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Starbucks To Raise Packaged Coffee Price 17%


First Posted: 05/26/11 01:31 PM ET Updated: 07/26/11 06:12 AM ET

NEW YORK (Reuters) - The world's biggest coffee shop chain Starbucks Corp will boost the cost of its packaged coffee for the second time since March, but this time it will take place in its own U.S. stores and by a steep 17 percent.

This move comes after arabica coffee futures traded on ICE soared to a 34-year high at $3.0890 per lb on May 3, more than double from a year ago when the rally began.

"We continually look at a variety of things that affect the price. The green coffee costs, fuel, those kinds of things and competitive reasons. We make adjustments as needed,'' company spokesman Alan Hilowitz said.

This latest price hike will affect the one-pound bags of roasted whole beans that Starbucks sells in its U.S. retail stores. It is the company's first such increase in its own cafes since 2009 when the increase was 4 percent, a spokesman said Wednesday.

In March, the company announced that it would raise the price for packaged coffee sold in grocery stores, which is sold in 12-ounce bags, by an average of 12 percent.

The price increase, effective July 12, will bring the packaged coffee sold in its stores to a range of $11.95-$14.95 per lb, from the current range of $9.95-$13.95.

Starbucks will also raise prices of packaged coffee in its Canadian cafes, but by a much lower average of 6 percent, Hilowitz said.

In September 2010, the company said it planned to charge more for its large-sized and labor-intensive drinks because of surging commodity prices.

The company currently did not have any plans to raise prices in other countries, Hilowitz said.

The rally of arabica coffee futures began last June on a combination of tight global supplies of high-quality beans and speculative buying. The market has since fallen about 15 percent.

Starbucks' price increases, however, have been smaller and less frequent than the bigger U.S. roasters.

Top U.S. packaged coffee maker J M Smucker Co raised prices for key brands, including flagship Folgers, by an average of 11 percent on Tuesday, its fourth and biggest hike in a year.

Smucker has raised prices by a total 38 percent since last May. Its chief rival Kraft Foods has raised prices by roughly 56 percent during the same time, with its last increase to its Maxwell House coffee brand up a large 22 percent on March 17.

Many large roasters use both arabica beans, typically roasted for brewed coffee, and robusta, most commonly processed into instant coffee but also used as a cheaper and minor component in roasted blends.

Starbucks uses only arabica beans, which are significantly more expensive than robusta.

The premium of arabica over robusta hit a record high this month at $1.89 per lb, with coffee traders and importers saying some roasters are offsetting rising costs by increasing the amount of robusta and lower costing arabica beans that they put in their blends. Kraft and Smucker declined to comment on purchasing details. (Reporting by Marcy Nicholson; Editing by David Gregorio)


Copyright 2011 Thomson Reuters. Click for Restrictions.

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Filed by Carey Polis  |  Report Corrections