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Starbucks Raising Coffee Prices

Starbucks (NASDAQ: SBUX) announced that it will raise the price of some of its beverages by as much as 10 percent in some markets with the average increase around 1 percent.

The company isn’t getting specific about the increase but one Starbucks spokesperson implied that large coffees will increase in price but its popular Frappuccino will not. The company didn’t mention food items or other popular beverages.

Starbucks is raising prices despite the fact that coffee beans are the cheapest they’ve been in three years. Other companies are lowering prices. JM Smucker and Kraft (NASDAQ: KRFT) announced that they will lower the prices of their Maxwell House and Folgers brand coffee in response to global market trends. Starbucks lowered its prices on its pre-packaged coffee last month.

But the price increase has little to do with coffee prices according to a company spokesperson. The cost of raw materials like coffee beans represent only about 10 percent of a store’s operating expenses. Other expenses–rent, marketing, personnel, equipment, materials and food costs, are driving the increase.

The price increase will take effect on June 25 and represents the first price increase in 18-24 months depending on the market.

[stock-tools exchange="NASDAQ" symbol="SBUX" image_height="230" image_width="350"]

Disclosure: At the time of this writing, the author had no position in any of the companies mentioned above.

 

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