When I read the headline, Latte Letdown: Starbucks Set To Raise Prices, I immediately jumped to this thought:
A steeper price could push Starbucks’ luck. [...] Since many people go to Starbucks every day, they are well aware of exactly what their regular order runs, and some even approach the counter with the exact amount of cash and coins in hand. Some 30 million customers visit Starbucks nationwide each week, shelling out $3.50 to $4 a trip on average.
Starbucks’ operating costs have gone up:
Starbucks said that it has recently experienced double-digit costs increases in its health insurance plan, which offers all of its 80,000 full- and part-time employes world-wide. Costs for dairy and real estate also escalated, but the company declined to say by how much.
I’m still not sure why Starbucks offers so many benefits when its employees would probably prefer cash.
Anyway, Starbucks may be able to raise prices without losing customers:
Demand for prepared coffee tends to be fairly resistant to price increases, and economics professors often use Starbucks as an example of a company whose product seems to have little price elasticity — that is, increases seem to have very little effect on consumer demand. By contrast, mass-market grocery brands such as Kraft Foods Inc.’s Folgers and Maxwell House coffees tend to be much more price-elastic…