Like many coffee aficionados, I have something of a love/hate relationship with Starbucks (SBUX). My main gripe is that the company’s food and beverage offerings have always been pricey compared to the fare served in most fast-food restaurants and run-of-the-mill coffee houses.
On the other hand, Starbucks coffee houses tend to be very inviting compared to others, with the intoxicating aroma of freshly brewed java greeting the customer while the décor, background music and overall ambience can be quite relaxing. The free wi-fi for those who want to bring their laptops and work while sipping is an added bonus.
And while I’ve always found their famous house coffee, Pike Place Roast, to be bitter tasting and disagreeable, some of their other flavors and blends make up for that (admittedly perceived) shortcoming.
My personal favorite flavored coffee by Starbucks is Maple Pecan: While not consistently available as a standard brewed coffee or syrup option in Starbucks cafe locations, it has historically been a ground coffee and K-cup option available at grocery stores during the fall season. In fact, the flavor has built up such a cult following over the last few years that Walmart (in particular) and other stores have been carrying it year-round since at least 2023.
Like virtually everything else, the price of this offering has risen in the last few years, jumping from its 2020-2022 average price of $9.95 per bag in my neck of the woods to $14.47 in the last couple of years (which was the price at which I recently purchased it). Imagine my surprise, then, when I returned to buy another bag a couple of weeks ago and saw it had risen to $17.13—a whopping 18% increase in just one week!
Maple Pecan isn’t the only Starbucks bagged coffee that has increased in cost lately, as many of its other blends have witnessed similar nationwide price hikes in early 2026. I mention this because, up until my sticker shock experience this week, I had been seriously contemplating adding SBUX to the Cabot Turnaround Letter portfolio once again, as discussed in a recent issue. (We made a nice profit in SBUX in late 2024/early 2025 before taking profits on it in the Cabot Turnaround Letter.)
But after seeing the latest price hike (which I have since confirmed was more than just a local phenomenon), it has forced me to take a closer look at what exactly is going on not only at Starbucks, but in the retail coffee industry at large.
As it turns out, the factors driving price jumps in Starbucks coffee have been impacting coffee prices categorically across the nation for the past year. Recent government data show that coffee is, in fact, one of the fastest-growing food categories for inflation in U.S. grocery stores. And as one industry source put it, “A $2 to $3 jump in a premium flavored coffee bag in a short period of time isn’t unusual in this environment.”
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Industry experts inform us that prices paid by consumers are largely determined by how much roasters pay for raw coffee beans, but other major factors include weather/climate in key growing regions like Colombia and Brazil, plus labor and fertilizer costs. More recently, tariffs have been a driving force behind coffee price increases.
Each of the aforementioned factors has been negatively converging on the industry in the last couple of years, pushing prices higher on the retail level. On the tariff front, a Reuters report in December noted that coffee drinkers still face higher prices even after Trump’s recent rollback on the tariffs that he placed on the commodity last summer. “Costs are mostly still filtering through supply chains and have yet to reach consumers,” Reuters acknowledged.
Beyond the tariffs, experts say the high retail prices for coffee have been primarily driven by the worldwide coffee bean supply shortages of the last four years, which have resulted in a more than doubling of raw bean prices in just the 12 months between March 2024 and March 2025!
On that score, an international industry trade house has released its latest revision of independent coffee crop forecasts for major producer Brazil, projecting the country’s total coffee production for the July 2026 to June 2027 season at approximately 76 million bags. If realized, this amounts to a sizable annual increase over previous years—around 20%.
According to coffee trading company I&M Smith Ltd., “These projections still point toward a recovery in production and [the] large Brazilian harvest to come. Which, if it comes to fruition, will provide welcome relief to the global supply pipeline. A larger Brazilian output is viewed as essential to meet domestic consumption requirements and to sustain average annual exports of approximately 43 million bags to consuming markets.”
Industry analysts estimate that it takes at least nine months for raw bean prices to ripple down to the retail level, and the predicted coffee production surplus is expected to push arabica beans down by around a third of their current cost by this year’s fourth quarter, per a Rabobank report (see chart below). As an inveterate coffee consumer, all I can say is “here’s hoping!”
Source: Reuters
As for Starbucks, the recent price increases aren’t expected to significantly dent demand for its products since the company caters to a predominantly upper-middle-class clientele and promotes its offerings as “affordable luxuries” for customers with higher disposable incomes. Analysts, on balance, don’t seem to be too concerned that the recent price hikes will significantly dent revenue; in fact, the consensus is for revenue to increase modestly this year (by 3% year-on-year) while comparable store sales are projected to improve. Earnings, meanwhile, are expected to increase 7%.
However, Starbucks’ higher operating costs are constraining margins (indeed, one news outlet described the margin trend as “sinking”), as well as ongoing investments in store operations and some of its recent turnaround initiatives. Consequently, margins aren’t expected to fully rebound this year, which could serve as a deterrent for some investors.
That said, recent metrics suggest that the overall turnaround under CEO Brian Niccol is proceeding apace, with domestic store growth reported for the first time in two years in January, and with plans to open an ambitious 600 to 650 net new company-owned and licensed cafes in fiscal 2026.
In its recent Analyst/Investor Day, the top brass acknowledged that “targeted pricing” will likely be needed this year in order to offset inflation, as well as “technology-driven productivity efficiencies where practical,” adding that innovation will be a primary driver of higher sales despite the higher prices.
The company further expects the cost savings from its strategic initiatives will propel growth going forward, and I believe this assessment will prove correct. The projected coffee supply increase—and presumptive retail price declines later this year—should also help, as should the company’s multi-pronged strategic improvements (which are starting to gain traction).
All told, I still believe Starbucks’ longer-term turnaround prospects are intact in spite of the current coffee price spikes and company margin issues.
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