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Starbuck Raising Coffee Prices

September 22, 2006

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Brother, can you spare an extra nickel for a cup of coffee? If so, you shouldn't be inconvenienced by Starbuck's latest price increase.

The Seattle-based coffee shop chain is increasing the price of all its drinks sold in the U.S. and Canada by five cents.

Consumers will also pay an extra 50 cents a pound for most Starbucks coffee beans sold in stores. The price hikes take effect October 3.

The company said the price increases are necessary to help cover increased costs for labor, energy and other operating expenses.

The price increase comes despite growing competition. McDonald's launched a more robust blend of coffee earlier this year and Dunkin' Donuts, which has added Starbucks-style lattes and smoothies, plans to triple the number of stores it operates in the next three years.

The hike is smaller than the eleven cent increase Starbucks imposed in 2004, the last time it raised prices. The company said that price hike did not reduce its sales figures.

The price hike was likely a recently-made decision. When Starbucks Chief Financial Officer Michael Casey addressed an investors group last spring, he said the company did not plan to raise prices "in the foreseeable future."

Starbucks did not raise its prices last year in the aftermath of Hurricane Katrina. The company held the line, even though damage to coffee stockpiles in New Orleans warehouses caused a temporary spike in the world price of beans.

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