By Annie Gasparro
Starbucks Corp. (SBUX) is lowering the price of its packaged
coffee sold in U.S. grocery stores, following similar moves by
competitors now that green coffee prices have retreated.
As of May 10, Starbucks will reduce the price for ground and
whole-bean coffee by an average of 10%, including its Seattle's
Best brand, at the some 50,000 retailers who sell its products.
The move comes after both Kraft Foods Group Inc. (KFT)--parent
company of Maxwell House and Yuban--and J.M. Smucker Co.
(SJM)--maker of Folgers, Dunkin' Donuts and Millstone coffee--each
reduced the prices of their packaged coffee by 6% in February.
U.S. food companies had raised prices in 2011, when arabica
futures surged. Now that retailers are seeing a tailwind from lower
coffee costs, they are starting to pass those along to
consumers.
Kraft is also taking direct aim at Starbucks in its Gevalia ads,
upping the competition in the premium coffee space.
A spokesman for Starbucks said pricing decisions take in to
account several factors, such as coffee and other supply chain
costs, the competitive landscape, and customers' expectations for
value.
"Sometimes pricing is also a way to expand our reach and bring
in new customers," the spokesman said.
Starbucks said the reductions will take its prices back to
roughly the same as they were before its last price hike in March
2011.
For instance, a 12-ounce bag of Starbucks coffee will be listed
for $8.99, from $9.99, and Seattle's Best will go to $6.99, from
$7.99. Retailers may also offer additional promotions that take the
prices even lower.
The pricing change, which is for the U.S. only, doesn't include
single-serve coffee packets, or any packaged coffee sold in its
cafes.
Starbucks has been making other efforts to increase the coffee
it sells outside its cafes.
Also next month, Starbucks will expand its loyalty-rewards
program to packaged coffee purchased in grocery aisles, allowing
customers to earn points they can earn redeem for free food and
drinks at its coffee shops. Meanwhile, Starbucks is testing a new
shelving design for higher-end retailers that helps its brand stand
out more. Trimmed in dark wood, with a faux-tile backsplash, the
displays are modeled after its cafes. Starbucks has announced plans
to roll them out in hundreds of grocery stores this year, as
packaged goods become an increasingly important part of its
business.
Write to Annie Gasparro at annie.gasparro@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires