Starbucks, Facing Higher Costs, Pushes Upscale Coffee

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Starbucks Corp. said higher labor and supply costs are likely to linger for months, adding that it is promoting higher-end beverages such as cold coffee and could lift prices in areas to help compensate.

The Seattle-based company’s outlook came as it reported quarterly sales that outpaced pre-pandemic levels. The company projected higher profit ahead, despite rising costs and some continued restrictions on seating. For its fiscal third quarter ended in June, Starbucks reported $7.5 billion in sales, above analysts’ expectations.

Starbucks was among the first global restaurant companies to feel Covid-19’s impact last year, as the coronavirus’s initial spread in China forced closures across chain locations there. Sales have recovered as the company has been able to reopen lobbies and steer customers to order online. Now, Starbucks and other chains face supply shortages and staffing problems, raising costs as consumers resume dining out.

Inflation and supply-chain disruptions cut into Starbucks’s profit for its most recent quarter, the company said, and inflation and higher wages are likely to further push up costs. That could lead Starbucks to lift menu prices in some markets, executives said. It is also promoting cold beverages and ones that are custom-made, which tend to be more expensive.

“We do have pricing power,” Starbucks Chief Financial Officer Rachel Ruggeri told investors Tuesday on a conference call.



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