Starbucks is cutting the prices of their ground coffee beans sold in grocery stores worldwide. The move will most likely cut into the massive coffee business' profits, but some analysts are betting that the low cost of coffee right now could hurt Starbucks' competitors even more.
Starbucks is cutting their prices for coffee beans starting May 10 in response to the coffee market's own lowering prices- coffee is at a 3-year low, according to reports. The Seattle-based coffee giant's 12-ounce bags will be cut a full 10 percent, from $9.99 to $8.99. Coffee in their many chains, K-cups, instant coffe, and verismo pods will remain at the same price, however.
"This will allow us to both enhance the value that we're providing our existing packaged coffee customers, and hopefully increase the frequency which they purchase Starbucks and Seattle's Best coffee, as well as attract new customers," Jim Olson, a spokesman for Starbucks, told Bloomberg.
Analysts believe that the drop in price has much to do with lowering coffee bean prices across the board; Dunkin Donuts, Folgers, Maxwell House, and Kraft have all dropped their bagged prices recently as well. Starbucks also has a significant amount of coffee beans stored to offset the inevitable loss of profits- $816 million in coffee beans is stored in company warehouses, according to Businessweek.
Now, competitors have no choice but to cut their prices further, dipping into profits, or give up customers to Starbucks' Seattle's Best brand, found in most grocery stores. The lose-lose situation for businesses like Folgers and Maxwell House, who don't have chain stores dotting the U.S. and abroad.
Although retailers will definitely enjoy the benefits of lower prices for Starbucks' coffee, customers may not, as the $1 dollar price cut is only a suggestion. Starting next month customers can earn points on Starbucks' loyalty program by purchasing the bagged coffee.