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Starbucks Price Hike Adds About 10 Cents to Some Coffee Drinks

Image: Starbucks Price Hike Adds About 10 Cents to Some Coffee Drinks

Tuesday, 25 Jun 2013 01:48 PM

By Clyde Hughes

A new Starbucks price hike that started Tuesday for many U.S. stores will have customers digging a little deeper in their pockets to pay for many of the small-sized brewed coffees.

Starbucks officials said the price hikes at its 11,000 cafes work out to an average 1 percent nationally, The Associated Press reported. Customers will find the new prices mainly on its small coffee drinks, which will cost roughly 10 cents more.

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The Seattle-based company told the AP that many of its medium and large coffees and Frappuccinos will not change.

"Less than a third of beverages will see a small increase in most stores," Starbucks spokeswoman Lisa Passe told the AP. She added that the price upticks will vary from region to region.

Starbucks spokesman Jim Olson told CNNMoney last week that this was the first price increase in nearly two years for the coffee chain, blaming the rising cost of labor, raw materials and rent.

Because of declining coffee cost and intensive competition with its rivals, Starbucks reduced the price of its packaged coffee sold in U.S. retail outlets by an average of 10 percent in May.

The AP said that earlier this month, a Janney Montgomery Scott analyst issued a note to investors saying Starbucks is likely to benefit from lower coffee costs for the next few years. Based on the price of a coffee contract at the time, Mark Kalinowski estimated that Starbucks would pay about half the $1.4 billion it paid for coffee in 2012.

The Wall Street Journal wrote that in the March quarter, Starbucks reported a profit of $390.4 million, up from $309.9 million a year earlier. Revenue jumped 11 percent to $3.56 billion.

Starbucks, which opened its first store in Seattle in 1971, has nearly 18,000 stores in 60 countries, according to the company's website.

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