Starbucks raising menu prices again
The coffee shop isn't alone as food inflation drives up costs at every restaurant and grocery store.
If your New Year's resolution was to pinch a few more pennies, Starbucks (SBUX) has some bad news for you. The coffee king is hiking prices, thanks to the rising costs of coffee and milk, and passing its expenses on to java junkies.
Starbucks is raising prices about 1%, on average, in some of its most popular markets in the Northeast and South. Cities such as New York, Dallas and Atlanta are the big targets. For example, a 12-ounce cup of coffee will go up in cost by 10 cents, a Starbucks spokesman said.
This comes after a rash of other increases. Some drinks in California and South Florida became pricier in November, so those regions are excluded from the most recent increase. That's after Starbucks raised prices in 2010, then again in early 2011.
More disturbing, however, is the unfortunate reality that nearly all of your favorite restaurants will be charging you more in 2012.
We are all paying more these days for essentials like milk and transportation and electricity, so the motivation isn't exactly a mystery. U.S. inflation is tracking a roughly 3.4% annual rate based on recent data.
But that doesn't make the coffee price change any easier to swallow -- especially considering Starbucks has seen its year-over-year revenue increase for eight consecutive quarters and has seen 10 straight quarters of profit increases. It's not exactly like the company is going bankrupt because of coffee costs.
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Other restaurants have been passing on their cost burdens to consumers in an effort to prop up their bottom lines. McDonald's (MCD) is in many ways a top competitor of Starbucks with its McCafe line, and McDonald's raised menu prices on a host of items in 2011. Burrito broker Chipotle (CMG) is in the same boat, in June announcing a price hike as food costs jumped from 32% to 35% of its overall business expenditures.
If you think you can stop eating out to avoid this trend, think again. Inflation is eating away at family food budgets, including items like peanut butter, ground beef, soy and Coca-Cola (KO) soft drinks. Heck, even Thanksgiving was a price shock with the cost of a traditional turkey dinner up 13%, or $6 per household.
So if your New Year's resolution was to save a few more bucks by cutting costs, the reality is you probably will have to pair that with another goal: going on a diet.
Jeff Reeves is the editor of InvestorPlace.com. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.
Starbucks is overly priced coffee already. If I want that Starbucks experience I will brew my own coffee at home and put in a Kenny G cd! I can get the same thing at home for about $0.15 a cup! Didn't Netflix just try the same thing back in June and look where that got them!
Raise it all you want. I don't drink it. Brew my own coffee. Like it better.
Besides, if your hanging out at Starbucks, you are not broke enough to seriously look for a job yet.
Starbucks, over rated coffee any way! You only pay for the name because they make you think that you are hip to go there! NOT!!!!!!!! Tasted burned anyway!
Like everything else, we change our habits to fit the circumstances. I used to stop at Starbucks every day. Then every other day. Now maybe once a week. I too have switched and tried other coffee. Found a couple I like at a much lower price. So we do what we must to get by.
But I no longer go out to eat often either nor do I buy Coke as a weekly item. Seems however the less we spend on a given item the more they raise the price. Hey if some folks are willing to pay inflated prices then the company will sock it to you and you pay for those of us who have said "no thanks" Their bottom line is apparently not hurt. You are paying the frieght. Works for corporate America.
Disappointed227, I agree with you 100%! The cost of living has gone up but paychecks have not, and the employement rate has not dropped.
The people who frequent Starbucks don't seem to care what it costs. It's a social gathering place. If they're immune to the prices until now, they'll keep coming. Why shouldn't Starbucks sqeeze them for all they can get. They're getting greedy, in my opinion, but it won't stop the "regulars" from coming.
I have retired to Costa Rice and enjoy the best coffee I've ever tasted, every day, for about $3.00 a pound.
This is why I just purchased my own machine. Cheaper and I don't have to wait in line.
Pretty soon it will be cheaper to just snort a line than buy a cup of coffee at Starbucks, unless of course one gets caught. Then again, Starbucks may soon charge more than a lawyer does. Hmm, people like lawyers are the only ones who can afford Starbucks coffee. What a vicious circle.
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While the former looks to expand its snack and soda exposure, the latter struggles to stabilize management.
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