UPDATE 2-Starbucks backs FY11 view; no price hikes planned

* No consumer price increases currently planned

* Higher coffee costs expected to weaken profit in FY 2011

* Backs FY 2011 EPS view of $1.36-$1.41

* Shares up 2.6 percent
(Recasts; adds company comment on consumer pricing, sourcing,
contracts, coffee prices, bylines; previous dateline DETROIT)

By Lisa Baertlein and Marcy Nicholson

LOS ANGELES/NEW YORK, Aug 17 (BestGrowthStock) – Starbucks Corp
(SBUX.O: ) has no plans to hike prices, even though higher coffee
costs are expected to weaken profit in the upcoming fiscal
year, the company said on Tuesday.

The world’s biggest cafe chain repeated its fiscal 2011
profit target of $1.36 to $1.41 a share, which includes an
expected hit of 4 cents primarily from higher coffee prices.
Starbucks’ 2011 fiscal year begins Oct. 5. [ID:nN21105862]

Starbucks, other restaurant companies and packaged food
makers are feeling the pinch of higher prices for ingredients
like coffee, wheat, dairy and beef. But they are hard-pressed
to raise prices since consumers are still feeling the pain of a
weak economy and high unemployment.

Starbucks told Reuters it plans to navigate the volatile
market without hiking prices on things like lattes and drip
coffee.

Spokeswoman Trina Smith said Starbucks has been monitoring
coffee prices for some time and it currently does not have
plans to raise prices.

Starbucks shares were up 2.6 percent to $24.43 in afternoon
trading on the Nasdaq.

Benchmark December arabica futures (KCc2: ) — currently the
benchmark “C” contract — have jumped more than 30 percent
since June 9, hitting $1.8290 per pound on Monday, the highest
level in more than 12-1/2 years.

The “C” contract trades on ICE Futures U.S. (ICE.N: ) and is
the world benchmark for arabica coffee.

Physical coffee sales use the “C” contract as a guideline,
so depending on the quality of the beans, buyers either pay a
discount or premium to that.

Starbucks has long-term relationships with farmers, traders
and co-ops and has bought the majority of its coffee for its
upcoming fiscal year, spokeswoman Sanja Gould said.

“We are contracted well into fiscal 2011,” she said.

“For many years, Starbucks has diversified its coffee
procurement into multiple coffee-growing regions, and we remain
confident in our ability to manage this dynamic effectively,”
the company said in a statement.

Mass-market coffee sellers recently raised prices on their
well-known grocery brands.

Top U.S. packaged coffee seller J.M. Smucker Co (SJM.N: ) on
Aug. 3 raised prices for most of its Folgers, Dunkin’ Donuts,
Millstone and Folgers Gourmet Selections coffees in the United
States by an average of 9 percent, citing higher green coffee
prices. [ID:nN03308846]

Kraft Foods (KFT.N: ) quickly followed with U.S. price hikes
on select Maxwell House and Yuban ground and instant coffees.
[ID:nN06424207]
(Reporting by Lisa Baertlein in Los Angeles and Marcy
Nicholson in New York; additional reporting by Ben Klayman in
Detroit; editing by John Wallace)

UPDATE 2-Starbucks backs FY11 view; no price hikes planned