- Despite the housing, mortgage and credit threats, Starbucks' (SBUX) legions of loyal customers are still lapping up its pricey lattes, company executives said Wednesday. However, the coffee chain's business is proving to be less resilient to rising dairy costs.
- "We're still doing fairly strong. The macroeconomic factors have had some impact but not a huge one on our sales," CFO designate Peter Bocian told an analysts' gathering
However, the world's largest seller of gourmet coffee drinks has taken a more direct hit from escalating commodity costs, he said.
"We have two major commodities, coffee and dairy," he said. "Coffee has a much bigger impact on our bottomline. We have done well to manage those costs."
- But as dairy prices continue to rise, Starbucks responded by passing along some of the higher costs to its consumers by raising beverages last October and then again in July
- "We took a hit from dairy costs in 2007,' Bocian said. "We expect some mitigation in 2008 but not in the early part. So this remains a negative [for us]," he said.
- Bocian didn't say whether the company was leaving the door open for more price hikes down the road.
Is it just me or do we see a pattern here? Or here? Or here?
I truly think Big Ben would prefer not to drop rates one iota. Perhaps the market is forcing the Fed's hand. But inflation seems to be raging in certain subsectors of the economy and it is reaching the point the consumer has to push him/herself away from the trough of spending. Not because he/she wants to mind you - no, we love to spend and it's going to take a lot to stop that. Maybe we are entering a period where "a lot" is finally happening.
That said, don't worry about all this hand wringing, CPI is only 2%.... why don't baristas understand that?
No position and not a coffee drinker (the idea of paying $5 for a latte? ugh)
