Higher coffee prices brewing, and coffee shops, consumers feel itCoffee roasters across the country are charging higher prices to grocery stores, small coffee shops and other retailers because of greatly increased costs to acquire beans from growers. Retail operations, in turn, have passed on the higher prices to consumers.
Rising coffee commodity prices are making that morning cup of coffee more expensive for consumers.
Rapidly increasing coffee bean prices also are squeezing locally-owned coffee shops and coffee roasting operations.
Kelly Thompson, co-owner of the Urban Stampede coffee shop in downtown Grand Forks, said the business has been absorbing as much of the increased coffee costs as possible. But occasional retail price increases are inevitable, he said.
“We have to be careful how much we raise prices,” Thompson said. “You can only raise prices so much before people stop buying.”
Coffee roasters across the country are charging higher prices to grocery stores, small coffee shops and other retailers because of greatly increased costs to acquire beans from growers. Retail operations, in turn, have passed on the higher prices to consumers.
The price that The Coffee Co. on South Columbia Road in Grand Forks pays for raw coffee beans from California has doubled in the past 14-15 months, according to owner/manager Sarah Sand. The Coffee Co. has passed on the increased costs to its wholesale clients, which are all located within about 100 miles of Grand Forks.
But Sand said the company is eating most of the increased costs on the retail side of the business, which includes an espresso bar and sales of coffee and other drinks.
“We’ve been kind of soaking it up,” Sand said of the increased costs. “That has greatly increased our costs. When you have something doubling in price, it makes it difficult.”
The Coffee Co. remains profitable, despite rising costs, Sand said.
Prices on the rise
A 1-pound can of ground coffee sold for an average of $5.10 in the United States in April, up from $3.64 a year earlier, according to the U.S. Department of Labor.
The J.M. Smucker Co., which distributes Folgers and Dunkin’ Donuts coffee sold at stores, announced last week that will raise the price of a pound of its coffee by 11 percent. A few days later, Starbucks — which previously raised prices on some coffee drinks last fall — said it would increase prices for bags of coffee beans sold at its cafes by 17 percent.
Experts are blaming the recent run up in coffee prices on poor growing weather in many coffee-growing regions, increasing demand from China and other developing nations and commodities market speculation.
In the last year alone, the price of green, unroasted coffee on the major commodities exchanges has shot up by nearly 92 percent.
“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.”
Experts say consumers have yet to significantly change their buying habits or switch to cheaper store brands, which is good news for local stores and coffee shops.
Mom and Pop challenges
The cost increases figure to hit smaller, independent coffee shops and roasters harder than large corporations like Starbucks, which have much greater buying power and can negotiate cheaper wholesale prices.
“We’re just a one-store operation,” Thompson said. “We don’t buy in the bulk that Starbucks or Caribou do. It affects us even more than the big chains. I don’t think it’s going to put us out of business. The doors are still open. It’s gotten a lot harder, but we’re still alive.”
Prices for food and other commodities have also been rising, creating a double whammy for many smaller coffee shops that also sell food items.
Thompson said he is doing what he can to keep costs down, including getting by with less staff.
“There’s nothing I can do about it,” he said of rising wholesale coffee prices. “I just have to watch what comes in, watch our profit margins and balance that with what the customer is willing to pay.”
The Los Angeles Times, distributed by McClatchy-Tribune Information Services, contributed to this report.
Schuster reports on business. Reach him at (701) 780-1107; (800) 477-6572, ext. 107, or email email@example.com. Follow Schuster on Twitter at @RyanSchuster.