Starbucks is planning to hike its prices this year, its third increase since October, as large U.S. restaurant chains try to blunt the impact of the most ferocious inflation in decades by passing costs along to consumers.
Fast-food restaurants hiked prices 8% last year, federal labor data show. The Consumer Price Index, a key gauge of inflation that looks at a basket of goods, rose 5.8% in 2021.
Starbucks didn’t say how much it plans to increase prices, but the cost of a cup of its brewed coffee has inched steadily upward. The company had already boosted prices in October and again last month, executives said on Tuesday.
The brewed Venti-sized cup of coffee stood at $2.45 in 2021, according to several menu sites. But currently, the same cup of coffee in some locations will set you back $2.95, or an increase of 20%.
The pandemic brought inflationary pressures and staffing issues, both of which “were amplified, well in excess of our expectations,” by the recent surge in the Omicron variant, Kevin Johnson, the company’s president and CEO, said on an earnings call Tuesday.
And there might not be just one price hike in 2022 for Starbucks, but several, with Johnson saying the company has “additional pricing actions” planned throughout the year.
Consumers aren’t cutting back on coffee, though: Starbucks said revenue in the most recent quarter jumped 19% to $8.1 billion.
Wall Street analysts took note, with Oppenheimer downgrading the company’s stock, “despite healthy U.S. sales trends and increased pricing as multiple inflationary headwinds have intensified.”
Corporations blaming their price hikes on inflation have come under scrutiny from some consumer advocates, who point out that the profits of many businesses are growing far beyond the rise in prices. That suggests that some companies may be using inflation as an excuse to pass along even higher price hikes to customers, they note.
Americans are feeling the impact of inflation, dampening their views about the economy and their own financial resiliency. While middle- and upper-income households may be able to weather higher prices, some families are struggling to cope. Due to inflation, about one-third of families with incomes below $50,000 said they actually can’t afford to buy groceries, a Credit Karma study found.