Starbucks is raising prices because of the higher cost of commodities such as coffee, sugar and milk. The price increase will affect Starbucks in cities including New York, Boston, Washington, Atlanta, Dallas, Albuquerque, and most Southern states.
Starbucks spokesman Jim Olson said in New York City, prices for 12-ounce “tall” brewed coffees and latte drinks will go up 10 cents. Prices on other beverages also will increase. The prices reflect competition in certain markets and higher costs for fuel as well.
Olson said pricing decisions are based on multiple factors, not just the price of coffee; Starbucks’ cost of doing business includes expenses related to distribution, store operations and commodities, including fuel and ingredients for food and beverages.
“These adjustments are the result of balancing the cost of doing business with competitive dynamics in these markets,” Olson said.
“Competitive dynamics” must be Olson’s euphemism for expansion. Starbucks plans to open 300 new UK outlets, bringing the total to more than 1,000. Much of the expansion will be in the north of the UK. Starbucks currently has nine drive-throughs in the UK but wants to increase this to 200.
Starbucks is also adding an extra 100 coffee shops, which in total will involve 5,000 new jobs. Starbucks’ UK sales have grown for nine quarters.
Restaurant operators ranging from Chipotle Mexican Grill to McDonald’s Corp are also raising prices to help offset commodity cost increases.
Last month, Fitch, a global credit rating agency, predicted U.S. restaurant food and beverage costs would rise by 5 percent or more in 2012, resulting in an increase for the second year in a row.
During the last six months, commodity prices have experienced record gains. Cocoa, Corn, cotton, coffee, sugar, wheat, and soybeans experienced huge price gains during the summer.
Fitch claims much of the increase for global food operators such as McDonald’s and Yum! Brands will be from higher food and wage costs in the expanding Chinese market, where global operating costs are rooted in company- operated units.
The Bureau of Labor Statistics claims U.S. consumers paid nearly 3 percent more at eateries in September 2011 than in September 2010, while food prices at supermarkets were 6.2 percent higher than the previous year.
Some Starbucks Accepts Food Stamps
Last month, FOX News reported a Starbucks in Oregon accepts Food Stamps for coffee drinks like Frappuccinos.