Go into any Starbucks and look for the ‘short cappuccino’ on the menu. You won’t find it. That is because this is one Starbucks drink that company executives don’t want you to buy.
This elusive Starbucks drink is just eight ounces – that’s one third smaller than ‘tall’, the smallest size listed on the official menu in stores around the world. So, why would you want to order such a small drink? Don’t be fooled by its miniature size. In fact, this Starbucks drink has exactly the same amount of espresso as the 12-ounce tall cappuccino. However, because it is packed into a smaller size, the coffee taste is a bolder, and arguably better one.
A cappuccino is a complicated thing. According to the rules as outlined by the World Barista Championship, a traditional cappuccino is a ‘five to six-ounce beverage’. In fact, they suggest that the shorter the cappuccino, the better the drink. In addition to the essential shot of espresso, the most important feature of this Starbucks drink is the layer of microfoam that is created on top. It is said that the larger the cappuccino, the more difficult it is to create a nice layer of microfoam. This Starbucks drink would surely meet the Championship rules. So, why is it not on the menu? Why is Starbucks insistent on offering larger, weaker cappuccinos?
Company executives officially say that there is no room on the menu board for this little Starbucks drink. However, Tim Harford of Slate Magazine believes the real reason is economic: “This is the Starbucks way of sidestepping a painful dilemma over how high to set prices. Price too low and the margins disappear; too high and the customers do.” After all, points out Harford, if it were just a question of lack of space on the Starbucks drink menu, this short cappuccino would at least be listed on the Starbucks website, wouldn’t it?
Brian McManus is an assistant professor at the Olin School of Business and he agrees with Harford, suggesting that this Starbucks drink is a victim of price distortion. “The bottom end of any market tends to get distorted,” he says. “The more market power firms have, the less attractive they make the cheaper products.” And Starbucks has a whole lot of market power, so they can afford to make larger drinks at a significantly higher price markup.
Thus, the philosophy behind this Starbucks drink, and all of its other drinks as well, is simple, says Harford. “People who are watching prices buy cheap drinks. People not watching prices buy whatever they want, or more expensive drinks…While they do want to make sales to connoisseurs, they don’t want to lose high-margin sales. Margins on big drinks are a lot bigger.”
Anyone can order this cheaper Starbucks drink so long as they know it is available and are willing to risk the potential embarrassment of having to ask for it themselves. For the rest of the regular Starbucks goers, their loyalty seems to be enough that they are willing to put up with this price discrimination.
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