Starbucks hikes prices with more on the way, but insists demand is ‘very strong’

Starbucks (SBUX) customers are staying loyal to the Seattle-based coffee giant despite a higher cost for their cup of coffee, even as political pressure mounts in response to rising prices.

In a phone interview with Yahoo Finance after Starbucks’ fiscal first-quarter earnings results, CEO Kevin Johnson said customer demand during the holiday season was “very strong” with revenue growth of 19%, coming in at a record $8.1 billion dollars for the coffee giant.

Like a growing number of companies confident in the consumer’s ability to handle higher prices, Starbucks also raised prices in October, and at the end of January. Yet Johnson said the company did it in a “very targeted way” as it faced a trifecta of supply chain strains, inflation and rising labor costs.

“We’re constantly monitoring to make sure that the price actions that we do take are being well received by customers, and not causing any elasticity issues or customer attrition,” he added.

Johnson told Yahoo Finance that the company plans to raise prices twice more in the back half of the fiscal year, likely around the “spring or summer,” in order to offset inflation and rising cost pressures. In 2021 US inflation rose 5.8%, reaching a 39-year high, according to the US Department of Commerce’s recent report, which is spurring the Federal Reserve into a campaign to hike rates.

(Courtesy: Starbucks)

(Courtesy: Starbucks)

However, not everyone is on board with the higher costs — including Rep. Pramila Jayapal (D, WA).

In a tweet, the progressive Congresswoman railed against Starbucks’ “soaring profits” and price hikes — striking a similar tone as fellow Democrat Alexandria Ocasio-Cortez. The New York Congresswoman told Yahoo Finance this week that inflation was mostly a phenomenon caused by “straight price gouging by corporations.”

In the fiscal first quarter, the company saw a profit of nearly $816 billion, up 31% compared to 2020’s fiscal first quarter profit. Some of that amount may eventually be chipped at by higher employee costs, with Starbucks planning wage hikes, and facing a unionization movement that’s spread to 54 stores across 19 states.

Johnson weighed in on those efforts, telling Yahoo Finance that “there’s roughly 50…that have filed petitions to the NLRB [National Labor Relations Board] to go through the process to see if partners in those stores want to vote for a union.”

He added: “Those have not occurred yet and I think that’s an important thing just to point out.”

Shares of Starbucks are down nearly 19% percent year-to-date.

Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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