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Why are coffee sales slumping?

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An open Dunkin’ Donuts shop at the corner of Dorchester Avenue and Boston Street in Dorchester.Jim Davis/Globe Staff

It's peak (iced) coffee season, yet two of the nation's top coffee purveyors, Dunkin' Donuts and Starbucks, reported slower than expected sales this week.

And no one is sure exactly why.

Could it be high prices? A bad national mood?

"There's a lot going on," said Sharon Zackfia, a partner at William Blair Investment Management in Chicago. She suspects consumers feel less likely to indulge in an afternoon Frappuccino when a contentious presidential race and boiling racial tensions have fueled economic uncertainties.

"If you're an average Joe consumer, you might not feel as happy with the world as you did a couple quarters ago," Zackfia said.


Despite slumping sales at its stores — same-store sales rose just 0.5 percent in the second quarter — America may still run on Dunkin', which posted revenues of $216 million.

Apart from larger economic forces, Dunkin Donuts chief executive Nigel Travis said in an interview this week that there may another contributing factor: higher prices.

"Our franchisees have controlled the pricing and got ahead of it some," Travis said in an interview Thursday. "It's something we've worked very hard on correcting."

The company said it has been improving its analytics so that franchise owners can see the impact of pricing on sales.

The Canton-based company's suggested retail price for a large iced coffee is $2.69 in the United States. A quick survey of Dunkin' outposts in downtown Boston found the cost was generally higher, with prices hovering about $3.20. In suburban locations, prices were a bit lower than in the city, though still higher than the suggested Dunkin' price: around $2.90 for a large, at locations in Concord and Marblehead.

Starbucks, by comparison, said its prices for a large iced coffee, or a "venti" in Starbucks parlance, ranged from about $2.95 to $3.25 depending on location. Of course, a Starbucks venti is a full 8 ounces smaller than a large Dunkin' brew.


Zackfia, the analyst, said Dunkin' Donuts prices have risen 3 percent so far this year, outpacing Starbucks' 1 percent increase.

"One of the big differences is that Dunkin's traffic has been negative for a while, adjusted for weather," she said.

The question now, she added, is where are people buying their coffee instead. "Are they driving people to McDonald's, Cumberland Farms, or Speedway?"

Analysts said both Dunkin' and Starbucks may have raised prices in response to city and state mandated minimum wage increases. In Massachusetts, the minimum wage rose to $10 an hour in January and will jump again to $11.

Another factor that might have slowed in-store traffic at Starbucks is the summertime price hikes that have become a tradition for the chain in recent years, said Neil Saunders, chief executive of the New York-based retail research firm Conlumino. The Seattle company is also planning broad employee wage increases in October.

Starbucks' chief executive Howard S. Schultz in a conference call with investors on Friday called the slow growth from April to June "an anomaly."

Sales at Starbucks stores open at least a year grew only 4 percent in the Americas between April and June, the third quarter in Starbucks' fiscal year. During the same quarter last year, sales in that category were up 8 percent.

"In Starbucks' 24 years of public life, I can't remember a quarter quite like Q3 of 2016, when a confluence of political and social turmoil at home, weakening consumer confidence, increasing global uncertainty, and the launch of one of our most significant long-term initiatives of all times all occurred within a single earnings period," Schultz said, referring to the controversial revamping of the company's loyalty rewards program.


Megan Woolhouse can be reached at megan.woolhouse@globe.com.