Starbucks brings back its reusable cups

Coffee chain Starbucks welcomes back its personal reusable cups. Yahoo Finance’s Brian Sozzi shares the details.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live on this Tuesday morning. As companies continue to normalize their operations, Starbucks, Brian Sozzi, bringing back the reusable cup after a 15 month break. Now we were talking about this this morning. You can't just bring any cup into Starbucks, right? It's got to be a cup that you purchased from them. But that, I guess, they'll wash and then give back to you if it's a properly endorsed cup, let's say.

BRIAN SOZZI: Has to be properly endorsed, has to be a Starbucks cup. They used to sell these reusable cups at the checkout register for, I believe, $1. Nonetheless, they're coming back on June 22nd second to all US company operated Starbucks stores. And to your point, as you mentioned, Myles, after a 15 month delay.

Let me walk you through the process, because it's pretty ridiculous here. It's not the same as it was pre-pandemic. A barista will check the cleanliness of your cup, and you keep the lid. So you hold onto the lid. They will then put the cup in a ceramic mug and transport it throughout the Starbucks restaurant. The company says beverages are made contact free. You then get handed back your drink, and you can go on your merry way.

So it sounds to me a lot more time consuming just to use this reusable cup. But it does come after we reported last week, and also the Wall Street Journal, that Starbucks is seeing shortages in many products. Certainly oat milk, but of course, many syrups, and you guessed it, cups, as people come back to the restaurants.

But ultimately, this causes me to take a look at Starbucks stock. I track it closely, and I looked at it here again. And I'm somewhat surprised. You look at Starbucks shares, only up 3.7% so far year to date. That stock is underperforming Restaurant Brands, that is the Burger King and Tim Horton's owner. That stock is up 9%. McDonald's is up 8.5% year to date. Wendy's is up 8% year to date. Yum! Brands, KFC and Taco Bell, that stock is up 8%.

And I came across a good quote. Recent research note out of the folks at JPMorgan. Restaurant analyst John Ivankoe, he says, quote, consumption habits now largely broken in the US may take time to rebuild. And I think that basically sums up why you're seeing Starbucks shares really lag here. There is uncertainty if consumers do go back to Starbucks stores to the extent they did pre-pandemic. Even if they go back to the office, are they packing their own coffee? Are they still going out for that mid-afternoon break, or are they actually just hopping back in an Uber or Lyft and going back home? Unclear.

And then secondarily, it is also interesting to see the stock lag as COVID variants overseas start to pick up, and more reports of those start to pick up. Starbucks operates about 14, more than 14,000 stores overseas. Any concerns about COVID variants could impact the travel season, and the longer term travel outlook, and weigh on Starbucks shares.

Ultimately, here's my hot take, folks. The days of spending $25 a day at a Starbucks location is, in fact, probably over. Maybe you spend half, or maybe you don't go there at all. That is likely to weigh on Starbucks' longer term earnings power. When does Starbucks rebound internationally? Very important key piece of the business for them.

And again, Starbucks, is it immune from the labor shortage? I know they always like to play up the fact that they were leading in terms of paying their baristas a lot more. Just a higher, well, much higher than minimum wage compared to other fast food workers. But they're going to need more workers to service this demand they're seeing, and they're going to probably have to raise wages even more, and raise prices. How that impacts customer traffic and ticket is unclear.

JULIE HYMAN: Brian, you, as always, are thinking about the stock and about the business proposition to go back to the reusable cup. I'm thinking in environmental terms. And I think it's great that they're doing this, in terms of allowing people to bring in their cups. I wish that more chains would do this kind of thing, because as we all have been ordering in a lot more over the past year, I think it's safe to say your recycling fills up with a lot of plastic junk that is, I mean, probably bound for a landfill and not going to be recycled at all. So I think it's a good thing from that perspective.

BRIAN SOZZI: No, it's good. I just don't think it is it's going to catch on to the extent a lot of these companies wish. I mean, Starbucks has been plugging these reusable cups for over five years. I just don't think it has moved the needle for them. But certainly, every cup matters

MYLES UDLAND: I mean, you're right. It was a trend pre-pandemic. It'll probably pick up in due time. But I don't think the first thing people are doing after a deadly global pandemic is getting into the reusable cup game at their local Starbucks where they've, again, as you mentioned, just started going back to as life gets back to normal.

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