Starbucks Lowers Price of Coffee Sold in Grocery Stores

   By Annie Gasparro 
 

Starbucks Corp. (SBUX) is lowering the price of its packaged coffee sold in U.S. grocery stores, following similar moves by competitors now that green coffee prices have retreated.

As of May 10, Starbucks will reduce the price for ground and whole-bean coffee by an average of 10%, including its Seattle's Best brand, at the some 50,000 retailers who sell its products.

The move comes after both Kraft Foods Group Inc. (KFT)--parent company of Maxwell House and Yuban--and J.M. Smucker Co. (SJM)--maker of Folgers, Dunkin' Donuts and Millstone coffee--each reduced the prices of their packaged coffee by 6% in February.

U.S. food companies had raised prices in 2011, when arabica futures surged. Now that retailers are seeing a tailwind from lower coffee costs, they are starting to pass those along to consumers.

Kraft is also taking direct aim at Starbucks in its Gevalia ads, upping the competition in the premium coffee space.

A spokesman for Starbucks said pricing decisions take in to account several factors, such as coffee and other supply chain costs, the competitive landscape, and customers' expectations for value.

"Sometimes pricing is also a way to expand our reach and bring in new customers," the spokesman said.

Starbucks said the reductions will take its prices back to roughly the same as they were before its last price hike in March 2011.

For instance, a 12-ounce bag of Starbucks coffee will be listed for $8.99, from $9.99, and Seattle's Best will go to $6.99, from $7.99. Retailers may also offer additional promotions that take the prices even lower.

The pricing change, which is for the U.S. only, doesn't include single-serve coffee packets, or any packaged coffee sold in its cafes.

Starbucks has been making other efforts to increase the coffee it sells outside its cafes.

Also next month, Starbucks will expand its loyalty-rewards program to packaged coffee purchased in grocery aisles, allowing customers to earn points they can earn redeem for free food and drinks at its coffee shops. Meanwhile, Starbucks is testing a new shelving design for higher-end retailers that helps its brand stand out more. Trimmed in dark wood, with a faux-tile backsplash, the displays are modeled after its cafes. Starbucks has announced plans to roll them out in hundreds of grocery stores this year, as packaged goods become an increasingly important part of its business.

Write to Annie Gasparro at [e-mail]

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