Starbucks to Boost Coffee Prices by 11 Cents

Starbucks Corp. (SBUX) will raise its beverage prices by 11 cents a cup on average starting Oct. 6, the world's largest coffee-shop chain said Tuesday.

The price hike would be the first by the Seattle-based company since August, 2000.

Starbucks, which said in July that it planned to raise prices in its fiscal year beginning in October, said the higher cost of milk and green coffee beans for its espresso-based coffee drinks was part of its decision.

Shares in Starbucks rose 0.5 percent in late Nasdaq (search) trade to $44.60. The stock is up 53 percent from a year earlier.

The increase, Starbucks's fifth in the past decade, affects the company's stores in the United States and Canada.

Starbucks is planning to accelerate new store openings in 2005, including an increasing number of drive-through cafes.

Last month, Starbucks reported its slowest growth in 14 months for sales at stores open at least a year. Same-store sales rose 8 percent in August, the slowest yearly gain since May 2003.

Matt DiFrisco, an analyst at Harris Nesbitt Gerard, said the price hike would not impact store sales and in fact, with dairy prices now past their peak, would help to boost earnings in the coming year.

"It seems as though we've passed an inflection point on dairy costs," DiFrisco said, it is more of a response to sales momentum slowing."

Customers were likely to take the price rise in stride. Prices for a tall-sized Starbucks Latte (search) in North America range from $2.25 in Minnesota to $3.00 in New York City.

Frappuccinos (search), the ice-blended coffee drink, range from $2.90 to $3.55 for a tall 12-ounce size in the same areas.