Starbucks Plans Price Increases on Some Drinks

A Starbucks customer drinks coffee in Palo Alto, Calif., Tuesday, Feb. 26, 2008. Starbucks CEO Howard Schultz has announced the closure, starting at 5:30 p.m. local time, to energize 135,000 employees. Starbucks' 7,100 stores across America will participate in the brief barista re-education. (AP Photo/Paul Sakuma) AP Photo/Paul Sakuma

Starbucks customers will soon get a jolt before any caffeine touches their lips. The world's biggest cafe chain is raising prices.

Raw coffee prices have been rising. Starbucks said on Wednesday that it has absorbed the higher prices until now, but no more. It said the price increases will be focused on big and labor-intensive drinks. It didn't say which drinks, or how much.

Most of its basic coffee and espresso drink prices will stay the same or even drop in some cases, including its $1.50 tall brewed coffee.

The announcement Wednesday also said it may raise the price of packaged coffee, including beans sold in grocery stores, in coming months.

Howard Schultz, the company's chairman, president, and CEO, blamed the increase on a "highly speculative" green coffee market over the past six months, along with "dramatically increased commodity costs."

Other coffee sellers have been raising prices, too. Prices for Folgers, Dunkin' Donuts and Millstone brands made by the J.M. Smucker Co. rose an average of 9 percent last month, the company said. And Green Mountain Coffee Roasters Inc. plans a 10 to 15 percent increase next month for its K-Cup packs for the Keurig single-cup brewing system.

Store operator Caribou Coffee Inc. tries to lock in raw coffee prices at least a year in advance, so it's buying coffee "significantly below current commodity price levels," Chief Financial Officer Tim Hennessy said on a conference call with analysts Aug. 4, according to a transcript. He said they have enough green coffee inventory to last until the second quarter of next year.

Starbucks reaffirmed fiscal 2011 guidance it gave in July for earnings per share of $1.36 to $1.41. It said that reflected the rise in commodity costs at that time. The new, higher retail prices should offset the rise in raw coffee prices since then, Starbucks said.

Starbucks shares had fallen 23 cents to close at $25.93. They rose 13 cents in aftermarket trading.
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