Starbucks to Raise Prices in China

Published December 31, 2010

| Reuters

SHANGHAI, Dec 31 (Reuters) - Starbucks Corp will raise prices for some of its products in mainland China from Jan. 1, a company spokeswoman said on Friday, as surging raw materials costs pressure food companies around the globe.

Starbucks will raise prices of its Frappuccino products by 2 yuan ($0.30), Caren Li, a Starbucks spokeswoman in Shanghai, said. Mid-sized cups of the beverage currently cost 25-33 yuan.

"The upward adjustment was partly to reflect recent increases in commodities prices," said Li.

But Starbucks would also cut prices for some of its products, including the vanilla latte, she said.

"The vanilla latte is a very popular product of ours. We hope to provide the best value for our customers with the price cut," she said.

Commodities prices, especially for agricultural commodities, have surged to multi-year highs in 2010. Arabica coffee futures have hit a more than 13-year high, while raw sugar futures were at a 30-year high.

Starbucks CEO Howard Schultz told Reuters in an interview last month that high coffee prices were unsustainable and driven by financial speculators.

Smaller Chinese rival Pacific Coffee said it had not raised prices in mainland China. But the chain, 80 percent-owned by Hong Kong-listed China Resources Enterprise Ltd, had on Dec. 4 increased the price of espresso-based coffee in Hong Kong by HK$1 ($0.129), while prices for tea and bottled drinks remained unchanged.

A Pacific Coffee spokeswoman in Hong Kong declined to say whether the company was also considering a price increase in China.

Pacific Coffee operates two outlets in Beijing, one in Shanghai and three in Guangdong province, compared with more than 300 operated by Starbucks in the mainland.

Last month, U.S. restaurant chain McDonald's Corp raised menu prices in mainland China to offset higher food costs in the world's fastest-growing major economy.

Other restaurant chains, including Pizza Hut and KFC parent Yum Brands Inc, have said they expected higher labour and commodities costs to weigh on near-term margins in China. ($1=6.62 Yuan) (Reporting by Soo Ai Peng and Donny Kwok; Editing by Jason Subler)

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