Starbucks raises prices

Update to my previous post!

NEW YORK (CNN/Money) – Starbucks plans to raise prices for the first time in four years, a newspaper report confirmed Thursday, hoping that loyal customers already willing to pay more than $3 for a tall latte will stick around.

“Prior to the end of the calendar year, Starbucks will be taking a modest price increase,” Chairman Howard Schultz told the Wall Street Journal, citing escalating dairy prices, as well as rising rent and health insurance costs.

However, the reason for the price hike is not due to some conspiracy to prevent shirkers as previously suggested, but because of rising commodity prices.

And the reason for the boldness is because elasticity of demand prevails once again:

But in a note to clients earlier in the summer, WR Hambrecht analyst Kristine Koerber had said, “We believe the price increases will be met with little resistance by the consumer because the underlying demand for the products has been so strong.”

Current pricing pressures could force the coffee chain to raise prices by as much as 4 to 5 percent, or about a dime to the average $2-$2.50 drink, according to the report.

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~ by ziddi on September 23, 2006.

2 Responses to “Starbucks raises prices”

  1. Well, stop drinking there!

  2. sheesh.. here in kuwait one of the cheapset drinks is $3 and my cup usually costs around $5. Hope they don’t add on to it here too.

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