Starbucks Cutting Prices On Bags Of Coffee Starting May 10th To Compete With Low-Price Brands Dunkin' Donuts, Folgers

Starbucks is cutting the prices of its bags of coffee sold in grocery stores starting on May 10.

The Seattle-based chain says 12-ounce bags of its whole and ground coffee will be cut to $8.99, down from $9.99. The list price of its Seattle's Best coffee will also be slashed to $6.99 a bag, from $7.99.

The $1 discount represents a 10 percent discount on its bagged beans.

The price cut by Starbucks Corp. reflects the company's ongoing push to accelerate growth in its packaged goods business.

Last quarter the company collected about $380 million from sales outside its cafés at an operating margin of 25.5 percent.

Coffee sales are at a three year low, a drop that prompted such brands as Folgers, Dunkin' Donuts, Maxwell House, and others to cut their prices earlier this year.  Now these other competitors will have to compete with Starbucks on the shelves more closely.

By committing to lower prices, Starbucks is sending a signal to its' competitors.  It's serious about taking on the low end of the market; Dunkin' Donuts, Folgers, and other coffee companies can either trim their margins further or give up volume. Either way, they lose.

Its not clear whether or not Starbucks will sway many customers quickly into buying their brand, but they believe it's worth the risk.

Unfortunately for coffee junkies on the go, Starbucks products in its Cafes will remain the same, despite a controversial price increase in many of its shops last year.

Starting next month, the company is also letting people earn points on its loyalty program from buying its bagged coffee.

Even at the $1 price reduction, most people think Starbuck's coffee is still overpriced and the tiny bargain won't sway a customer from switching from their Chock Full O' Nuts to the swankier brand.

Do you think the upcoming price decrease will convince the public to buy Starbucks coffee bags in the grocery store?