Coffeeflation Hits Starbucks!

Moneybox
A blog about business and economics.
June 20 2014 3:44 PM

Starbucks Coffee Is About to Get More Expensive

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Start stockpiling.

Photo by Paul J. Richards/AFP/Getty Images

Watch out Starbucks fans: Your coffee is about to get more expensive. Starbucks is raising the cost of its ground and whole-bean coffees sold in grocery stores and at other retailers by about 8 percent, or roughly $1 per bag, starting on July 21. Price tags on Starbucks K-cups, VIA instant coffee, and Seattle's Best Coffee (a Starbucks subsidiary) won't be affected. That gives real aficionados about a month to stock up on the ground and whole-bean packs before the price increase kicks in.

Starbucks' decision shouldn't come as a surprise and is likely based on the soaring cost of arabica beans, its preferred roasting variety. Production of arabica beans has been hampered by drought in Brazil and blighted by disease in other regions. On the other hand, for now Starbucks is choosing to buffer café customers from the coffeeflation. Prices at Starbucks shops will edge up just 1 percent starting June 24 and won't affect food or iced-coffee frappuccinos. You might end up paying a dozen or so cents more for a grande regular coffee, but that's less than the current rate of U.S. inflation and in line with the increase Starbucks implemented a year ago.

Starbucks is the latest in a series of coffee companies to hike its packaged coffee retail prices. J.M. Smucker Co., the distributor of Dunkin' Donuts and Folgers packaged coffee, became the first major roaster in the U.S. to bump up costs with an average increase of 9 percent. A few days later, Kraft Food Groups announced a 10 percent increase in its Maxwell House and Yuban brands. The one advantage in Starbucks' case is that packaged coffee prices will not increase if you purchase it in one of the company's stores—and if that ends up driving more foot traffic to Starbucks cafés, it could turn out to be a smart business decision all around.

Alison Griswold is a Slate staff writer covering business and economics.

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