Starbucks under fire for price hikes
By Lee Hyo-sik
Starbucks Korea is facing a consumer backlash for its plan to raise the prices of dozens of its popular foreign drinks ahead of the peak summer season. Other large Korean and coffee franchises are expected to follow suit, making it more difficult for the government to rein in consumer prices in the coming months.
The Korean unit of the world’s largest coffee franchise, headquartered in Seattle, said Friday that it will hike prices of 32 coffee drinks by 300 won ($0.27) from May 7 at its outlets across the country. For instance, a tall-size Americano will cost 3,900 won from next Monday, up from the current 3,600 won. Prices of cafe latte and caramel macchiato will go up to 4,400 won and 5,400 won, respectively.
But Starbucks said it will keep 10 coffee drinks at their current prices, while cutting those of 13 by up to 200 won. Coffee drinkers are not happy with the news, saying they already pay high prices at the American franchise.
“I go to Starbucks at least once every day to get a cup of black coffee,” said Choi Kyung-sook, a 41-year-old officer worker in central Seoul. “It is irritating whenever I hear the U.S. coffee maker is raising prices. It feels like Starbucks is taking advantage of coffee lovers like me.”
Choi said Starbucks is making light of Korean consumers. “It claims that it is not raising costs, but adjusting prices as some of its coffee drinks will be sold lower. But all of popular drinks, including latte, will become more expensive.”
She is seriously considering switching to other coffee franchise when hanging out with her friends over a cup of coffee. “I have recently found that Paul Basset offers great coffee at similar prices. I think the beans are freshly roasted and tastes better.”
But Starbucks Korea said it has no other choice but to hike prices in order to reflect rises in prices of coffee beans, milk and other ingredients.
“We have refrained from increasing prices of our products and have been able to do so by making our management more efficient. But due to surging prices of coffee beans and milk, on top of higher labor and rental costs, we are forced to charge our customers more,” a Starbucks Korea spokesman said.
More price hikes to come
Other coffee franchises are expected to follow Starbucks’ footsteps in the coming days.
Caffe Bene, a homegrown coffee franchise that operates the largest number of outlets in Korea, already hiked prices of its coffee drinks by up to 500 won on April 28. A Tall-sized Americano now costs 4,500 won, up from the previous 4,000 won, while customers pay 5,300 won if they want to drink cafe latte.
Industry watchers say that coffee shops tend to raise prices ahead of the summer season when consumers consume large quantities of cold coffee-based drinks.
Such price hikes will negatively affect the government’s anti-inflation campaign.
According to Statistics Korea, consumer prices rose 2.5 percent in April from a year earlier, marking it the second consecutive month in which inflation growth has remained in the 2-percent range.
But prices of farm products soared 10.7 percent, with auto fuels and utilities costs moving up 6.5 percent and 5.8 percent, respectively.
Korea Electric Power Corp. has recently asked the government to allow it to raise utility bills by an average of 13.1 percent as soon as possible to improve its worsening balance sheet and help reduce power consumption.
An operator of Seoul subway No. 9 seeks to hike the fees by 500 won, while Seoul and other municipal administrations plan to raise water and sewage bills to prop up their worsened financial standing.