7-Eleven drink spike to hit customers' hip pocket

BY RISHAB JAIN

7-Eleven coffee prices are set to double on October 4 from $1 to $2 for the regular size, large coffees will be $3, and the super cups will be $3.50.

7-Eleven chief executive officer and managing director Angus McKay said it will mark the first time the convenience story has changed its prices since 2009.

“It is no longer possible to absorb cost increases, as we have done for the past decade," Mr McKay said.

“We will continue to provide our customers with great value, and great quality, while ensuring our prices are sustainable for our store owners, our suppliers and our communities."

7-Eleven is the world’s largest operator of convenience stores, with more than 35,000 franchised and licensed stores in 17 countries, generating annual sales exceeding $36 billion.

7-Eleven’s CEO Angus McKay says selling coffee for $1 a cup is no longer sustainable. PHOTO: supplied

Associate Professor of Economics at Monash University Vinod Mishra said the price increase will not have a long-term effect on coffee consumers.

“Keeping in mind the consumer mentality any price increase, or a shock, has a very strong short-term effect," Assoc. Prof. Mishra said.

"In the long term, they get more used to the idea and don't care so much,” he said.

Gopi Krishna, an office worker who regularly enjoys 7-Eleven coffee, said the proposed price increase was fair.

“That's fair enough, though there would be a bit higher turnover [if the prices stayed the same],” Mr Gopi said.

Professor Mishra said the timing of the price hike was likely a strategic move, since there was consumer-willingness to pay for products like iced coffees and Slurpees in summer.

“They are actually increasing the prices in summer because the demand is relatively inelastic, or less price sensitive, during that time of the year,” he said.

“Introduce the price change in summer, where people are not sensitive to the price, and by the time summer ends, it will probably be embedded in their brain.”

7-Eleven sells approximately 80 million cups of coffee annually.

Another major product subject to the price hike is Slurpees.

This sweet treat will be $1 for a small, $1.50 for a large, $2.50 for a super, and $4.50 for a mega.

Popular summer favourites, Slurpees, will also increase in price in October.

Assoc. Prof. Mishra said the new prices might lead to a drop in sales in the initial period, but not a significant loss in the long run.

“It is possible that we may see some drop in the quantity demanded, in the sense that somebody who buys a Slurpee every day might buy every other day, and somebody who used to buy a large Slurpee might buy a small Slurpee. But overall, I don't see a big drop."

7-Eleven customers can save money on their coffees and Slurpees by bringing in their own cups.

The retail giant announced that a 50-cent discount would apply to customers who bring their own reusable cups.

7-Eleven is championing the move as an eco-friendly way to reduce waste from disposable cups.

Assoc. Prof. Mishra said the money 7-Eleven loses by offering this discount will likely be offset by increased sales.

“The people bringing their own cups will have their cost cut, but this will probably attract a lot more people [to 7-Eleven] thinking that, 'okay, they are environment-friendly,'” Assoc. Prof. Mishra said.