Coffee Prices Getting a Jolt

Roasters are passing along rising coffee prices to retailers, who have begun charging consumers more.

June 08, 2011

LOS ANGELES - The price of a cup of coffee is about to increase, the Los Angeles Times reports.

Growers have been passing along their "wildly increasing costs" to coffee roasters, who have charged supermarkets and retailers more. And now consumers are being hit with a pass-along price increase.

J.M. Smucker Co., distributor of the Folgers and Dunkin' Donuts coffee sold at stores, said last week it would increase prices for a pound of coffee by 11 percent, its fourth increase in a year. A few days later, Starbucks said it would raise its coffee prices for bags of coffee beans by 17 percent.

Coffee prices have risen sharply over the past year, with a one-pound can of ground coffee selling for an average of $5.10 in the U.S. in April, up from $3.64 last year. And over the past 12 months, the price of green, unroasted coffee on commodities exchanges has gone up nearly 92 percent.

"These are big increases ?" and I don't think we're done with it," said food industry consultant Phil Lempert. "We're going to see higher prices on coffee for a very, very long time."

Some experts believe the rising prices will have long-term repercussions for the industry.

"The question is not whether you will have that cup of coffee," said Harry Balzer, chief food industry analyst at NPD Group. "It's more about buying cheaper brands or finding other ways to compensate ?? Nothing will get you to change your behavior faster than money."

Shallom Berkman, co-owner of a small L.A. chain Urth Caffe, said the company has been absorbing wholesale price increases but will soon have to resort to a modest price hike, even though his fair-trade organic coffee already sells at a premium price.

"If prices rise 10 percent more, we probably will have to make a small increase," Berkman said. "But we will definitely lose customers if that happens. Ours is already more expensive, and the first thing that gets cut back is the luxury items."

Be on the lookout for more about rising commodity prices in the upcoming July issue of NACS Magazine.

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