By Sharon Bernstein, Los Angeles Times

June 4, 2011
The price of your morning buzz is about to get even higher.

Hit with wildly increasing costs for beans from growers, coffee roasters
are charging more to supermarkets and other retailers €” and those folks
are passing the higher prices on to consumers.

J.M. Smucker Co., which distributes the Folgers and Dunkin' Donuts coffee
sold at stores, said last week it was hiking prices for a pound by 11% €”
the company's fourth and biggest increase in a year. A few days later,
Starbucks €” which had already raised prices on some coffee drinks in the
fall €” said it would raise prices for bags of coffee beans sold at its
cafes by 17%.

Prices for coffee have been rising steadily. According to the U.S.
Department of Labor, a 1-pound can of ground coffee sold for an average of
$5.10 in the U.S. in April, up from $3.64 the year before.

Over the last 12 months, the price of green, unroasted coffee on the big
commodities exchanges has gone up nearly 92%.

"These are big increases €” and I don't think we're done with it," said
food industry expert Phil Lempert, who edits the blog SupermarketGuru.com.
"We're going to see higher prices on coffee for a very, very long time."

Spurring the run-up in bean prices is a combination of bad weather in
coffee-growing regions, increased demand from developing countries such as
China and intense speculation in the commodities markets, experts said.

Chuck Jones, co-owner of Jones Coffee Roasters in Pasadena, said his costs
for high-grade beans have nearly doubled.

"At this time last year I was paying $1.85 for coffee that I'm now paying
$3.60 for," Jones said. His company sells gourmet green beans to roasters
around the world, including Starbucks.

The company also roasts beans it sells to retailers, restaurants and
coffee shops. Prices for those beans are up 30% over last year, Jones
said.

The rising prices, with no end in sight, could have long-term
repercussions for the industry. But don't expect people to give up
something as addictive as caffeine, said Harry Balzer, chief food industry
analyst for NPD Group.

"The question is not whether you will have that cup of coffee," Balzer
said. It's more about buying cheaper brands or finding other ways to
compensate. Balzer's own mother has started brewing weaker coffee at home.

"Nothing will get you to change your behavior faster than money," he said.

So far, consumers have not significantly slowed their buying habits or
switched to cheaper brands at Ralph's Grocery Co. stores, said spokeswoman
Kendra Doyel.

"We have not seen a huge shift in consumer buying habits away from their
favorite coffee brands over the past few months," she said.

One reason for that, Doyel said, could be that it's far cheaper to buy
coffee to brew at home than it is to purchase it by the cup.

People who do drink their coffee in cafes, however, may not face price
hikes as big as consumers who buy by the pound, said Tim Castle, a coffee
importer and industry expert who has written several books on coffee.
That's because the markup in a restaurant is extremely high €” as much as
400%. The shops can therefore absorb more of the increasing costs.

But cafes are feeling the pinch to nudge counter prices upward. Like
Starbucks, Peet's Coffee & Tea raised prices on coffee drinks in the fall.

At a Peet's in Studio City on a recent morning, Stuart Rigby said he still
buys his morning brew every day in a cafe, but he's compensated for the
cost by cutting way down on pastries. "It's a tossup," he said. "Buy
coffee and not as many pastries, or cut down on the coffee."

Rigby has also started bringing in his used cup from the day before,
because the chain cuts a dime off the price for customers who bring in
their own containers.

Shallom Berkman, co-owner of the small L.A. chain Urth Caffe, said the
operation has been absorbing the wholesale price increases, so far.
Because the upscale cafe's sustainably grown fair-trade organic coffee
sells at luxury prices to start with, Berkman is convinced that a price
hike would make it too expensive and turn customers off.

He may soon have to raise prices anyway.

"If prices rise 10% 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."

hmm, so one way of looking at it is: gourmet coffee is getting
(relatively) cheaper.

Excellent!

-miles

--
Christian, n. One who follows the teachings of Christ so long as they are not
inconsistent with a life of sin.