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Starbucks Maintains Prices Despite Climbing Coffee Costs

Posted On: 8/31/2010

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Starbucks, coffee prices, coffee service, coffee business, office coffee service

SEATTLE -- Starbucks Corp. says it has no plans to raises prices, even though it expects higher coffee costs to weaken its profits in the upcoming fiscal year.

Coffee prices have risen to an almost 13-year high, with coffee stockpiles at their lowest levels since May 2000. There's also concern that global supplies will be further reduced as heavy rains may have harmed arabica crops in Colombia, the world's second-largest coffee producer.

Starbucks said it is able to maintain its current prices because it has long-term relationships with farmers, traders and co-ops in multiple coffee-growing regions. It also has bought the majority of its coffee for its upcoming fiscal year.

The coffee retail giant is standing by its fiscal 2011 profit target of $1.36 to $1.41 a share, which factors in an expected 4¢ hit from higher coffee prices.

Earlier this month, J.M. Smucker Co. raised prices of most of its Folgers, Dunkin' Donuts and Millstone coffees in the U.S. by an average of 9%, citing higher green coffee prices. Kraft Foods followed with U.S. price hikes on select Maxwell House and Yuban ground and instant coffees.