Starbucks Cutting Prices: Bagged Coffee in Grocery Stores 10% Less

Monday, 15 Apr 2013 10:42 AM

By Alexandra Ward

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Starbucks is cutting the price of its packaged coffee sold in grocery stores by 10 percent starting next month, in an effort to attract new customers and remain competitive with rival companies like Dunkin' Donuts.

Prices will drop from $9.99 to $8.99 for a 12-ounce bag of Starbucks coffee beginning May 10, said spokesman Jim Olson.

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"This will allow us to both enhance the value that we're providing our existing packaged coffee customers, and hopefully increase the frequency which they purchase Starbucks coffee, as well as attract new customers," Olson said in a statement. Starbucks Via instant coffee, K-Cups, and Verismo pods aren't affected by the price cuts, he said.

The list price is just a suggestion and retailers are free to charge their own prices, however, so customers may not see a change.

Last quarter, the Seattle-based company brought in about $380 million from outside café sales. Based on that level, Starbucks will have to sell 65 percent more bags of packaged coffee to net the same amount of profit, according to Bloomberg Businessweek.

"Starbucks has been working hard to grab grocery store shoppers' dollars by expanding the array of products it has available in those stores," writes Mary Beth Quirk at Consumerist. "Times must be relatively tough on the company, as it previously raised the price of its packaged coffees back in March 2011. Other companies like Dunkin' Donuts have been lowering their prices, so the pressure is on Starbucks to do the same."

Folgers, Dunkin' Donuts, and Maxwell House all slashed prices earlier this year, and it seems Starbucks now realizes it has to keep up to stay relevant.

"If you can run economically enough to make money at the lower price, you’re simply taking money out of your competitors' pockets," Rita McGrath, a professor at Columbia Business School, told Businessweek.

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