Starbucks Raises Prices in Northeast, Sunbelt

Tuesday, 03 Jan 2012 12:31 PM

 

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Starbucks Corp. raised prices by an average of about 1 percent in the Northeast and Sunbelt regions on Tuesday, a move affecting cities such as New York, Boston, Washington, Atlanta, Dallas and Albuquerque.

Shares of Starbucks, which boosted prices in some other U.S. markets in November, climbed 2.2 percent to a new high of $47.04 in early morning Nasdaq trading.

Starbucks expects high costs for things like coffee, milk and fuel to cut into profits this year and — along with restaurant operators ranging from Chipotle Mexican Grill to McDonald's Corp. — is raising prices to help offset some of that cost pressure.

In New York City, prices for 12-ounce "tall" brewed coffees and latte drinks will go up 10 cents. Prices on about half a dozen other beverages also will increase, Starbucks spokesman Jim Olson told Reuters.

The world's biggest coffee chain raised prices on some drinks in California and South Florida in November. Those regions are not affected by the Tuesday pricing action.

Olson said the price for a 16-ounce "grande" brewed coffee, Starbucks' most popular beverage, remains the same across the United States and has not changed since January 2011. The price for grande lattes is unchanged in most markets, he added.

The Seattle-based chain has not made across-the-board price increases since 2007, choosing instead to adjust prices on a market-by-market basis.

Starbucks said its pricing decisions are based on multiple factors, not just the price of coffee, which has eased lately.

"These adjustments are the result of balancing the cost of doing business with competitive dynamics in these markets," Olson said.

Starbucks' cost of doing business includes expenses related to distribution, store operations and commodities, including fuel and ingredients for food and beverages, he said.

The company is also busy remodeling about 1,700 cafes.

Starbucks caters to a somewhat higher-income customer, and recent price increases prompted no apparent pushback.

In the fiscal fourth quarter, global sales at cafes open at least 13 months jumped 9 percent, better than the 6.5 percent gain analysts, on average, expected according to Thomson Reuters data.

Customers visited Starbucks cafes more often during the quarter and spent more money when they did. Same-restaurant sales at U.S. cafes, which account for about four-fifths of its revenue, rose 10 percent.

The company previously said it expects costs for commodities such as coffee and milk to reduce fiscal 2012 earnings by about 21 cents per share.

Despite that, it has forecast a profit of $1.75 to $1.82 per share this year, which would represent profit growth of as much as 20 percent over fiscal 2011.

© 2014 Thomson/Reuters. All rights reserved.

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