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Coffee City

Melissa Allison follows the world's biggest coffee-shop chain and other Seattle caffeine purveyors.

August 20, 2009 at 1:40 PM

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Starbucks changes drink prices; last price hike was followed by U.S. traffic decline

Posted by Melissa Allison

Starbucks began changing drink prices in some markets today as part of a readjustment that will roll out nationwide over the next few months.

A spot check of Seattle stores showed no changes today in this area.

Prices on popular and simple drinks like 12-ounce lattes and 12-ounce brewed coffees will fall 5 to 10 cents, said Starbucks spokeswoman Valerie O'Neil.

The price for some larger and more complicated beverages -- for example, Frappuccinos and macchiatos -- will increase by up to 30 cents, she said, although most price hikes will be in the 10- to 15-cent range.

The price increases are Starbucks' third since 2004. The last time it raised prices, in July 2007, traffic into its U.S. stores dropped.

At the time, Starbucks blamed rising gasoline prices, the battered housing market and other economic factors for keeping customers away. Its U.S. sales still rose that quarter (ended Sept. 30) by 19 percent, partly because of the 9-cent price increase on coffee drinks.

"Customers are feeling the impact of the economic slowdown," then-CEO Jim Donald told analysts on conference call.

U.S. traffic continued to slide and has subsequently fallen at international stores, too. The company's same-store sales for its most recent quarter ended June 28 were down 6 percent in the U.S. and 2 percent internationally.

O'Neil said the new changes -- which executives said in April were coming -- reflect geographic and cost considerations but that there was "not one specific trigger."

She emphasized that in some cases, Starbucks' coffee drink prices will remain below competitors'. "There's a misperception out there that Starbucks is more expensive than others, when in reality we are in some cases below our competitors' prices," she said.

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