Starbucks announced yesterday that they are planning to raise prices in several regions to help offset rising costs for the premium coffee establishment. These price increases will begin rolling out soon in areas in the Northeast as well as the Sunbelt, and will affect major cities like New York, Washington DC, Atlanta and Dallas. However, markets in big states like Florida and California will not see any price changes in the near future.
This move is a rather curious one, as Starbucks has recently been struggling to stay alive in a world where belt-tightening has become the new norm. Instead of cutting prices or offering limited-time deals (like Subway has done with its $2 six-inch promotion) Starbucks is hoping that their legions of faithful caffeine junkies won’t mind forking over some extra change to get their fix.
This isn’t the first time Starbucks has raised their prices at an inconvenient time, and unfortunately, they have paid the price for raising prices in the past. The company recently admitted that its returns over the past few years have been “far less” than those of its competitors. Armed with this knowledge, it would seem prudent to lower or at least keep prices the way they are. However, Starbucks is set on continuing to offer a premium experience for their customers for a premium price.
After the announcement was made, Starbucks shares did lose 0.6% of their value, but it seems investors are still banking on Starbucks’ long term strategy. And with a stock that has risen just over 43% in more than a year, these investors may be on to something. However, it remains to be seen if Starbucks can keep it’s customer base as well as they have after this last round of price hikes.