Is another price increase in the works at Starbucks?

One analyst says there's a "strong likelihood" that Starbucks would raise prices to improve operating margins. Starbucks says of that: "We don't comment on analysts' notes or rumors, but we are always monitoring the cost environment we are operating in." (Seattle Post-Intelligencer)

Comments

[jt]

Ok, this is too soon to the last one. I know costs and whatnot have gone up due to the increased costs of oil, corn products etc. But this is freaking coffee. SB should look at ways to reduce costs before raising prices. Maybe less deals with Paul McCartney and less crap in stores.

Yes, I buy a lot from SB - at least once a day (and yes, I am a loser) but I can guarantee I will cut back if they raise prices again. And I do have a lot of disposable income.

It just comes down to cost/value. At $4+ for a venti, it is pushing it already. By raise that any more, and they will find a lot of people looking elsewhere for their coffee fix. SB is not immune to cost effects.

[Scorpio370]

You also have to look at the fact that one increase to you is several increases to Sbux. I have noticed just from going to the grocery store the price of milk has gone approximately 80 cents, not to mention the cost of several other comparable products, the cost of deliveries has gone up, etc. this is all because of the price of gas going up. And depending on how much cost went up for the company will depend on if they increase prices, and how much they increase those prices.
I have been expecting this for some time because everyone else has already increased their pricing, not to mention the tax rate in my area went up .01 and MANY of our regulars were upset that WE raised our prices until we pointed it out that it was the lovely government giving themselves a raise and sticking to the consumer to pay it up.

[volusia]

$4 for a Venti... what? Cup of coffee? I don't think so. Espresso-based drinks and Frappuccinos are understandably $4+ for a Venti, because of all the necessary labor and materials needed to create them. Brewed coffee is $2.03 for a Venti in my area, with tax.

Please think before you post. Or better yet, clarify.

[DT]

if brewed coffee was over $2 that would be a breaking-point for me. I'd rather drink cheap crap coffee at that point.

[Barista Bryan]

Just keep in mind people, the last price increase of five cents was the first increase that Sbux had in over ten years. Just because some market analysis that has no affiliation with the company says something, doesn't make it so. If some guy said "Bryan will probably start going to ball games because the Padres aren't so bad this year" would be totally wrong also.

[Pat Nerr]

There has been several price increases Barista Brian over the last 10 years and I know becuase I wrote some of the store communication for it.

Scorpio, you make a good point but the profit margin on the espresso drink is still the best thing Starbucks has going. No other product has the margin. There is room to absorb.

Price increases are necessary, but the difference is that lately there has been no plan for unprepared customers. For example, when we would implement a price increase in the past, they asked the store partners to be prepared with extra dimes or nickels to offset the impact to the customer. This also empowers the store partners to make it right until everyone adjusts.

Every time there has been a price increase the earnings look better for the company, hence Wall Street and Shareholders are happy.

I don't remember that 6th guiding principle mentioning anything about Shareholders and Wall Street. It mentions profitability and Starbucks has that. They just aren't equipped for dealing with single digit comps. But then that shouldn't be passed on to the customer.

Pat Nerr... promoted himself to customer

[Pat Nerr]

oh... and there is a price increase coming. Just as they are outsourcing some HR people without a plan for helping displaced workers.

[Elizabeth]

Any regular Starbucks customer should buy a personal thermos/mug (not necessarily from our store... but of course that would be preferable!). Using this saves ten cents off of every drink, which means that a ten-dollar mug pays for itself in one hundred days, i.e. three months. Plus, it's good for the environment.

And $4 is for a venti mocha. That's twenty or twenty-four ounces. A lot of fricking beverage. Of course it costs $4!

You know I find it amusing that all of a sudden some people (pat nerr)suddenly find the company they spent 10 years at unethical.Where were your ethics 9years ago? Funny how everytime a partner leaves starbucks all of a sudden starbucks is not the company they thought it was. It was okay when you were getting a paycheck though wasn't it? Pathetic.....

[pat nerr]

the short-sider viewer might think that... but having started out as a 5.25/hr partner I think I've proved my loyalty. The issue is the way the company has changed around the way it treats partners and conducts business. I said plenty via the company mechanisms yet it fell on deaf ears. It was not o.k. while I was getting a paycheck and the only way to make the executive open their eyes to issues to to expose it to the outside... What would I stand to gain from exposing it now? Starbucks stood for something at one time... it just takes a while to come to your senses. Let's take the issue of a company blog... is it so dangerous for employees to say how they feel in a public forum? or shall such blog sit boggend down in legal review forever...

let's face it, with 300+ identified Starbucks MySpace accounts and countless blogs, I think peple have something to say that work there.

Perhaps I should tell you how the Mission Review process works?

[pat nerr]

you clearly are either... a company mole (and I'd know who you are) or you're just dense.

I'll give you the benfit of the doubt.

[Mark Andre Delgado]

Cost of labor for a Venti Frappuccino?

According to Starbucks standardized procedures, the total amount of labor required (including prep and COGS) for a Grande Syrup Coffee Frappuccino is 1.5 minutes labor and $0.41COGS. A minute and a half of labor. That's about $0.20. Plus COGS. Wow. A whopping 61 cents.

Venti Raspberry Mocha Frappuccino: $4.60
Actual Cost: $0.61

Where's that other $3.99 going?

Surely store operations don't cost 75% of the beverage.

Hmmm.

"According to Starbucks standardized procedures, the total amount of labor required (including prep and COGS) for a Grande Syrup Coffee Frappuccino is 1.5 minutes labor and $0.41COGS. A minute and a half of labor. That's about $0.20. Plus COGS. Wow. A whopping 61 cents"

Not true, what about the labor of making said mixes, someone has to do that, then put said mix into the sure shot, label it, etc. Get your prices staright.

[Mark Graban]

Prices companies charge are basic economics -- they charge what the market will bear. Why does Starbucks charge $4 for a venti drink? Because customers are paying it.

It has nothing to do with what your costs are. It has nothing to do with "what's fair."

If prices are too high, customers will go away. That's how business works.

Whenever you ask, "why does company X charge $$ for product Y?", the answer in your head should be "because they can."

Barista Ryan You are so wrong! I have been with SBUX for eleven years and there have been at least three previous price increases since I started with the company. That is a fact.

[Bladerunner]

Though the cost of a beverage has been stable. The cost of pastries has gone up a nickel here or a dime there. The stock market may like a price increase for the drinks, but this would be cruel. The average consumer is trying to buy food and gas with a 20% increase in two years. With the same income. Keep it off the table till the next election cycle is over. keep the drink prices stable. Raise the prices of nick-naks, lame old rock star CD's and pastries.

[Barista BrYan]

Ok, so I made a mistake. But here in San Diego, when the first Starbucks opened, it was $1.50 for a tall coffee. That was what, 11 - 12 years ago? The price just went up to $1.55 last year.

[Zac]

Does anyone know why in California and some other states they dont charge sales tax with the drink but in others they do charge sales tax?

[BurntOutShift]

Zac, it's based on that respective states food tax.

In my state, groceries are tax free. This includes many prepackaged food items. So I can buy a pack of bagels tax-free, or I can go to Starbucks and buy one of their "fresh" items and its taxed.

Same reason why a bottle of tazo tea is tax free but a cup of it isn't. It all depends on the states tax laws.

[Zac]

Thanks Burntout! Makes sense.

[Brooklyn Barista]

Yes, it's happening in about a week or so. Get ready to cough up an extra 10 cents or so people.

[Pat Nerr]

Brooklyn... Please get a roll of dimes for each register... for your customer's sakes. It's the right thing to do.

[Darleen]

I certainly agree pat nerr, nice way to ease our customers in to the increase, all stores should use 10 dollars of their partner incentive money for this, I do everytime we have an increase, it helps take the sting off. Great tip pat nerr!!

[sbuxnewbie]

One of the messages on the protal says to do a $20 pay= out from a drawer, and keep a cup of dimes and nickels by each reg, for the customers who bring exact change.

They say the nationwide average increase will be about $0.09 per beverage, depending on the market.

[Brandon]

Perfect time to upsell mugs! Ten cents off every subsequent drink equals the old price (except for the mug price of max. $20... but if your buying coffee everyday, $20 once shouldn't be a big deal)...

I don't approve (even though as a barista it's not my place) of having extra change for customers... All of my customers have $$$$$, and if they have exact change to pay, they usually have a cup full of change to grab dime out of, or another dollar in their wallets...

I'm thinking it will come with the next summer phase...?

The Barnes & Noble Cafe stores recently received a memo stating that Starbucks stores will increase prices on the 31st, so BN Stores will receive new signage to reflect the pricing increase as well.

These memos have been incorrect before, but I do find it odd.

[Mark]

With the gas price hikes, driving for a coffee at Starbucks will cost you more. If they increase their prices then all I can say is "buh-bye SB and "long time no see DD." It is true, Dunkin Donuts is a favorite to all and can never be replaced. Their prices for a great coffee are near stagnant and much lower then SB. Need I say more?

"If they increase their prices then all I can say is "buh-bye SB and "long time no see DD." It is true, Dunkin Donuts is a favorite to all and can never be replaced."

Mark,
You are talking out of both ends, how can you say long time no see DD in one breath and then say they are a favorite to all if you are currently drinking starbucks? If a nine cent increase will break your loyalty, then all I can say is buh-bye mark! Go to DD and enjoy.

[Bucksguy]

I just hate price increases......two weeks of angry people. It's horrible.

[Lori, Calif]

I love Starbucks - I don't know why everyone is so upset. It's simple supply and demand, if you can't afford it or don't think it's a fair price don't buy it.
I know someone who worked their way through college at Starbucks and they treat their employees very well.
If you go to the donought store across the street you get people who speak almost no English, give you whatever they feel like putting in your order and make it clear they would like you to get out of their store because you are bugging them.
At Starbucks you get happy people who seem like they are glad you came and speak English (some times they seem over cafinated (-: - but it's nice to get what you order.
You get what you pay for.

[Kathryn]

I'll be definitely cutting back majorly on my Starbucks addiction. Here in Chicago, with tax, my Grande Vanilla Latte will be over $4. Tax is nearly 10% in the city and the local Starbucks near my home, just does not make it as good. I've recently discovered Mconald's Vanilla Iced Coffee. You get nearly twice as much for a little over $2, so a much better bargain. Not as crazxy about DD, the workers are rude and there's just too much of a language barrier. Too bad cause there's a DD right across from my work, but Mickey D's is only a block away.

The McD's iced coffee also tastes like sweetened water. I gave it a fair try, but it doesn't compare to an iced latte or iced coffee.

[TH]

Ok wait a minute. We are talking about Coffee here. i have quit going regularily. The price hike in not really understandable. I now go to a local coffee shop to get my latte. honestly found a much better cup of coffee and hey I save $1 per cup. I now realize how much more they are charging out there. SB will not be my usual spot any more.