Jeff Sommer of the New York Times wrote in his article: "Starbucks isn't the place to go for cheap coffee. It is selling an experience, not a commodity."
Though this being the case, many still line up for a cup from the coffeehouse chain which has just increased its prices, even if their product's main ingredient has taken one of its deepest dives. The decrease in coffee bean prices is attributed to high temperature and lots of rain in Brazil.
To the millions of people who have made Starbucks a part of their morning habit, the additional 5 to 20 centavo increase may not be that noticeable, especially if all they have to do is to swipe, scan or do mobile payment.
But for the American coffee company, the dimes and nickels are a great way to add up profits, since they have not had an increase in their prices for about two years.
Spokeswoman Lisa Passe said that Starbucks has "to balance the need to run our business profitably while continuing to provide value to loyal customers and to attract new customers."
People who are familiar with the operations of Starbucks identify other possible reasons for the increase:
1. Since the company has been experiencing rapid growth in terms of its profit and expansion, it has locked in the price with their supplier, for more than 80 percent of their coffee supplies until 2016. A commodities economist with London's Capital Economics opined, in an interview, that a company such as Starbucks "can't afford to be in a position where it will run out of coffee or will suddenly have to pay an unexpectedly high price for it." By getting into an advance purchase agreement, Starbucks is trying to insulate itself from exposure to commodity and currency fluctuations.
2. When the price of coffee beans go for an unexpected decline, as what has happened this year, the company's strategy may have a negative short term effect since it is most likely that Starbucks paid more than the present market price for their coffee stocks.
3. Since coffee accounts for less than 10 percent of the company's overall costs, it then requires spending on wages and real estate, including extensive employees' benefits, distribution, marketing and equipment.
