Mixed fortunes for Starbucks



Starbucks

Starbucks

Coffeehouse Starbucks admits fears that the cost of coffee will dent its profits.

Markets anticipated that Starbucks would be increasing its profit forecast to $1.49 per share in 2011 but sources at the firm have confirmed it will be freezing the guidance at current levels.

The news comes as it braces itself against the growth in the wholesale price of coffee which has risen by almost three-quarters since last summer.

Although the last quarter of 2010 saw the chain making record profits of £218 million, a 44 per cent increase compared to 2009, shares in the brand fell 3 per cent in after-hours trading as investors grew concerned with its rising cost base.

Bad weather in Colombia and the potential for crop disease has combined with strong global demand contributing to a spike in the costs of coffee beans.

There were high customer numbers in Starbucks outlets across the world last year which led to revenue increasing by up to eight per cent on 2009, 15 per cent higher than the market had predicted.

This good fortune has cushioned the firm enough that it will be able to limit the cost to the customer at this time.

High commodity prices are likely to impact on other industry leaders over the course of the year.  McDonald’s have also released plans to increase prices on some of their popular products. How much more would you be prepared to pay for your favourite food and drink?

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