Coffee prices fall to 4-year low Starbucks raises prices in the US

Coffee at Starbucks is not cheap. But when the price of coffee plummeted to a four-year low, Starbucks instead plans to raise the price of some drinks in the United States.

There is an ample supply of raw coffee

Starbucks announced on Friday that its u.s. stores would raise some beverage prices from June 25. JimOlson, a spokesman for the company, said the average price increase was 1%, which would vary slightly from region to region, and for some regions, it would be the first price increase for Starbucks products in the last year and a half to two years.

Olson declined to say which drinks would go up, saying only that the price increase would affect less than 1/3 of the drinks in most stores and would not affect large or extra-large freshly brewed coffee, or frappuccinos and refreshers drinks.

Starbucks is the world's largest coffee chain, and its retail products include more than 30 of the world's top coffee beans. Compared with the world's leading catering companies, Starbucks' market capitalization ($48.5 billion) is second only to McDonald's ($97.5 billion). It is $17 billion higher than third-place Yum, which includes KFC and Pizza Hut.

Oddly, however, the Starbucks price increase coincided with a collapse in coffee prices. As of yesterday, Arabica coffee futures listed on the ICE exchange were trading at $118.85 per pound, down 17% this year, the lowest since July 2009, according to Bloomberg. Coffee futures reached an all-time high in 1977, when coffee prices were close to $309 per pound.

One of the main reasons for the collapse in coffee prices is that Brazil, the largest grower of sugar and Arabica coffee beans, has an ample supply of these two soft commodities. Between 2013 and 2014, global raw coffee season stocks rose 19.5% year-on-year, the highest since 2010, with Brazil's opening inventory surging 200%, according to Bloomberg data.

The cost of coffee accounts for only 10% of the stores.

Why is Starbucks still raising prices when coffee is getting cheaper?

The answer is, "Coffee accounts for only 10% of total operating costs in a Starbucks store, and the price increase is to cope with rising rent, labor and non-coffee food costs." According to Olsen.

According to Starbucks' English website, in addition to traditional coffee, there are also bread, hot breakfast, sandwiches, ice cream and other foods.

Starbucks operating expenses rose 9% year-on-year to $1.53 billion in the first quarter of 2013, according to Bloomberg data, but due to an 11% year-on-year increase in main revenue and a rise in net non-operating profit in the same period, net profit eventually rose 26% to $390 million.

In fact, Starbucks is not indifferent to the falling price of coffee. In April, the company announced that it plans to cut the catalog price of its eponymous brand and Seattle'sBest bagged coffee in the United States to remain competitive as coffee costs fall. Specifically, the price of 12-ounce Starbucks bagged beans and ground coffee will drop to $8.99 from the current $9.99.

Chinese stores have not received the notice of price increase.

As to whether Weibo will also raise its price in the Chinese market, a reporter from the Daily Business News (Starbucks) called Starbucks Enterprise Management (China) Co., Ltd. and tried to transfer to the company's public relations and other relevant departments, but failed because the other party needed a real name transfer.

The reporter then asked a Starbucks store in Chengdu by phone, and the other party replied that he had not received any notice of an increase in the price of Starbucks beverages recently.

The Chinese market has become a focus of Starbucks' expansion plans. In March, Starbucks Chairman and CEO Howard HowardSchultz told CNBC that Starbucks plans to open 1500 stores in China by the end of 2015. Starbucks now accounts for half of China's coffee market. According to Chinanews.com in April, Starbucks has about 61% of the coffee market in China, and Starbucks hopes to make China the second largest market in the world next year.

According to Starbucks' Chinese website, Starbucks has opened more than 500 stores in China.

(responsible Editor:)