Fall is here, and retailers are trotting out a wide variety of products in the most popular flavor of the season — pumpkin spice. But prepare to pay a mint.
That’s because food manufacturers commonly bake in an informal “pumpkin spice tax” into the price of dozens of flavored foods and grocery products, from lattes and croissants to hummus and dog treats. And this year, a combination of inflation and robust demand has made that premium even steeper than usual — 14% more compared to the traditional varieties of the same products, according to MagnifyMoney, a personal finance site. That’s up roughly 6 percentage points compared to October 2020, the last time the study was conducted.
For retailers, upcharging consumers for seasonal or limited-run products is a tried and true marketing tactic.
“They see an opportunity, that there is demand, and they are going to capitalize on it,” MagnifyMoney executive editor Ismat Mangla told CBS MoneyWatch.
A flavor phenomenon
Pandemic-relatedas well as the war in have across the board. Inflation to rising food prices. While pumpkin spice is not in short supply, other staples like .
“It’s no secret we’re in inflationary times, and everything is a little bit more expensive now. But [retailers] can offset certain costs by raising prices on things they know people are clamoring for for a short period of time,” Mangla said. “Pumpkin spice is not difficult to procure, but it’s a way for restaurants and stores to capitalize and make a little bit more money on what is in demand.”
It’s also a way for retailers to recoup losses on other food categories.
“If there is no shortage of pumpkin spice, you’re better served upcharging products you know will be in high demand and hope customers will be insensitive to the price increases,” said Kelly Goldsmith, a professor of marketing at Vanderbilt University and an expert on scarcity. “They’re taking advantage of the fact that they have an active and excited base of people willing to pay.”
“Gold standard of innovation”
Demand forhas been rising ever since Starbucks first spawned the trend with the launch of its Pumpkin Spice Latte 19 years ago. The beverage has been so popular that the coffee giant recently launched what it calls a “pumpkin portal” where customers can take quizzes about Starbucks products and other trivia.
Indeed, at a recent Wall Street conference, Starbucks executive Michael Conway described the company’s suite of pumpkin spice products as nothing less than “the gold standard of innovation in the U.S.”
A pumpkin spice latte from Starbucks this year costs $6.45 — 18% more than the $5.45 Starbucks charges for a regular 16-ounce drink, according to MagnifyMoney’s survey. But pumpkin spice pretzels from TraderJoe’s saw the largest markup, at a whopping 161%. The grocery chain’s “Pumpkin Spiced Teeny Tiny Pretzels” cost 50 cents an ounce, compared to 19 cents an ounce for its regular “Honey Wheat Pretzel Sticks.”
While these sound like whopping markups, the products are all small-ticket items, which means many consumers may not even notice the higher cost or are simply willing to pay up for a favorite treat.
“It sounds dramatic how much the pumpkin spice tax has increased, but when you get into it it’s pennies on the dollar to the consumer,” Goldsmith said.
Of course, there’s a limit to how much retailers can tack on to the price of even the most popular items.
“Whenever a price deviates from expectation, it is more likely to get your attention. “The tipping point depends on what is the expectation and when does that expectation get violated,” Goldsmith said.
That lets retailers charge more for a product to capitalize on consumer fears of missing out on beloved seasonal products or that could run out due to their popularity.
These are the top five pumpkin spice products with the biggest markups, according to MagnifyMoney
- Trader Joe’s Pumpkin Spiced Teeny Tiny Pretzels: 161%
- Whole Foods Market spiced pumpkin pancake & waffle mix: 130%
- Trader Joe’s Pumpkin Spice Hummus: 50%
- Trader Joe’s Pumpkin Bisque: 46%
- Trader Joe’s Pumpkin Cheesecake Croissants: 30%
“The pandemic trained people to understand that things do run out,” Goldsmith said. “We’ve been conditioned to respond, and scarcity marketing tactics are even more effective than they were pre-pandemic.”