By Julie Jargon
Starbucks Corp. says it plans to raise prices for certain
packaged coffee and other products, following other big java makers
in responding to a spike in raw coffee costs earlier this year that
is now making its way to consumer wallets.
Starting Tuesday, some beverages in Starbucks company-operated
stores will increase by five cents to 20 cents. A 20-ounce,
venti-sized cup of brewed coffee, for example, will go up to $2.35,
an increase of either 10 cents or 15 cents, depending on the
market. Price increases on the beverages in its stores will
increase the average ticket by less than 1%, Starbucks said.
The list prices of Starbucks packaged coffee sold in grocery
stores will increase by an average of 8% on July 21. That
translates to an increase of around $1 per bag, so a 12-ounce bag
of coffee would go to $9.99 from $8.99. The price of K-cup
single-serve coffee packs, VIA instant coffee and Seattle's Best
Coffee won't change, nor will the price of packaged coffee sold in
Starbucks stores.
Arabica futures hit their highest price in late April in more
than two years. Futures prices have since fallen by about 20%, but
retail coffee prices often trail the futures market by a few
months.
J.M. Smucker Co. this month became the first major U.S. roaster
to lift coffee prices in about three years when it announced a 9%
price increase on its Folgers and Dunkin" Donuts packaged coffee.
Kraft Foods Group Inc. followed suit a few days later with a 10%
price increase on its Maxwell House and Yuban brands. The price
hikes came as forecasters predicted a drought in Brazil, which
produces half the world's arabica coffee beans, would curtail
supplies.
Starbucks has locked in all of its coffee needs for fiscal year
2014 and 40% of its coffee needs for fiscal 2015.
"For both our packaged coffee and retail business, there are
many factors that contribute to our pricing decisions, including
competitive dynamics and our overall cost structure," a Starbucks
spokeswoman said.
Smucker, Folgers and Starbucks each last raised their prices on
grocery store shelves in the first quarter of 2011 by 10% to
12%.
In mid-2011, the market for arabica coffee began to drop,
ultimately falling nearly 50% by the end of 2013, prompting coffee
makers to then lower their prices. But the retail price decreases
didn't wipe out the increases coffee companies took during tougher
times, Kraft's Chief Financial Officer Teri List-Stoll said in an
interview last month.
"As coffee prices were coming down, the retail pricing gap to
commodities widened a bit," Ms. List-Stoll said. Still, consumers
don't seem to balk at higher coffee prices. "Coffee has more price
elasticity than other commodity categories," she said.
The Starbucks spokeswoman said the company decreased its
packaged coffee prices by approximately 10% in April 2013. "With
this increase, we are effectively restoring prices to their April
2013 levels," she said.
Starbucks last raised prices in its cafes in June 2013 by an
average of 1%. Starbucks said that in most of its stores, it won't
make any changes to the prices of its most popular drinks,
including its grande-sized lattes, tall brewed coffees and
Frappuccinos. The spokeswoman said she expects fewer than 20% of
Starbucks customers to be impacted by the price increases.
--Annie Gasparro and Leslie Josephs contributed to this
article.
Write to Julie Jargon at julie.jargon@wsj.com
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