By Noah Rothstein
As producers grapple with higher coffee bean prices, constrained inventories, and other costs, many coffee consumers can expect to pay more for their cups of joe at supermarkets and cafes.
Retail brands like Folgers and other independent coffee chains plan to raise prices if they haven’t already. Starbucks and Nestlé said they could raise prices, while other coffee sellers have tried to hold their prices steady to capture more business.
Supply chain issues are likely to worsen due to the drought in Brazil, the world’s largest coffee producer. According to the U.S. Department of Agriculture, Brazil’s total coffee harvest this year is expected to drop by the most significant year-over-year amount since 2003. Its arabica crop is forecast to be almost 15 million 132lb. bags smaller than in 2020.
FairWave Holdings LLC, a Kansas City company that operates 20 cafes and sells packaged coffee, has marked up menu prices and slowed hiring in response to soaring costs, executives said.
“In my 35-plus years of experience, this is one of the most rapidly rising cost environments that I’ve seen,” Dan Trott, the company’s chief executive, said.
Nestlé, which produces Nescafé instant coffee and Starbucks-branded packaged coffee, said that while it has hedged coffee costs, it may raise prices as supply chain costs are set to have a bigger impact in the third and fourth quarters.
The J.M. Smucker Company, which owns Folgers and produces Dunkin’ ground coffee, said it is trying to cut costs in its supply chain and has raised prices.
“We are seeing inflationary costs impacting the entire fiscal year,” said Tucker Marshall, the company’s chief financial officer, on a June conference call.
Companies are facing higher costs for labor, commodities, and shipping, and consumers have felt its brunt in many cases. In July, consumer prices rose 5.4% from a year earlier, the same pace as in June, the highest 12-month rate since 2008, the Labor Department reported.
Companies like Waka Coffee have tried to purchase coffee and other raw materials in bulk to negotiate lower prices and minimize shipping costs as a means of getting in front of rising inflation. Despite these inflationary pressures, Waka Coffee has not raised prices and instead hopes to lower them and offer a cheaper alternative to other companies’ brews.
As Starbucks faces higher labor and supply costs, executives said the company plans to advertise premium beverages, such as cold coffee, to help compensate and lift prices in some areas.
Coffee companies said customers have been unmoved on price increases because they see higher costs across the board.
Lisa Bee, chief executive of cafe chain Sweetwaters Coffee & Tea, said that because buying a cup of coffee is often a minor expense, her customers haven’t minded the price increase. Sweetwaters sells specialty coffee and recently hiked its prices by around 5% to 10%.
“Even if there is a 10%, 15%, even 20% increase, you’re not talking about a lot,” Lisa Bee said.
