Starbucks stretches coffee pricing in US to beat downturn

by Staff, Brand Republic 21-Aug-09, 08:45

NEW YORK - Starbucks is attempting to improve revenues in the economic downturn by cutting the prices of its more basic drinks and raising the prices on fancier ones.

The price on drinks such as a venti-sized, or 20oz, Frappuccino -- Starbucks version of iced-coffee has gone up by five cents. Other venti-sized hot drinks are up by 15 cents, and 25 cents has been added to the price of a venti caramel macchiato.

At the same time the price of a tall cappuccino is down by 10 cents and basic brewed coffee is down by five cents.

The new prices are being tried out in some markets, but the rest of the US is expected to adopt the new prices in the next few months.

The Wall Street Journal reports that staff at Starbucks have been sent a memo advising them to tell customers that the price increase reflects the increased cost of doing business.

With revenue down by 6.6% for the second quarter of the year, Starbucks is looking at ways of innovating its business. The drop in prices of basic products is seen as a response to McDonald's introducing a range of hot drinks including cappuccinos and café lattes.

At the same time, to protect its brand, it can't be seen to be undertaking a wholesale price slashing campaign.

Last month it was reported that Starbucks is trialling unbranded cafes that appear to be independents. They have been dubbed "stealth" Starbucks.

In the UK, sandwich chain Pret a Manger has raised its coffee prices this week, blaming a rise in the cost of coffee beans and milk.