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Who says there's no inflation? Coffee prices are still going through the roof. That affects purveyors of the almighty bean in its many forms, and Starbucks (Nasdaq: SBUX ) is the latest to hike the prices on some of its coffee products.
Coffee prices have surged near 13-year highs, and companies such as J.M Smucker (NYSE: SJM ) and Kraft Foods (NYSE: KFT ) have already reacted. Smucker boosted prices on its offerings by an average of about 9%. Green Mountain Coffee Roasters (Nasdaq: GMCR ) is planning a 10%-15% increase in its own coffee products. Starbucks had originally said it could absorb the added costs, but now it's caving to the commodity price spike.
These are tough times for the coffee crowd, since raising prices on a beloved product is a dangerous endeavor when so many consumers aren't feeling too flush.
Although Starbucks may lower the price of its 12-ounce brews, it will hike prices for large, labor-intensive drinks, and it's mulling an increase in the price of the packaged coffees it sells through grocers. Its packaged-foods division is a disproportionately profitable segment of the company.
McDonald's (NYSE: MCD ) , which has been offering plenty of coffee drinks to try to steal away caffeinated market share from Starbucks, said it will hold strong on its own bargain beverage pricing. That might hurt coffee players, including Starbucks.
It would have been nice if Starbucks hadn't had to increase the price of its caffeinated wares. If consumers got sticker-shock over what might feel like premium prices for not-so-premium coffees such as Maxwell House, Folgers, and so forth, then Starbucks might come out looking like more of a value. It could have been an opportunity for Starbucks to woo some customers to its side of the coffee aisle.
Still, it's not a surprising turn of events, and the rise in the price of green coffee will likely force other rivals such as Caribou (Nasdaq: CBOU ) and Peet's (Nasdaq: PEET ) to similarly upwardly adjust their prices.
Do you think Starbucks customers will react badly to the price increases, or do you think they've heard coffee prices are spiking and understand that such costs often get passed to consumers? Will Americans give up their coffee if it just gets too blasted expensive? Discuss the situation in the comment boxes below.