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Starbucks to hike prices on 'labor intensive' drinks

By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney.com) -- Starbucks drinks, long considered symbols of Americans' penchant to overspend, are about to get even pricier.

The coffee giant said late Wednesday that it will raise the price of "labor-intensive and larger-sized" beverages because of soaring prices of green arabica coffee beans.

Starbucks (SBUX, Fortune 500) said green coffee prices are close to a 13-year high, and costs for its other raw ingredients, including dairy, sugar and cocoa, have been volatile.

As CNNMoney reported earlier this month, coffee futures have climbed more than 40% since June.

"[This has] completely altered the economic and financial picture of many players in the coffee industry," Starbucks chief executive Howard Schultz said in a written statement. "We have thus far chosen to absorb the price increases ourselves and not pass them on to our customers. But the extreme nature of the cost increases has made it untenable for us to continue to do so."

The prices of many drinks, including "certain espresso beverages," will stay steady, and the company's flagship tall brewed coffee will remain at $1.50 "in most markets," Starbucks said.

But if your favorite caffeine bomb is a Venti Coffee Caramel Frappuccino, prepare to pay up: Starbucks is targeting its price hikes at drinks that are larger and more time consuming to make. It also warned that it may soon raise the price of its packaged coffee sold in grocery stores.

Starbucks doesn't plan to let the price shocks cut into its bottom line. The company backed its fiscal 2011 earnings outlook of $1.36 to $1.41 a share. To top of page

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