If coffee was the one thing you did not want to cut costs on, maybe it is time to reconsider your spending plan. Particularly since Starbucks announced yesterday it has raised prices throughout the United States by an average of about 1 percent.
Basically, if you’re working, living and more important drinking coffee from Starbucks in New York, Boston, Washington, Atlanta, Dallas, Albuquerque and a few other cities in the U.S. Northeast and Sunbelt you will have shell out more money for your caffeine beverage.
The company’s executives say the decision to boost prices is justified by the need to recoup higher costs for coffee, milk and fuel. However, these costs are expected to have already impacted this year’s profits.
Starbucks spokesman Jim Olson says the prices reflect competition in certain markets and higher costs for coffee, fuel and other commodities. Olson said the changes in prices are the result of “the cost of doing business” which includes distribution, materials and commodities.
In the end, after the 1 percent price increase, in New York for instance, the price of tall brewed coffees and tall lattes increased by 10 cents. However, for coffee drinkers there’s some good news too: the price for grande brewed coffees stayed the same.
Starbucks has about 10,800 stores in the United States and according to Edward Jones analyst Jack Russo, “they’re trying to protect their profits and margins. Everyone else is doing it, so why not they?”
As the world’s biggest coffee chain, Starbucks can afford the luxury of increasing prices, because, as analyst Jack Russo points out the company has a significant presence in the coffee industry and the positive brand equity of the name.
But Starbucks isn’t the only company to have increased prices trying to cope with higher costs. Denny’s, the family restaurant chain based in South Carolina, will raise menu prices this year to help make up for higher commodity costs and maintain profit margin.
According to Denny’s Chief Executive Officer John Miller, food costs will rise between 3 percent and 5 percent this year.
However, some competitors are trying to keep their prices lower as much as possible. It’s the case of Indianpolis-based Steak’n Shake, which, as stated by CEO Sardar Biglari, it has “no intention of raising menu prices, especially because we are attempting to insulate our customers from inflation”.