Catching up on the Starbucks controversy

Although the controversy involving a branch of the giant coffee chain Starbucks has largely concluded, I wish to share my insights on the issue of senior citizen and PWD discounts that have embroiled the company.

On January 17, Starbucks Philippines had issued an apology following a controversy over a signage that limited the 20% government-mandated discount for senior citizens and persons with disabilities (PWDs) to just one food item and one drink per visit. The issue gained attention after a senior citizen's complaint led to a House inquiry, where House Speaker Martin Romualdez expressed concerns over some establishments' compliance with the law. The House inquiry also revealed similar complaints against other establishments like the bakery chain Goldilocks.

When we talk of discount, we usually refer to a reduction in the price of goods or services offered to customers. A discount could either be given as a courtesy to a specific customer demographics or a marketing strategy to attract customers in general.

While discounts are often viewed from a marketing perspective, and in the case of senior citizen and PWD discounts, as a social courtesy or a responsibility, people often overlook the fact that “there is no such thing as a free lunch.” Somewhere down the line, the cost is borne by someone or some group.

The Expanded Senior Citizens Act of 2010 or RA 9994, as amended by RA 10645, mandates a 20% discount on goods and services availed by our senior citizens, such as medical-related expenses, hotels and similar establishments, public transportation, restaurants, recreation centers, and purchase of certain goods.

The establishment or business providing the discount bears the cost. This means a reduction in their profit margin on the sales or services provided to senior citizens. To compensate for this, the government allows businesses to claim the discounts given as a tax deduction. It is some form of a cost-sharing mechanism between the private sector and the government.

However, it is almost unheard of for the private sector to absorb the cost of a discount. Aside from this would lead to a reduction in profit margin, giving discounts also impacts the sector’s capital for expansion and its ability to pay a workforce that can maintain a satisfactory level of product or service. Thus, in most cases, the cost is passed on to other consumers, often without them noticing.

I am in favor of senior citizen discounts as they represent a practical and effective means for the community to express its gratitude and support for our senior citizens. This gesture not only acknowledges their invaluable contributions and years of service to society but also addresses the specific needs of our elderly population. Our society is also able to absorb the cost of such discounts, largely because the Philippines, unlike many aging societies in Asia and Europe, boasts a substantial pool of younger workers

“In most cases, the cost is passed on to other consumers, often without them noticing.”

and taxpayers.

However, before we consider expanding the discount scheme to other special groups, as we have already done for PWDs, it's important to remember what I mentioned earlier: Every benefit has its cost, which inevitably falls on someone, somewhere --usually on the general consumers and taxpayers.

The Starbucks controversy also seems to suggest that many businesses in the country, including small-medium franchise owners, licensees and/or partners of this globally known coffee chain, feel the heavy burden of sharing the cost for government-mandated discounts. These entrepreneurs are not immune to the pressures of keeping their business afloat and cost-cutting in these challenging times.

Thus, it’s important to consider all aspects of the Starbucks controversy.