Starbucks price hikes coming as raw materials costs spike

starbucksThe Seattle-based premium coffee brewer, Starbucks, has announced it would raise prices of already aggressively priced coffee beverages.

The company says variable costs, in particular, raw materials, have seen significant price increases over the last decade, with some key ingredients like green arabica coffee trending upward to a 13-year high.

Starbucks also noted dairy, sugar, and cocoa as other primary raw materials that have materially increased in costs.

Starbucks CEO Howard Schultz said in a statement today that the company absorbed the higher costs in the past, but would now have to shift the costs to consumers given the upward trend and continued volatility.

The company said the price hike would only apply to larger-sized beverages that mainly include the raw materials that have risen in price, and that not all markets would see the price increases, even for the same products.

Despite the material increase in variable costs, earnings forecasts for fiscal 2011 have remained unchanged at EPS between $1.36 to $1.41.

Despite the economic downturn, the company still sees a record number of sales as more people flock to the premium brewer.

Starbucks recently reported its strongest quarterly earnings in the first quarter of this fiscal year, posting total profits of $242-million ($0.32 per share) in the period.

The company has undertaken additional steps to bring more people into its stores, where more recently it made WiFi Internet access even more seamless with unlimited free Internet for customers in all company-owned Canadian stores starting last July.

The Starbucks stock (NASDAQ:SBUX) closed down almost 1-percent to $25.93 per share in today’s trading session.


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Peggy holds a Bachelor Arts degree with honors in Economics from York University in Toronto, Canada. She is a Certified Management Accountant (CMA). She has also passed Level I of the Chartered Financial Analyst (CFA) Program. She is also a realtor. Write to peggy@business2press.com
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  • http://www.facebook.com/people/Emmanuel-Gallegos/100001157880978 Emmanuel Gallegos

    Iam back to mcdonalds if you ask me :)

    • Leafs-sux

      i liked it when they gave it away for free for about a month in Canada a couple of months ago

  • http://genevieve-amore.blogspot.com/ Genevieve

    If you buy a cup of Starbucks coffee for say $5, compound that $5 at a rate of 20% compounded interest for the next 15 years and you’ll realize that Starbucks coffee costs more than that $5, it cost a freaking $70! So the next time you pick up a cup, please ask yourself if $70 for that cup is really worth the money. Honestly speaking, I don’t find their coffee THAT good to be asking for that kind of money. Like Warren Buffett said, “Price is what you PAY, Value is what you GET.”

    • Thegraywizard2000

      $5 for a cup of coffee – where do you shop? My Venti cost $2!

  • SBLOVER

    Been a SB cust for 15 years. This a.m. I had to pay $4.60 for a venti mocha. Love my mocha’s but can’t afford $5 a day….and that’s when I only have 1. Guess it is time to break-up with SB. So sad!!!!!!!!

  • Ericphx1

    Yeah, my daily routine will have to change going from 4.65 for my venti caramel machiatto to 5.21 starting yesterday! I thought 4.65 was pretty high, but over $5 is time to switch to something or somewhere else.

  • steven

    I agree my venti caramel machiatto went from 4.54 to 5.05…and I drink at least one a day. Guess its time to give it up :(

  • Casmia225123@aim.com

    Instead of giving up the every day daily STBX beverage; make it 2-3x / week. I like Monday’s cause its Monday; Wednesday to look forward to; and of course Friday is a good day; or any days you choose. You’ll look forward to it more…

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