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Starbucks Ups Price on Elaborate Drinks

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Wall Street Journal: Starbucks Corp. customers can expect to pay up to 25 cents more for their caffeine fix.

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Starting in several cities on Thursday, customers will pay more for larger and more complex drinks and less for smaller and more basic drinks.

In some markets, customers will pay a nickel more for a venti, or large sized, cup of vanilla bean- or coffee-flavored frappuccino; 15 cents more for a venti mocha or vanilla latte; and 25 cents more for a venti caramel macchiato. An additional espresso shot or an extra dose of milk or syrup also will cost another 10 to 15 cents.

However, a tall latte or cappuccino will cost ten cents less while a tall hot or iced brewed coffee will cost a nickel less in some markets.

Starbucks first disclosed in April that it would adjust its prices, but it didn't give specifics. In recent days, memos went to baristas across the U.S. advising them to "expect customers to be sensitive to pricing changes in this economic climate," according to one memo reviewed by The Wall Street Journal.

The memo instructs baristas to tell customers that price increases reflect the increased cost of doing business and that price cuts are meant to show that the Seattle-based coffee giant is looking for ways to provide value.

Spokeswoman Valerie O'Neil declined to identify the cities where the pricing changes first take effect, but confirmed that they will roll out nationwide over the next few months. She cited higher cost for labor and ingredients in the price increases.

"This is the first time we've ever lowered prices," Ms. O'Neil said, adding that in some markets, even drinks that are increasing in price will remain below competitors' prices.

Starbucks has been struggling lately to attract and retain cash-strapped customers amid the recession. The retailer's net revenue fell 6.6% to $2.40 billion in the third quarter ended June 28, from $2.57 billion a year ago, as same-store sales fell 5%.

But Starbucks reported better-than-expected earnings for the quarter of $151.5 million, or 20 cents a share, versus a loss of $6.7 million, or 1 cent a share, a year earlier. Excluding restructuring charges, earnings rose to 24 cents a share from 16 cents.

Baristas are supposed to continue offering morning customers "treat receipts" entitling them to return for a $2 grande cold drink after 2 p.m. through Sept. 28. Registered Starbucks cardholders will get free syrups, milk options and brewed coffee refills.

Specific pricing changes will vary by market, based on a given area's cost of goods and labor. "There may be pricing differences between stores of close proximity and between company-operated and licensed stores," the memo said.

To soften the blow for customers unhappy with the price increases, Starbucks told baristas they can use change from a change cup at the register to make up the difference during the first four days following the price hike.

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