600 million cups sold — a deep dive on Pumpkin Spice Lattes
Starbucks just had its 6 highest weeks of sales ever. Why? Pumpkin spice lattes are back on the menu, selling more than ever. Even if you don’t sip it, it’s undeniable that PSLs print green.
Starbucks recently released its annual 10K filing. My favorite takeaway? Starbucks just had its 6 highest weeks of sales ever.
A huge reason? Pumpkin spice lattes (*ahem* PSL) made their fall debut. And spoiler alert: PSLs make it rain. Coincidentally, the pumpkin spice latte also turns 20 years old this year.
In this deep dive, we’ll delve into:
How the PSL was created
The growth of the PSL
The numbers and $ behind the PSL
Business takeaways behind PSL’s success
Written while burning a pumpkin-spice scented candle
Tis the season. For cozy fireplaces, photoshoots in plaid, and #pumpkin everything.
For many, nothing says fall like a pumpkin spice latte. According to John Hopkins, pumpkin spice is strongly associated with feelings of nostalgia.
For Starbucks, the PSL is the star of its fall season. And of its balance sheet.
I. In the room where it happened — the creation of the PSL
Before 2003, all things pumpkin spice was well, not a thing. Pumpkin spice was just about the slice of pie that followed turkey-coma on Thanksgiving. Not something associated with coffee.
Enter Starbucks.
A guy named Peter Dukes (senior beverage product manager) and his teamare about to change the world.
On the 7th floor of Starbucks’ headquarters in Seattle, there is a magical place called “Liquid Labs” — the R&D lab where new drinks are whisked up. It’s like Starbuck’s version of Willy Wonka’s chocolate factory.
The reason for innovation?
Through its regular R&D, Starbucks had proven the success of seasonal drinks — the eggnog latte and the peppermint mocha. Yet these were winter seasonal drinks. Having a fall seasonal drink could bring in more revenue with increased foot traffic and spend per visit for an additional 3 months in the year.
Timeline of the PSL's creation:
Early 2003 R&D
The team tested 100+ beverage flavor ideas. When polled, chocolate and caramel ideas were most popular. Yet these were deemed not unique enough. In contrast, pumpkin pie triggered “nods around the room”
Corporate blind taste test
Groups of employees did blind tests. They were then surveyed on their thoughts of all the beverages presented. Questions included things like “how likely are you to buy the beverage”. Pumpkin spice came out the winner
3 months of pumpkin crafting
Lots of decisions go into crafting a new drink. Supply chain logistics, ingredient cost, pumpkin syrup or pumpkin puree, spices, quantity of spices to espresso to steamed milk, to whip cream or not.
Fall 2003 launch
100 stores in Vancouver and DC did a trial period offering the PSL. Within the 1st week, Starbucks knew it was onto something — sales skyrocketed and managers called corporate excitedly
Fall 2004 rollout
A year later, the pumpkin spice latte officially rolled out into all US stores. Excitement and syrup shortage follows
II. The hockey-stick growth of the PSL
The PSL went from unknown debutante to coffeehouse darling. Yet in the beginning, PSL could hardly be called a seasonal shoo-in.
The first three years — slow, steady growth
While customers certainly loved the drink, there was discussion of potentially discontinuing to do something new and fresh. The thinking was that the sales might be from the novelty of any new drink rather than PSL
2006 — social media enters the chat
Then in 2006, social media took off. Influencers and ordinary people alike flooded Facebook and Twitter to share their love. Virality, and a massive uptick in sales, were achieved.
For example, in 2017, Starbucks did a livestream called “PSL Pumpkin Hatch” on FB Live & Youtube — 8M viewers tuned in just to know the release date.
In 2023 present day, Starbucks now starts its PSL season a full month before fall actually hits calendars — this year it was August 16. Happy 20th anniversary to the PSL indeed.
III. Hips Numbers don’t lie
20% more margin
Starbucks charges $1 more for the PSL than its regular latte. This is actually a 20% price increase from the regular latte at $5. This 20% is substantial when Starbucks’ standard lattes are probably ~40% to 60% margin based on industry estimates
74% of total sales
Beverages account for the majority of Starbucks’ sales. Starbucks doesn’t share what percentage the PSL accounts for. However, given the record sales recently, it’s likely a fair amount
$500M
The amount that Americans spend on spice spice products each year
50g of sugar
The nutritional facts of one grande PSL
600M
The # of cups of PSLs sold since 2003. To put that perspective, if the lattes are laid end to end, 600M lattes would circle Earth twice
180 billion calories consumed
AKA 600M lattes x 300 calories per latte
IV. Business Lessons from the PSL
Good things take time — the PSL launched in 2003. Despite initial success, Starbucks considered discontinuing it to keep the menu fresh. Then, in 2006, PSL met social media — prep met luck. Soon, #PSL was trending
Omnichannel builds flywheels – in 2019, Starbucks launched its first pumpkin spice creamer into retail stores like Target. This propelled a flywheel of brand and flavor recognition that brought more customers into stores
Rising tide lifts all boats — Starbucks’ PSL was the drink that launched a thousand products. While a flavor is not itself a competitive moat, creating a whole new industry is just good business. According to Nielsen, people spend $500M on pumpkin spice products annually
Trends are more powerful than diets — The best hot cocoa in NYC. Levain chocolate chip cookies. The PSL. When it comes to trends and sheer ‘delicious-ness’, consumer tastes prove fleeting. No one cares about no-sugar, dairy-free in these moments
Lean into the trend — this year, Starbucks added the PSL earlier than it ever had. On Aug 16. A full month before fall actually starts. And yet, Dunkin Donuts launched their PSL a week earlier. Why? Because it’s profitable and builds awareness among customers early
Limited edition & seasonal items drive sales — Starbucks hasn’t had a seasonal drink as successful as the Pumpkin Spice Latte. Therefore, Starbucks has done two things — (1) add to the pumpkin spice trend with new pumpkin drinks and food items each season (2) rotate in ever-changing, seasonal drinks like the Apple Crisp Oatmilk latte to create buzz through novelty
The name game is part art, part luck — one of the potential names for the drink was “Fall Harvest Latte”. While good taste thankfully prevailed, the name “PSL” was purely happenstance — baristas wrote “PSL” on cups and customers quickly adopted the name
The real takeaway? When it comes to PSL, let the gourd times roll.
== Author’s note ==
Thank you so much for reading my substack, it truly means the world to me. Please feel free to share any feedback on this post – I’d love to hear it! It’s been a second since I’ve written here, and I’m excited to get back to it.
Coming up is more behind-the-scenes, deep dives of public companies like 7-Eleven, McDonalds, and Sweetgreen. Personally, I’m fascinated with how these companies create.
As a final thank you, I’ll leave you with this final PSL tidbit – did you know that the Starbucks’ PSL uses a baseball sized-pumpkin varietal called kabocha? On the fields where they’re grown, an acre produces about 2,000 pumpkins a season.
Cozy wishes,
Shelley