Your Starbucks Coffee Just Got More Expensive, Relatively Speaking

by Rich Smith May 25th 2012 10:15AM
StarbucksHow much would you pay for a cup of Starbucks (SBUX) coffee? Starbucks hopes it's a lot. And if it's not too much trouble, they'd also really rather you not do any comparison shopping before placing your order.

Already one of the pricier cups of joe in this country, Starbucks hiked prices on its brewed beverages at cafes in the Midwest, Pacific Northwest, California and Hawaii last November. Then it upped prices in the Sunbelt and Northeastern regions in January.

Meanwhile, everybody but Starbucks, it seems, is doing the exact opposite.

Take J.M. Smucker (SJM), for example. The food conglomerate is more famous for its jams, but Smucker also owns Folgers and Millstone, and controls the rights to retail distribution of Dunkin' Brands (DNKN) coffee. Last week, Smucker announced that "sustained declines" in the cost of unroasted coffee beans have permitted it to cut the cost of its coffee -- and that's just what it's doing, slashing packaged coffee prices by about 6%.

Fast-forward three days, and on Friday, Maxwell House owner Kraft Foods (KFT) followed suit, and even did Smucker one better. While Kraft's Maxwell House and Yuban brands will see prices fall 6%, the company's premium Gevalia brand will drop by a full 10%. According to the companies, this is the second round of price cuts since August 2011 for Smucker and Kraft.

And at Starbucks? Costs just keep going up.

So what's the deal, Starbucks? According to Kraft, the big coffee retailers are all seeing "sustained decreases in the cost of green coffee." The logical conclusion, then, is that either Starbucks is a really bad haggler when it comes to negotiating the cost of its beans, or else... Starbucks is sticking it to the consumer. How's that for a bitter aftertaste?

Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool owns shares of Starbucks.Motley Fool newsletter services have recommended buying shares of Starbucks and writing covered calls on Starbucks.

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11 Comments

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allenseye

A small percentage of Starbucks (Seattles Best) is Fair Trade. Starbucks (Seattles Best) has a better relationship with growers than the Berkeley, Ca Fair Trade organization. Starbucks (Seattles Best) pays growers top dollar for beans, and rebates back to the growers communities $ based upon lbs harvested. These dollars are used to build medical facilities, schools, fresh water systems, etc. The families in the communities thereby are improving their communities through their own efforts - not charity. Because of the size of the Starbucks (Seattles Best) organization they have the power to do this. Most other coffee cafes buy beans from brokers at the most favorable price. When you shop at Starbucks (Seattles Best) you are also supporting these growers, their families, and their communities. That is why I shop at Starbucks (Seattles Best).

June 22 2012 at 12:36 AM Report abuse rate up rate down Reply
Justus M.

Or the dollar's value has fallen, and starbucks is paying growers a decent price for a quality product.

June 21 2012 at 9:11 AM Report abuse rate up rate down Reply
rusty

come on guys starbucks is following the best f#$% the consumer buisness in the world, apple they wanna be just like them with all the little sheep obeying anything why shouldnt starbucks make coffee cost more if apple can rip off people so can they and since they are one of the largest coffee brands everyone will complain but keep buying it

May 28 2012 at 10:49 AM Report abuse rate up rate down Reply
sidnnd

Expensive coffee and crapy customer service. Bad business! Buy somewhere else.

May 28 2012 at 1:00 AM Report abuse rate up rate down Reply
jhrochesterny

I only buy Starbucks when Im traveling on the NY thruway and its the only place to get some, otherwise never, I also think it tastes burnt. Not a lot of good coffee out there these days, even the stuff I grind and make myself(eight o clock colombian) doesnt taste like it used to, dunkin donuts sems different as well. Maybe the beans are different?

May 27 2012 at 9:57 AM Report abuse rate up rate down Reply
Judith

How much would I pay for a cup of Starbucks coffee? Nothing - I can't stand the stuff, it tastes burnt.

May 26 2012 at 7:45 PM Report abuse rate up rate down Reply
seattlewkr

Try patronizing other shops. People just get all lined up to get ripped off.

What a business. It's getting to be like movie concession stand pricing in there.

May 26 2012 at 2:11 PM Report abuse rate up rate down Reply
Wootown Woman

Or you could realize that you're comparing apples and oranges. Smuckers, Kraft and Gevalia are in the retail coffee business. Sbux is in the coffee shop/restaurant business. The article compares the cost of brewed coffee in a cafe with the cost of tinned supermarket coffee. Big difference in overhead costs. Would you expect to pay the same price for a steak at a restaurant -- with all the trimmings - as you would to buy the steak at the grocer's?

May 26 2012 at 7:56 AM Report abuse rate up rate down Reply
jrgordon47

The reason Starbucks pays more is because they pay the small growers they buy from a fair price for their beans....So if you want the world to keep spinning around with good Karma.

May 25 2012 at 5:15 PM Report abuse rate up rate down Reply
2 replies to jrgordon47's comment
seattlewkr

When a brand can build a store once a week, there's plenty of room for getting reasonable in their pricing and give their rank and file employees a little sick leave.

They're just Wal-Mart, with a different face.

May 26 2012 at 2:13 PM Report abuse rate up rate down Reply
cozmcrae

You are talking about "fair trade" coffee. Only some of the coffee Starbucks sells is fair trade. I buy organic coffee which is usually also fair trade.
I like Starbucks coffee. The people who don't like it are used to the traditional "American" roast which is a lighter roast than the coffee that Starbucks started out with. But now they offer their coffee in three degrees or styles of roast: light, medium, and dark.
But on the subject of cost: I recently bought some bag coffee at Whole Foods. The coffee I had been buying there for $11.99 has gone up a dollar. I bought a somewhat cheaper coffee and when I got it home I discovered there are 10 ounces in the bag. Anyone remember when a bag of coffee was a pound? It's been shrinking and shrinking. Less coffee for the same price (or more!)--like so many consumer commodities.

May 27 2012 at 5:45 PM Report abuse rate up rate down Reply