Starbucks raises its prices

By CANDICE CHOI
AP Food Industry Writer

NEW YORK – Starbucks wants a few extra pennies for that latte.

The Seattle-based coffee company raised its prices on average by 1 percent nationally Tuesday. But it said the price for many drinks, such as medium and large brewed coffees and Frappuccinos, won’t change in most of its 11,000 U.S. cafes.

“Less than a third of beverages will see a small increase in most stores,” said Lisa Passe, a Starbucks spokeswoman. She noted that the increases vary by region and apply to different drinks.

Depending on the market, Starbucks Corp. notes it’s the first price hike most customers will see in about two years.

The price increase comes despite falling coffee costs that have boosted the company’s profits. In the last quarter, Starbucks cited lower coffee costs for a stronger operating margin, which represents the money it pockets from sales after subtracting what it pays to keep stores running.

And those lower coffee costs are expected to continue padding its bottom line.

Earlier this month, a Janney Montgomery Scott analyst issued a note to investors saying Starbucks is likely to benefit from lower coffee costs for the next few years. Based on the price of a coffee contract at the time, Mark Kalinowski estimated that Starbucks would pay about half the $1.4 billion it did for coffee in 2012.

But Starbucks notes that coffee represents just one of its many costs and historically has accounted for less than 10 percent of overall store expenses.

Passe said other expenses include rent, labor, marketing, equipment and other ingredients such as milk and sugar.

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