Starbucks to lower price of bagged coffee

10 percent decrease set for May as global coffee prices continue to fall

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Starbucks is lowering prices on bagged coffee sold in U.S. grocery stores by about 10 percent beginning May 10 following a drop in coffee prices.

Decreases will vary depending on the store and size of package, but many stores will cut prices by $1 on 12-ounce bags of Starbucks and Seattle's Best Coffee, to $8.99 and $6.99 respectively, the company said.

In recent months, global coffee prices have fallen more than 50 percent year-over-year, and investors are watching to see if coffee companies lower prices to attract more customers or let the gains fall to their bottom line.

Starbucks is cutting prices to "provide value and continue to attract new customers," said spokesman Zack Hutson.

It is unclear whether prices on packaged coffee and beverages will decrease in Starbucks stores as well, because the company does not discuss future pricing for competitive reasons.

Expanding rewards

The price drops come after years of increases. Some were prompted by higher milk, fuel and labor costs, and more recently by escalating coffee-bean prices. A couple of years ago, the commodity price for coffee repeatedly broke multidecade records.

Starbucks CEO Howard Schultz blamed speculators for driving coffee and other commodities beyond what they were worth.

The company's last increase came in 2011, when the price of bagged coffee in groceries rose by 12 percent and in Starbucks cafes by 17 percent.

Also beginning in May, Starbucks will include a code on bagged coffee sold in groceries that customers can use toward its loyalty program.

They will use the code to earn points online, which can be redeemed for food or drinks at Starbucks cafes.

It's part of a push to expand Starbucks' loyalty program and to enhance sales in its grocery channel, which executives have focused on more in recent years, partly because margins tend to be higher.