Starbucks brewing up new drink prices

If you can spare a nickel, you can afford Starbucks' first price increase in two years.

Beginning Oct. 3, the coffee retailer known for getting customers to pay $3 for a latte will finally be charging exactly $3 before tax for a 16-ounce latte in downtown Seattle.

Prices on all drinks sold across the counter at Starbucks will go up 5 cents in the United States and Canada, where drink prices vary by market.

Starbucks also is adding 50 cents a pound to the price of most whole beans sold in its stores, the first price increase for that product in nine years. Pricing on four blends will not change.

The increases will help cover rising costs for things such as energy, fuel and employee wages and benefits, said spokeswoman Valerie O'Neil.

They are not directly related to a wage increase the company announced this week for most U.S. baristas, shift supervisors, assistant store managers and store managers, she said.

The higher wages came partly because of an employee survey completed in the spring.

"We wanted to make sure we were taking care of them," O'Neil said.

Starbucks did not lose significant numbers of customers the last time it increased drink prices, which was by 11 cents in 2004.

The latest price increase came as a surprise to investors, who were told during a May conference call that no increases were coming.

"Occasionally in one of the international markets, there will be a price increase," Chief Financial Officer Michael Casey said at the time. But in the United States, "we have no plans in the foreseeable future to take a price increase. Not this year, and not in our current thinking for 2007."

Still, investors welcomed the news, which came after the close of regular trading Thursday. Starbucks' share price rose 18 cents in after-hours trading, to $34.19 a share, after dropping 67 cents in regular trading.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com