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Thread: Starbucks gambles that price hikes won't leave customers cold

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    Elite Member celeb_2006's Avatar
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    Default Starbucks gambles that price hikes won't leave customers cold

    Starbucks gambles that price hikes won't leave customers cold | Money & Company | Los Angeles Times

    Investors know that businesses can’t cost-cut their way back to prosperity and rising earnings. So what Wall Street most wants to see from companies in the second half of this year is revenue growth.
    But the old-fashioned way of boosting revenue -- by raising prices -- seems out of the question in this economy.
    Yet Starbucks Corp. now is taking that gamble: The coffee company confirmed today that it will be rolling out price increases on some drinks nationwide in the next few months -- along with some price cuts -- after testing the changes in select markets since spring.
    Starbucks Corp., the world’s largest coffee-shop operator, said it will raise prices on some drinks, including frappuccinos and caramel macchiatos, by as much as 30 cents starting today.
    The increases average about 10 cents to 15 cents per beverage, and will also apply to extra shots of espresso or flavors, Valerie O’Neil, a spokeswoman for the Seattle-based company, said.
    Prices on lattes, cappuccinos and brewed coffee will decrease 5 cents to 15 cents, the first price cuts the company has made, she said.
    The company is "fine-tuning our pricing in select markets to better reflect geographic and cost considerations," O’Neil said.
    Starbucks’ revenue has declined year-over-year for the last three quarters as many consumers have hacked spending in the recession. Sales were down 6.6% in the third quarter, to $2.4 billion.
    Sharon Zackfia, who follows Starbucks for investment firm William Blair & Co. in Chicago, said the net effect of the price increases and reductions may be neutral for revenue in the near term. But she said the company’s strategy of pricing its drinks market-by-market -- to be more competitive with its main rivals -- could help the chain boost overall traffic.
    Although Starbucks still has a high-end image, the company’s "price premium" on most drinks now "is the lowest it has ever been," Zackfia said.
    The company’s shares didn’t show much of a reaction to the pricing leak today. The stock closed up 10 cents to $19.22. But the shares have recovered sharply from their multi-year low of $7.17 reached Nov. 20., 2008.
    Starbucks first disclosed in April that it would adjust its prices, but it didn't give specifics. In recent days, memos went to baristas across the U.S. advising them to "expect customers to be sensitive to pricing changes in this economic climate," according to one memo reviewed by the Journal.
    The memo instructs baristas to tell customers that price increases reflect the increased cost of doing business and that price cuts are meant to show that the Seattle-based coffee giant is looking for ways to provide value.
    -- Tom Petruno

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    Gold Member atrayubrandy's Avatar
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    I think that is a stupid gamble. Starbucks is already considered by most to be over priced. I used to love Starbucks (and I still think their drinks are mighty tasty) but there are so many cheaper alternatives that I haven't been to a Starbucks in about a year. I now frequent Dutch Bros (currently available only on the west coast). No matter which one you go to the staff is always friendly, the drinks are almost half the price of Starbucks (and equally as good but lacking in variety), and they are constantly having promotions (free coffee for women on mother's day, free coffee for men on father's day, free coffee when they open, $2 Tuesdays, etc). The only thing Starbucks has going for it is the atmosphere since Dutch Bros is a drive thru only. I think Starbucks would be better off finding a strategy for bringing more customers in instead of forcing them away with increasing their already inflated price.
    Beneath the sun of summer a sea of flowers won't bloom without the rain.

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    Elite Member WhoAmI's Avatar
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    I read they're raising the prices on drinks that take longer to make and dropping it on those that are ready-to-go.

    I heard a story on NPR a couple of weeks ago about them training employees to be more efficient with their movement--they had to learn to assemble Mr. Potato Head as fast as possible.

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    Elite Member qwerty's Avatar
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    I'll go to Starbucks to chat with friends - but I stopped buying $4 cups of coffee there long ago.

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    Super Moderator NoDayButToday's Avatar
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    I don't know when it goes "live", but it's kinda weird. From what I've read, the bigger the drink or the more that goes into it (like the fraps, which are a lot of steps in comparison) are going up, but the basic and smaller drinks will be going down in price by a bit. The price decrease was necessary, I've been saying it for awhile, and I agree with the reasoning for the increase. The only problem is that the increase on some drinks will push the total price above $5 (Fraps most notably), that's a threshold that bothers me.

    I also can't help but think that the price increase is somewhat to discourage people from getting the big drinks b/c really....who needs 24 oz of Frap? It's just not healthy no matter how you make it. And we've had demands for even larger cups, which they've categorically said no to.
    Last edited by NoDayButToday; August 23rd, 2009 at 10:29 AM.

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    Elite Member Grimmlok's Avatar
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    paying 30 cents more for coffee that still tastes like burnt shit, made by an overworked barista who invariably gets it wrong anyway

    no thanks
    I am from the American CIA and I have a radio in my head. I am going to kill you.

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    Elite Member WhoAmI's Avatar
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    I believe they've already started this in some markets. I don't know how it's being received. I don't think it's a bad idea. It'll make people think twice about buying the unhealthy stuff.

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    Gold Member Flak's Avatar
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    I go meet with friends and just ask for hot water and bring my own tea. I've spent enough at Starbucks over my lifetime to not feel guilty while going through unemployment.
    By trying we can easily learn to endure adversity -- another man's I mean. -Mark Twain

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    Mr. Zig and i both decided to cut coffee from our spending long ago. we take a travel mug from home if we head out early and need a boost. while traveling we will stop at a gas station for their less pricey options. we both have local punch out cards for when we do have reason to partake.

    Flak - i like to relax at Barnes and Noble with my water bottle and visit.

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    Elite Member Mr. Authority's Avatar
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    I have'nt been to Starbucks either for like the past two months now. Used to love their Frapps but even then I could just make a milkshake at home. Same thing minus the coffee.

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    Elite Member cupcake's Avatar
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    We have a gazillion coffee houses. The coffee tastes better and more reasonable. Id rather support the locals over the Starbuck giant
    My grace is sufficient for you, for my my strength is made perfect in weakness...I love you dad!
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    Elite Member angelais's Avatar
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    Quote Originally Posted by Grimmlok View Post
    paying 30 cents more for coffee that still tastes like burnt shit, made by an overworked barista who invariably gets it wrong anyway

    no thanks
    EXACTLY!!
    Did you know that an anagram for "Conscious Uncoupling" is "Iconic Uncool Pus Guns"? - MohandasKGanja

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    Gold Member thunder&lightning's Avatar
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    one of the local mom and pop coffee houses closed down here over the past year. i used to like their frapps at starbucks but haven't been there in over a year as well. could learn to make them at home.
    another year i claim of total indifference.

  14. #14
    Elite Member darksithbunny's Avatar
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    Well they already raised prices here and after today I won't be going anymore. Can't afford it.

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    Penske material sprynkles's Avatar
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    I quit SB after I found out my favorite Latte drink had over 800 calories, OMG!

    She is such a useless shit stain on the panties of humanity~Bitter's awesome description of K.K

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