Starbucks Goes to 11

Will this be the drop heard 'round the world? Today, caffeine kiddies learned that Starbucks (Nasdaq: SBUX  ) will be raising its prices in the U.S. by $0.11 per cup early next month. (That's the reported average, anyway.) Will consumers resist? Or are they ready to pony up an extra dime and penny for their morning favorites?

To judge only by the response of my Foolish neighbor, Alyce Lomax -- who reported on the rumor earlier this month -- the answer is a curt "yes," delivered in a millisecond. In fact, she's now scampered off to the nearest Starbucks for the first of her daily venties. And I suspect most other coffee drinkers will have a similar response.

Say what you will about supporting "local" coffee places -- I lived in plenty of places where there was no such beast before Starbucks. This company brought drinkable coffee to the masses, and it continues to expand its customer base profitably. I strolled through an airport this weekend that will soon feature two outlets in a single branch of the terminal. That could mean six locations in one airport, each with a semi-captive audience.

The public appetite for Starbucks seems to be insatiable, and growth is not just coming via expansion. The end of last quarter (June) marked the 150th consecutive month of positive comps for the chain, and the eighth month of double-digit gains. Smaller competitor Diedrich Coffee (Nasdaq: DDRX  ) actually saw sales decline, and negative comps at its flagship Gloria Jean's.

From an investor's point of view, the only fly in the cup is the price. Starbucks never looks exactly cheap. But, of course, fire sales are often rare for long-term outperformers: Think of Wal-Mart (NYSE: WMT  ) , eBay (Nasdaq: EBAY  ) , and Coca-Cola (NYSE: KO  ) .

Is tiny Peet's Coffee (Nasdaq: PEET  ) , a Rule Breaker? Check out David Gardner's latest newsletter to see which growth companies are making the cut.

Seth Jayson doesn't drink much Starbucks coffee because he's saving his pennies for the stock. At the time of publication, he had positions in no company mentioned. View his stock holdings and Fool profile here. The Fool is investors writing for investors.


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