"I want to resist raising prices in this environment," Howard
Schultz, Starbucks' chairman and chief executive, said, referring to
still cautious spending by many consumers.
"I am concerned about dairy, both domestically and around the world,
and we are working feverishly with our suppliers, (and to) identify
new suppliers," Schultz told reporters after the company's annual
meeting in Seattle on Wednesday.
U.S. dairy prices are at record highs and could move up a bit more
in March before easing as a result of increased production, said
Jerry Dryer, editor of the Dairy & Food Market Analyst.
He and other experts say the rise is primarily due to increased
demand from Asia and other markets.
"The demand for dairy in Asia, specifically China, is something the
world's going to have to deal with," Schultz said.
General Mills Inc <GIS.N>, which sells Yoplait yogurt and
Haagen-Dazs ice cream, earlier on Wednesday said that its Yoplait
business was the main driver behind an 11 percent decline in its
U.S. retail segment operating profit in the latest quarter.
Roughly two-thirds of that profit decline was due to dairy inflation
and higher merchandising and marketing investments in its domestic
yogurt business, Don Mulligan, General Mills' chief financial
"We've been assuming that it will top off for the last few months
and it hasn't yet," Mulligan said, referring to dairy prices.
[to top of second column]
Elsewhere, coffee prices recently hit a two-year high due to
crop-damaging drought in Brazil, the top producer.
"I'm not concerned about where coffee is going," Schultz said. "I
think the market has significantly overreacted to the issue in
Brazil and I don't see coffee prices spiking at very much higher
levels than they are today, over the long term."
Schultz said Starbucks has managed through prior commodity cost
hikes and "can absolutely do it again."
During the annual meeting, Schultz promised more growth in the years
ahead, vowing to turn Starbucks into a "$100 billion company" by an
unspecified date in the future. Starbucks' current market value is
about $57 billion.
(Reporting by Bill Rigby in Seattle and Lisa Baertlein in Los
Angeles; editing by Cynthia Osterman)
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