Analysts predict Starbucks' price increase will result in "some traffic fall-off"

What stock analysts are saying about the average 9 cent drink-price increase:

* "While Starbucks pricing strategy remains judicious and pricing power remains strong in our view, we anticipate some traffic fall-off resulting from this increase given the challenged state of the consumer, likely magnified press, and mounting competition in the coffee space."

* "It is unusual for Starbucks to raise prices twice in one year, and we believe this step is driven by the very high increases it has experienced in the cost of milk, which is up about 94% year over year."

* "This price increase should help both comps and margins, but does not offset our concern about slowing traffic trends and the overall growth rate of the U.S. business," (MarketWatch)

Comments

[atownsbuxrules]

Wow. Stock analysts are, like, psychics.

I wonder what kind of complex minds it takes to figure this stuff out.

[Pat Nerr]

I think the drowning earnings and excessive spending on things that don't really matter at the corporate level might have tipped them off.

or the single digit comps... one of those

[praxisguy]

I don't see anything unusual here. Dairy is off the charts and the economy is on the front end of a recession. That's the elephant in the room.

When milk is up 94% and the cost of fuel is up at least 50% from last year and 75-80% from where it was two years ago, that's inflation. And it's a word no one dares mention.

It looks like we're slowing trying to slow our growth in the US by a tad - that's probably the right move - IMHO - while managing spending.

Good decisions while staying true to our core values and maintaining the customer experience. That's what it's about.

[J Grant]

I propose a worldwide boycott of Starbucks in protest of price hikes – there are other alternatives and I think Starbucks needs to realize this.

[Jason]

People won't blink at the price change most will not even notice.

[jack]

just a little info... the some partners dont care about the company's core values, and customer care,they care about social hour. how do we change that?

[atownsbuxrules]

Yep, I will boycott Starbucks, too! I just won't go into work, where I'd have to make frappucinos all day and have to explain the price increase 507679 times as if I personally made the decision. That sounds like a good plan to stick it to the man. He likes getting things stuck to him, mostly money from people who cave in and sneak in against their priciples because they really can't go the day without their quad venti iced mocha.
You will be at home biting your nails, covering your ears to the siren's call. .. let's face it. You read Starbucks Gossip, and are just as obsessed as the rest of us. Good luck with your boycott. Try one of those caramel lattes from D&D, lemme know how that goes. I'm sure the watered down taste of powdered milk enzymes and stale coffee will pair nicely with one of their deliciously burnt tasteless bagels. :P

[Dustin]

What!? Price increase drive away customers? You're kidding?

[Elizabeth]

Price increases are part of life. Some people will stop coming to Starbucks, and some will keep coming but complain all the while, but it is the job of us partners to keep smiling and providing good customer service. Plain and simple.

[logjam]

starbucks has moved away from their business which is coffee. its cheaper for mc d's to buy better coffee than for starbucks to be in the food business. and now starbucks is the home of the two dollar doughnut.

[Andrew]

In metropolitan areas starbucks is not a luxury it is a neccessity. 9 cents is immatural no one cares. no one will notice. I think that the analysts should take a look at the starbucks business model and be amazed that starbucks can gross over $1,000,000 a year in less than 1000sqft. I would also like to give analysts who critique starbucks' margins a lesson about excess capacity.

[Northern Latte]

Logjam...I don't know what Starbucks your going in but our chocolate and glazed donuts are $1.03 a far .97 cents from 2 dollar donuts

"just a little info... the some partners dont care about the company's core values, and customer care,they care about social hour. how do we change that?"

I live for social hour and at the same time care about customers and the company's principles. By the way, just got a 30 inch plazma in the store the other day to "tell customers" what song is playing. Because going into the back to see what the player says is worth $2000 now.........good business choices.

[logjam]

I stand corrected ours are 1.95. however;1.05 is still outrageous. sbux charges high prices for tasteless food. if they wanted to increase profit margins and cut calories they could make smaller pastries i.e. cofee cake. and still charge too much.

[Northern Latte]

Are the 1.95$ donuts the Top Pot ones? We haven't got those yet they are arriving in September.

[TheRealRevolution]

"if they wanted to increase profit margins and cut calories they could make smaller pastries i.e. cofee cake. and still charge too much."

Sure they could Logjam, but then again you'd be complaining about the fact that now are pastries are smaller! This "stick it to the man" while working for the man, just isn't working for you. It's my biggest pet peeve about working here at Sbux, there are so many partners who truly want to be here, and we are stuck with these jackoffs that are egocentric, and believe that they are the only ones who have the right answers ...jeesz....

[logjam]

actually, i am a partner and have been for six years. and i love my job. tomorrow i'll be up at 3:30 grabbing my apron and going to my store where i like the people i work with and truly enjoy the custmers. and. in fact, the size of the classic coffe cake is smaller the price is the same and i hve heard no complaints.i don't have all the answers but i do believe portion control and price could bring more to the bottom line for starbucks be of some service to the customers. case in point; in vienna when the sbux were opened acustomer survey showed that they, the customers thought the pastries were too large and preferred china to paper cups. they were accommodated.simple problem simple solution.

[Therealrevolution]

Logjam, I've got to point out the error in your logic. Remember that the market you work for is an American market, not an Italian market. Now, we could surely debate the issues with the American appetite, but we wouldn't be able to solve for it, either...

The research has been done, you just might not be privy to it. And as a company, we need to start focusing on 1)hiring the right people 2) trusting their decision making and 3) holding them accountable. All while providing a great work environment.

[wheresthecoffee]

Wow, a whole dime. I could have bought 25 iced venti americanos instead of the 24 I'll be getting soon. Won't. even. notice. it.

[logjam]

last i checked vienna was in austria. youare right about hiring good people. i have to disagree with you on the my point because you are wrong.

[JC]

Starbucks won't be the only company raising prices, yet that's all people seem to talk about. Obviously some people in the old media don't like Starbucks and want their stocks to tumble.

I do wish they focus more on coffee and bring back the manual espresso machines. I was at an Italian restaurant last week and had an amazing cappuccino. I hate to say it, but it blew the doors off Starbucks and the automatic machines...

[Pat Nerr]

JC... you can't hang on to the past buddy. Starbucks has to grow...

I almost typed that with a straight face.

[Rx]

Northern Latte:

Top Pot = Death

worst doughnuts ever invented
(beside Krispy Kreme...)

[sbux.americano]

The sbux fanboys here are missing the point. If 10 cents doesn't matter, what amount does? 20 cents? How about 50 cents? Second increase in less than a year... starbucks stores now look like mini-Targets (clearance table looks like a junk yard)... the food offerings are bland... stock price is in the dumpster... competition is fierce. It doesnt look good

[HP]

First of all, the first price increase was the first in FOUR YEARS! Four years people, that is amazing! And it was a mere five cents. So, if you add that to the lastest increase, it is an average of LESS THAN 4 cents per year. Look at the price increases that have taken place on anything else over the past 4 years. Like, maybe.....GAS?

[Grant]

I stop at starbucks on the ave of 7-9 times per week. I intend to stop going there at all because of the increase. I will find other places, im sure their out there

[jumper]

I won't ever go back. The prices have reached my threshold of what I will spend on crap that ain't even that good to begin with. Hello Caribou!
the jumper

[mr]

Starbucks has had four price increases in the last two years and have gone from "pricey" to outrageous! I just can't rationalize spending $4 bucks for a cup of ice with a little flavoring in it. Especially for a drink I can make at home for about 20 cents. I, for one, will no longer be a Starbucks regular. If I'm out and about and need a coffee drink fix, I hear the new McDonal's offerings are pretty good for $1.27 with tax.

[PDXBarista]

"Northern Latte:

Top Pot = Death

worst doughnuts ever invented
(beside Krispy Kreme...)"

Oh my gosh, RX, thank you! Those doughnuts from Top Pot are SICK.

And does it sincerely annoy anyone else besides me that people order "a glazed old fashioned"? Like, you can't just say "glazed doughnut" or simply tack the word "doughnut" onto "glazed old fashioned"? It's like....you need to have a subject to put with all of the adjectives. Didn't we all learn this in fourth grade?