[Vision2020] Starbucks to raise drink prices Tuesday 7-7-15

Kenneth Marcy kmmos1 at frontier.com
Mon Jul 6 13:03:08 PDT 2015

Starbucks to Boost Coffee Drink Prices Tuesday Morning

By Paul Ausick    July 6, 2015 2:59 pm EDT

Starbucks Corp. (NASDAQ: SBUX) said on Monday that it plans to raise 
prices on coffee drinks by 5 to 20 cents bright and early on Tuesday. 
That’s while coffee futures prices are near their lowest point in a year.

Starbucks raised prices last June when coffee prices averaged around 
$1.75 a pound. Coffee futures traded at around $1.25 a pound on Monday. 
The 12-month high was posted in the first half of October 2014, when 
prices approached $2.40 a pound on fears of drought in Brazil, producer 
of about a third of the world’s coffee.

What is causing the rise now is not the price of unroasted coffee, but 
what Starbucks called “the need to run our business profitably while 
continuing to provide value to our loyal customers and to attract new 
customers” in an emailed statement to the Associated Press.

In other words, Starbucks is raising its drink prices because it can. 
Coffee might be a commodity, but the Starbucks brand is not.

The company can’t raise bagged prices, apparently, because competitor 
The J.M. Smucker Co. (NYSE: SJM) just lowered bagged coffee prices by 
6%. Smucker markets Folgers as well as Dunkin’ Donuts-brand bagged 
coffee which it licenses from Dunkin’ Brands Group Inc.(NASDAQ: DNKN).

Smucker’s profitability from coffee sales is nearly entirely based on 
the price of green, unroasted coffee, while Starbucks also has to pay 
rent, employ staff, buy equipment, and market its brand and its drinks. 
That’s a lot more costly and explains why prices of coffee drinks are 
going up while green coffee prices are going down. The only surprise is 
that Starbucks did not think it could raise the price of its bagged coffee.



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