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Originally published June 21, 2013 at 12:21 PM | Page modified June 21, 2013 at 5:49 PM

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Starbucks hiking prices despite lower bean costs

The chain will raise prices on about a third of its drinks.

The Associated Press

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Coffee costs are finally falling, but Starbucks wants a few extra pennies for that latte.

The chain will raise prices on fewer than a third of its drinks, it said.

The price hikes will vary by region and by drink across the nearly 7,000 company-run U.S. cafes that are affected. No changes are expected at airport, grocery and other locations not run by Starbucks.

In Seattle, the price of a 12-ounce brewed coffee will increase by a dime to about $1.75, but prices on larger-sized brewed coffees will not change here, according to a source familiar with the changes.

Frappuccino and Refresher drinks also will see no change in Seattle, the source said.

In some markets it’s the first price hike customers will have seen in about two years, Starbucks said.

The increase comes despite falling coffee costs that have boosted Starbucks’ profits. In the last quarter, the chain cited lower coffee costs for contributing to a stronger operating margin.

Earlier this month, a Janney Montgomery Scott analyst issued a note to investors saying Starbucks is likely to benefit from lower coffee costs for the next few years.

Based on the price of a coffee contract at the time, analyst Mark Kalinowski estimated Starbucks would pay about half the $1.4 billion it did for coffee in 2012.

But Starbucks notes that coffee represents just one of its many costs, and historically it has accounted for less than 10 percent of overall store expenses. Its other expenses include rent, labor, marketing, equipment and other ingredients such as milk and sugar.

Seattle Times business reporter Melissa Allison contributed to this report.

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