Faced with growing competition from cheaper rivals, Starbucks Corp. is testing $1 short cups of drip coffee with free refills in its hometown...

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SEATTLE — Faced with growing competition from cheaper rivals, Starbucks Corp. is testing $1 short cups of drip coffee with free refills in its hometown.

That’s about 50 cents less than an 8 oz. cup of joe the Seattle-based coffee retailer normally charges, though prices vary from store to store.

Small cups of premium coffee at McDonald’s Corp., Dunkin’ Donuts and other lower-cost competitors typically start in the low $1 range, according to The Wall Street Journal, which first reported on Starbucks’ new test program Wednesday.

Starbucks would not say when the test began, how many stores are part of it, whether it’s considering a similar promotion for any other brews or whether any new test markets are on the horizon.

In a statement e-mailed by Starbucks spokeswoman Bridget Baker, the company said the test “is not indicative of any new business strategy.”

“Testing is a way of life for us, as we are constantly looking for new ways to connect with the customer and provide the best Starbucks experience,” the statement said.

Starbucks raised the average price of its coffee and other freshly made drinks in most of its U.S. stores by 9 cents last July, citing the rising cost of dairy products and other essentials. It was the second price hike in less than a year; a 5-cent price increase took effect in October 2006.

Price increases have helped shore up revenue as traffic in U.S. stores flattened, then declined for the first time in the company’s history last quarter.

Starbucks Chairman Howard Schultz, who recently returned as chief executive after the company fired CEO Jim Donald as part of efforts to revitalize the company, has acknowledged the faltering economy appears to have contributed to the decline.

But Schultz said he believes the company’s main problem was that its focus on customers got blurred in recent years as it concentrated on growth.

Starbucks is the world’s largest chain of coffee houses, with more than 15,000 stores worldwide.