Starbucks to raise prices on certain drinks

By Ben Rooney

Starbucks is raising prices on certain drinks by as much as 35 cents in large U.S. markets and in Canada as part of what the coffee chain calls its “normal course of business.”

The price hikes, which rolled out Tuesday, apply to “some of our larger and more complex beverages,” a Starbucks spokesperson said Friday. At one location in New York, prices went up by 20 cents, with local customers paying more than $4 for a tall mocha latte. Prices have also gone up in California, Washington, D.C., and other large U.S. markets. But Starbucks was quick to point out that prices have also gone down on some of the company’s most popular drinks and sizes, including tall lattes, tall brewed coffees and tall iced teas.

“As part of a normal course of business, we continually evaluate the best way to provide value to our customers while also weighing the needs of our business,” Starbucks said. Still, the price hikes did not sit well with at least one customer, who voiced displeasure on the social networking site Twitter. “Way to increase prices in NYC by 20% @starbucks – really??? No wonder the store was empty this morning…” user @sethburr tweeted early Friday. The move could be a risky one for Starbucks, which has suffered declining sales for two years as consumers switched to lower priced brands like McDonald’s (MCD) and Dunkin Donuts.

Indeed, the price hike may have already cost Starbucks the business of one other Twitter user. “My latte was more expensive this morning – Starbucks raised their prices – might have to kick the habit,” user@crivingtonhowie tweeted Friday. But store traffic has been picking up recently, Starbucks said in its most recent quarterly report. The company now expects “modestly positive” same-store sales in 2010. A company spokesperson said Starbucks does not expect the price increases to impact sales. And the company has raised prices before with limited backlash. In September, prices went up by 5 cents, or about 2%. That was the first time the company hiked prices in two years.