The festive season is now upon us. The high street is filling up with shoppers and the cash tills are ringing. This is certainly what the shops are hoping for, especially the American coffee chain, Starbucks.

Not content with hitting the headlines through their tax avoidance schemes, Starbucks are now adding fuel to the fire in their decision to raise the prices of their drinks. The increase is set to slap on an extra 10p to your caffeine hit, with an extra 15p on top of the popular Americano. The price rises make Starbucks on average 7.5% more expensive than its competitor Costa and 11.7% more expensive than Café Nero[1].

What warrants the increase?

With Arabica coffee prices falling, it’s difficult to understand why the increase has been actioned. As of 05/11/13 Arabica coffee futures on Intercontinental Exchange, a commodities trading market, are trading at their lowest in almost five years.

Starbucks have defended these rises, adding;

“The cost of doing business is going up, from wages to milk to energy, so our prices have to increase slightly.”[2]

We all know the cost of doing business is going up, as is the cost of living. However, if Costa and Café Nero have frozen prices, why should Starbucks increase theirs?

It appears that the price rises are conveniently creeping up after Starbucks has been exposed for tax avoidance and is now paying tax. Unsurprisingly, Starbucks has only reported taxable profit once in 15 years in the UK. Under pressure from the public and politicians Starbucks made a financial U-turn;

"We listened to our customers in December and so decided to forgo certain deductions which would make us liable to pay £10m in corporation tax this year and a further £10m in 2014," a Starbucks spokeswoman said.[3]

Too little too late?

Starbucks may be paying tax, yet increasing prices for the festive season is unlikely to get them on the top of anyone’s Christmas card list. So when you’re Christmas shopping on the high street, you may want to think twice about where to stop for a coffee break if you’re watching your pennies.

As for miserly Starbucks; Bah humbug!

Article written by Wisteria (http://www.wisteria.co.uk/) Chartered Accountants.

[1] Based on a large cappuccino; Starbucks: £2.85, Costa: £2.65, Café Nero: £2.55

[2] http://qz.com/143712/coffee-prices-keep-plunging-but-dont...

[3] http://www.bbc.co.uk/news/uk-politics-23019514