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Behind the frivolous fun of Fluffernutter Coffee Chiller from Dunkin’ or Starbucks’ Tropical Butterfly, there is some serious demand and supply.
Let’s take a look.
Refresher Economics
Refreshers appeal to buyers and sellers.
Although a refresher could cost a dollar more than an iced coffee, the customer sees an affordable treat. Rather like eye candy, the refresher is pretty enough for TikTok and fun, too. In addition, more customized prep further validates the higher price.
Appealing also to the seller, the refresher can be much cheaper to make. Not needing pricier coffee beans and expensive milk, refreshers can expand sellers’ profit margins. As Modern Restaurant explained, a traditional drink could have sold for $2.50 with approximately $2.15 in gross profit. “But a crafted soda or refresher selling for $5.50 may only cost an additional $0.50 to $0.90 in syrups, creams, cold foam, boba, or other ingredients. That can move gross profit into the $4.25 to $4.75 range per serve.” (After all, cold foam is cheap.)
As a result, we wind up with the demand side willing and able to pay more for a treat while the supply side expands its profit margin.
Our Bottom Line: Diminishing Marginal Utility
Then, to all of this we can add diminishing marginal utility.
Given a pile of chocolate chip cookies when we are hungry, the first is delicious and so too is the second one. But then the extra pleasure we get from each subsequent cookie plummets. Or, using economic language, we say that the marginal (defined as extra) utility diminishes.
Similarly, offered temporarily, a limited edition refresher like the Tropical Butterfly will not be around long enough for our extra pleasure to plunge.
We should add (with a smile) that refresher (the drink) economics is a perfect demand and supply refresher!
My sources and more: Thanks to the NY Times for inspiring today’s post. From there, Modern Restaurant Management had additional supply and demand details.
Please note that several of today’s sentences were in a past econlife post.
