Starbucks raising menu prices again

The coffee shop isn't alone as food inflation drives up costs at every restaurant and grocery store.

By InvestorPlace Jan 3, 2012 10:18AM
Image: Coffee (© HD Connelly/Getty Images/Getty Images)By Jeff Reeves

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.

 

Post continues below:

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 editor@investorplace.com, 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.





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85Comments
Jan 3, 2012 11:56AM
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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! Thinking

 

Jan 3, 2012 12:59PM
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Just brew your own coffee.  It's so much cheaper.

Jan 3, 2012 1:08PM
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There's nothing worse than a grown man drinking coffee with whipped cream from a sippy cup. 
Jan 3, 2012 12:59PM
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If you don't want to pay for Starbucks then don't go there.  If you want a Starbucks then don't complain about the price.
Jan 3, 2012 11:39AM
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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.

Jan 3, 2012 12:20PM
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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!

 

Jan 3, 2012 11:54AM
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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.

Jan 3, 2012 11:51AM
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The land of plenty is in plenty of trouble.
Jan 3, 2012 11:46AM
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Disappointed227, I agree with you 100%!  The cost of living has gone up but paychecks have not, and the employement rate has not dropped. 

Jan 3, 2012 12:27PM
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I was a avid Starbucks goer.  However, the prices have kept going up and up.  Now you can go and get coffee at another Espresso stand for a $1.00 cheaper (mocha).  Now that adds up if you go get a coffee everyday!!!  Go elsewhere and save money!
Jan 3, 2012 12:54PM
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WHAT'S ALL THE FUSS ABOUT PEOPLE? I MAKE MY OWN COFFEE AT HOME THANKS TO A KEURIG SINGLE CUP BREWER THAT I RECEIVED FOR CHRISTMAS. I SUGGEST THAT YOU GIVE IT A TRY,BECAUSE IT WILL PAY FOR ITSELF OVER AND OVER AGAIN. PLUS YOU WONT HAVE TO DEAL WITH A BARISTA WITH A ATTITUDE
Jan 3, 2012 12:23PM
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  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.

Jan 3, 2012 12:20PM
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Like most other companies they're getting to damn greedy.  Someone needs to start a boycott to teach them a lesson. 
Jan 3, 2012 1:36PM
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People are crazy to buy Starbucks Coffee
Jan 3, 2012 2:24PM
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Come on people....time to put a stop to all these money grabbers. Lets put the squeeze on them!  America is down and the top are raising their prices..... shame on them!  I say boycott them all. Cut down on gas, electricity...food....sounds ridiculous but it can be done...we are Americans and super creative!  Let them have a bit of feel of what so many folks out there are going through!  It can be called Love Americans movement..in lieu of "Love America...Love it or leave it!"
Jan 3, 2012 2:06PM
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This is why I just purchased my own machine. Cheaper and I don't have to wait in line.

 

Jan 3, 2012 12:53PM
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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.

Jan 3, 2012 11:45AM
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I went to Starbucks, bought a french press there for $15, went to Dunkin Donuts and bought a bag of coffee, and make my own for a fraction of the price - taste better too!
Jan 3, 2012 12:59PM
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@Cristine, that explains a lot regarding service at starbucks...

I remember when coffee prices were affected by the "market" as a commodity traded on the exchange...  Now, it's just pricing according to demand.  The more who drink starbucks coffee, the higher price they can charge.  Just like crack.
Jan 3, 2012 1:53PM
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This is ridiculous!  Starbucks continues to raise their prices while at the same time lowering their customer services standards.  I spend hard earned money there, and they can't even be bothered to say thank you, because it appears beneath them.  With prices going up again, I believe it's time I started brewing at home and at the same time, not having to deal with a lousy barista, or one who can't even be bothered to scan my smartphone.  Instead they have their "guests" do it themselves.  That's not customer service; that's more "Do as Starbucks says," and I'm pretty tired of it.  Maybe it's time to fork over the $100 for a single brew machine mentioned here, and give it a whirl.  I've no doubt I'd save money, and while I do love my Starucks, it is only coffeee, and maybe they (Starbucks) need to realize that they are in fact killing the golden goose, and quit having the attitude that you're doing all of us a favor, when the opposite is true.  We the consumer can make or break you, and perhaps it's time you took notice of that fact.  I don't give a whit about milk prices going up.  I don't use their milk, but they want me to pay the price, and to do so without so much as a "go to hell" after I've made my purchase.  Today could just have been my last cup; Starbucks needs to learn their lesson, and while I'm sure my stopping won't change the world, if enough of us quit spending the ridiculous sums of money to be snubbed by their "partners," maybe then good old Harold will notice that he's killed and abused the Starbucks name.  This has left a bitter taste in my mouth, similiar to the taste of their bitter, but expensive, coffee.
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