Seattle Starbucks tests $1 coffee and free refills

LOS ANGELES Wed Jan 23, 2008 6:52pm EST

A cup of coffee sits at a Starbucks coffee shop in New York, March 14, 2007. REUTERS/Keith Bedford

A cup of coffee sits at a Starbucks coffee shop in New York, March 14, 2007.

Credit: Reuters/Keith Bedford

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LOS ANGELES (Reuters) - Starbucks Corp (SBUX.O) is testing $1 coffee and free refills in its Seattle outlets as the global gourmet coffee chain grapples with slower consumer spending and rising competition from fast-food rivals.

Company shares were up at midday on the Nasdaq, rising 2.3 percent, or 43 cents, to $19.11.

Starbucks is experimenting with a smaller, "short" $1 cup as well as free refills for brewed coffee. Starbucks charges around $1.50 to $4.00 for a coffee, depending on size and flavor.

In a statement, Starbucks said, "This test is not indicative of any new business strategy."

The company said testing is part of its ongoing business and that the company will not comment on specifics of its test campaigns until a final decision is made.

Shares in Starbucks have lost around half their value over the past year amid worries about U.S. consumer spending, over-expansion and competition from fast-food rivals such as McDonald's Corp (MCD.N) that offer specialty coffees.

Regular coffee prices at both McDonald's and Dunkin' Donuts, a unit of Dunkin' Brands Inc., start in the low $1 range.

Starbucks announced a management reshuffle earlier this year, bringing Howard Schultz back into the chief executive position. It also said it would close underperforming U.S. outlets and speed up international growth.

Starbucks has around 15,000 stores around the world including over 10,000 in the United States.

(Reporting by Ritsuko Ando and Lisa Baertlein; Editing by Brian Moss)

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