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Why is Starbucks hiking prices again? (+video)

Starbucks will raise the prices for some of its coffee beverages by 5 to 20 cents in the US, beginning Tuesday. The price hike from Starbucks comes as other coffee producers are cutting prices.

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The Starbucks logo is seen at one of the company's coffee shops in downtown Chicago. Starbucks says it’s hiking prices again starting Tuesday, July 7, 2015, with the increases ranging from 5 to 20 cents for most affected drinks

Gene J. Puskar/AP/File

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Starbucks Corp said it would raise prices for some of its coffee beverages by 5-20 cents in the United States beginning Tuesday.

Starbucks, however, will leave the prices of some popular beverages such as the Grande Brewed Coffee and the Frappuccino unchanged in most U.S. outlets, it said on Monday.

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The price hike comes at a time coffee prices have cooled from highs hit last year after a drought in the world's biggest coffee producer, Brazil, triggered supply concerns.

Some other coffee sellers are cutting prices. Last week, The J.M. Smucker Co. said it would cut prices for most of its coffee products because of declines in future prices for unroasted coffee beans. In an emailed statement Monday, Starbucks Corp. said coffee costs are only part of its expenses, which also include rent, labor, marketing and equipment.

The statement said the company continually evaluates pricing to "balance the need to run our business profitably while continuing to provide value to our loyal customers and to attract new customers."

A representative for Starbucks, Lisa Passe, said the price increases are expected to impact less than 20 percent of customers. But that estimate is based on current purchasing patterns, which include more cold drinks given the warmer weather.

Arabica coffee futures on ICE fell to a one-and-a-half year low on Monday.

Starbucks said the price hikes would affect fewer than 20 percent of its customers and would increase the average ticket by 1 percent.

The price hike, which will be implemented "market-by-market and product-by-product," will not include food items or packaged coffee, Ms. Passe told Reuters.

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Tall (12 oz) and Venti (20 oz) cups of brewed coffee - small and big in Starbucks' lingo - will cost 10 cents more each in most U.S. markets, the company said in an emailed statement.

For example, a Venti coffee will now cost $2.45 in most U.S. outlets.

Starbucks raised prices last year for most of its drinks, including the Grande Brewed Coffee, for the first time in four years.

U.S. roaster J.M. Smucker Co said last week that it would cut prices for most of its Folgers and Dunkin' Donuts coffee brands to bring back customers. 


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