The Economics of Pumpkin Spice

Halloween candy and pumpkin spice lattes used to wait until at least after Labor Day to make their annual debuts, ushering in the start of fall several weeks before the autumn season officially begins. But in the past few years, restaurants and retailers have been releasing their autumnal food and beverages even earlier. As schools have pushed for an earlier start to the school year, Labor Day has lost some of its status as a seasonal indicator. Since many families are preparing for school in August anyway, fall feels right around the corner.

According to Technomic, in 2019, restaurants and convenience stores launched 268 pumpkin-themed seasonal items. By 2022, the number had more than doubled to 559 items. November is still the most popular month to launch limited-release pumpkin items timed for Thanksgiving, but August has been gaining ground.

Starbucks likes to take credit for the rise of pumpkin-flavored food and beverage items. "Go back 20 years ago, nothing pumpkin existed in the marketplace. The only thing you could find in the grocery aisle was a pumpkin puree," Peter Dukes, one of the original creators of Starbucks' pumpkin spice latte, said at a recent press event celebrating 20 years of the drink.

Because pumpkin flavored items are a huge profit-maker for brands, there is a race to be first to release. This year, Starbucks debuted their fall menu items on August 24. While customers complained that it was too early, other rival brands released even earlier. Dunkin' Donuts released its autumn menu on August 16, and Krispy Kreme rolled out their pumpkin spice donut lineup on August 7. IHOP Chief Marketing Officer Kieran Donahue told CNBC that the chain typically sells about one million of its pumpkin spice pancakes every time they return to menus. "The fact of the matter is, it's a popular menu item … I think we could offer it at any time [of the year] and people would buy it," he said.

Fall flavored menu items provide a profit boost to restaurants. In 2019, Starbucks sales increased 6% week-over-week when the PSL returned to menus. Their sales increased 8% week-over-week in 2020 after the PSL debuted again, and in 2021 sales increased 10% week-over-week.

According to Neilson data, Americans spend more than $500 million on pumpkin spice products every year. "If it's just a seasonal, limited time only, you're more likely to consume it multiple times over that same time period than if it was spread out over a long period of time," said Dr. Jadrian Wooten, an economics professor at Virginia Tech.

But it isn't all spent on coffee and donuts. Americans can buy at least 138,000 different pumpkin spice items, ranging from drinks and food to chips, Spam, beer, baby food, deodorant, and even trash bags! Pumpkin spice customers aren't merely willing to buy more products; they are also willing to pay more for them. In a 2020 study of 40 grocery items across six different retailers, MagnifyMoney discovered an average 8.8% "pumpkin tax" on pumpkin spice items. Trader Joe's was the worst, with an average pumpkin spice markup of 17.6%.

Lizzy Freier, director of menu research and insights at Technomic, said that the early pumpkin kickoffs have not led companies to pull items faster. So go ahead and enjoy an iced pumpkin cold brew now, and then have a hot pumpkin spice latte once the weather cools off.