are in the trenches right now competing for workers too. And there's no indication that they're getting the workers they need to service this influx of demand.

JULIE HYMAN: You know, I have two thoughts. One is on what you were just saying, Myles, on price increases and how they have become so public. I mean, I think the Fed can sort of rely on the idea that these hit hard when they happen. And then people kind of forget about them, right? They get used to paying them, just as though, just as we will see these increases.

I mean, if they're transitory, which the Fed believes they will be, then they won't keep going up. So that's kind of the bet there. My second takeaway is that Brian Sozzi has a lot of sympathy for multimillion dollar George Sherman. But God forbid you want some oat milk in your coffee, man. Whew. All right.

BRIAN SOZZI: Julie, I think Starbucks is going to see a higher corporate tax rate anyway under President Biden. I mean, you know, whatever, earnings going down.

JULIE HYMAN: And maybe the prices will go up more because of that, who knows.