Feb 7, 2023 - Economy

Why Starbucks "free" drinks will now cost more

Illustration of a Starbucks coffee cup with a stock trend line drawn on the side with marker

Illustration: Annelise Capossela/Axios

Inflation has driven up the prices of your favorite Starbucks drinks and is now coming for your free coffee.

The big picture: The Seattle-based coffee giant will update its popular Starbucks Rewards program starting Feb. 13 and will change how many “stars” are needed to get certain items, meaning you’ll need to spend more money to earn that free drink.

  • With high inflation, customers have been flocking to reward and loyalty apps, which have also helped businesses grow digital sales.

Why it matters: Starbucks has 30.4 million active U.S. loyalty members who drove 56% of sales in its last quarter that ended Jan. 1.

The coffee chains’ program changes are a devaluation of the rewards, Bankrate.com analyst Ted Rossman told Axios, similar to what airlines and hotels have done with the free flights and rooms in their loyalty programs.

  • “I think what it really speaks to is companies being stingier about what they're giving for free and wanting to reward spending,” Rossman said, “but also wanting to juice their bottom lines in terms of not giving too much away for free.”
  • When Dunkin' updated its loyalty program in October, critics called the program less rewarding because it required more points to earn and redeem rewards. 

Starbucks changes to loyalty program

The changes with redemption tiers “better align the cost of product redemptions to our current pricing,” Brady Brewer, Starbucks executive vice president and chief marketing officer, said during the Feb. 2 earnings call.

  • Brewer said the change also creates “discount efficiency, which helps us to continue to grow the program while effectively managing margins.”

With the program upgrade, Starbucks is changing some of the tier levels for award redemptions and shifting some items between tiers. Currently, 150 stars will earn even the most expensive drink: any size drink with any add-ons — like syrups and extra espresso shots.

The tier levels that are changing:

  • 50 stars will be 100 stars.
  • 150 stars increases to 200 stars.
  • 200 stars will be 300 stars.

Yes, but: While a pastry goes from 50 to 100 stars and there is a 50-point difference for a handcrafted beverage, some stars shift down.

  • Iced coffee (not including cold brew beverages) and iced tea (not including iced tea lemonades) will be 100 stars, down from 150 stars.
  • Packaged coffee moves to 300 stars, down from 400 stars.
  • Select merchandise items will be 100 stars, down from 200 stars.

How to earn stars with Starbucks Rewards update

Between the lines: Starbucks said it is not changing how members earn rewards, which is two points per dollar when using a registered Starbucks card or one point per dollar with other payment options.

  • There are ways to earn bonus stars through Double Star Days, games and personalized offers.

State of play: Not counting any star bonus opportunities, starting Feb. 13, a rewards member using a Starbucks Card will need to spend $100 to earn the 200 points needed to get a Frappuccino.

  • Members using another form of payment would need to spend $200 to earn 200 points to get a free Frappuccino or latte.
  • Currently, members would spend between $75 and $100 to earn the 200 points.

Starbucks Rewards free drinks and more

Here are the redemption tiers effective Feb. 13:

  • 25 stars: Customize a drink with an extra shot of espresso, dairy substitute, syrup or sauce up to $1.
  • 100 stars: Brewed hot or iced coffee or tea, a bakery item, packaged snacks and core reusable plastic to-go cups.
  • 200 stars: Handcrafted beverages and Cold Brew beverages or hot breakfast.
  • 300 stars: Lunch sandwich, protein box, salad and packaged coffee.
  • 400 stars: Signature mug, drink tumbler and coffee merchandise up to $20.
  • Other benefits: Not a part of a tier, but members also get a free Birthday Reward, a discount for using a reusable cup and free refills of hot or iced coffee or tea in-store.

Starbucks Rewards changes over time

Flashback: Starbucks has changed its rewards program over the years and moved to a revenue-based program in 2016 instead of a one-star-per-transaction model.

  • In 2019, it added tiers with more ways to redeem rewards.
  • Starbucks updated its rewards program in 2020 to allow members the ability to earn stars with credit or debit cards, cash or mobile payments. Before the change, the only way to earn stars is when paying with a Starbucks Card.

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