Starbucks Corp. is raising prices slightly on some of its
beverages to cover rising costs including wages and rent, even as
prices for raw coffee have been falling.
The Seattle company, like other coffee purveyors, often raises
prices for its products when coffee prices increase, but the latest
move comes despite a decline of about 42% in Arabica futures prices
from a peak late last year. The increase, which takes effect
Tuesday, will increase the cost of the average customer order by
about 1%, Starbucks said. Bagged coffee won't be affected.
The increase comes from an overall need to manage business
costs, including labor and rent expenses, a Starbucks spokeswoman
said.
"Our pricing philosophy is to balance our need to run our
business effectively while providing maximum value to our
customers," she said.
Some other retailers have started raising prices in cities that
have passed wage increases. Chipotle Mexican Grill Inc. has been
raising prices in several cities across the country, with the
highest increases in San Francisco, where the minimum hourly wage
rose to $12.25 on May 1, up from $10.74. Chipotle's menu prices in
San Francisco rose, on average, more than 10% compared with about
4% in other cities, according to a recent note from William Blair
& Co.
Starbucks said that for most beverages that are increasing,
prices will go up by 5 to 20 cents. The types of drinks affected
will vary by market, but in most stores, prices will increase for
tall, or 12-ounce, and venti, or 20-ounce, brewed coffee, as well
as grande, or 16-ounce, latte. That represents the first price
increase on those items in two years. A venti-sized brewed coffee
will cost $2.45 after the increase, for example. In most stores
there will be no change to the more popular drinks and sizes.
Last week, J.M. Smucker Co. said it had lowered the price of its
bagged Folgers and Dunkin' Donuts coffees by 6% to reflect lower
coffee costs. Analysts expect Kraft Foods Group Inc. to follow suit
with its Maxwell House brand.
Write to Julie Jargon at julie.jargon@wsj.com
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