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Archive for Sunday, March 23, 2008

Coffee consumers face price jolts

Americans look for ways to keep affording daily java break

Sarah Morris gets a cup at Groundwork Coffee Co. in Los Angeles. Some aficionados will continue to purchase coffee regardless of the cost. World coffee prices have climbed 23 percent in the last six months.

Sarah Morris gets a cup at Groundwork Coffee Co. in Los Angeles. Some aficionados will continue to purchase coffee regardless of the cost. World coffee prices have climbed 23 percent in the last six months.

March 23, 2008

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A coffee latte at Groundwork Coffee Co. in Los Angeles. Groundwork's owner says price hikes have been less severe for premium coffee that his stores sell.

A coffee latte at Groundwork Coffee Co. in Los Angeles. Groundwork's owner says price hikes have been less severe for premium coffee that his stores sell.

Lisa Spruill is fighting inflation with a secret stash of coffee. The office building manager has six cans of Don Francisco coffee squirreled away, all purchased with double coupons at local supermarkets in recent months.

Spruill's micro-investment is paying off as she and other Americans find themselves coping with the increasing price of morning java - whether it's at the supermarket or the corner coffeehouse.

"If I hadn't done that, I would have to reduce my coffee drinking," Spruill said. "I have already curtailed my Starbucks drinking. I am cutting back wherever I can."

Breakfast is getting a lot more expensive. Coffee is now up there with other increasingly expensive essentials, such as milk, bread and eggs. Overall, the cost of groceries is rising at the fastest rate since 1990, according to the federal Bureau of Labor Statistics.

The increase for coffee started with Starbucks raising drink prices in July. Other coffee chains followed suit. The big supermarket brands - including Folgers, Maxwell House and Chock full o'Nuts - raised prices twice in the past two months. World coffee prices have risen 23 percent over the past six months.

It's not that there's a sudden coffee shortage.

A weak U.S. dollar that makes imported coffee more expensive and speculative investments in all commodities, including raw (green) coffee, wheat, oil and platinum, have sent prices skyward.

Retailers' costs rise

Large coffee roasters, including Folgers owner Procter & Gamble Co. and Kraft Foods Inc., which sells Maxwell House, said they are raising the price they charge supermarkets and mass retailers for their coffee by about 7 percent, or 20 cents for containers in the 11- to 13-ounce range. The price of instant coffee also is going up.

This was the second round of price increases this year. In February, Procter & Gamble and Kraft added 15 cents to what they charged supermarkets for a typical can of ground coffee. Combined, the two increases raised Kraft's suggested retail price for Maxwell House by almost 10 percent to $3.94.

"There is nothing fundamentally that suggests coffee should be higher, but due to the volatility in the stock market, the prices have remained high because the dollar has been devaluating against other currencies," said Jay Isais, coffee buyer for Los Angeles-based Coffee Bean & Tea Leaf.

As investor focus shifts from commodities, Isais forecasts that prices slowly will ease to fall in line with the supply of beans.

Much of the increase has affected what coffee entrepreneur Richard Karno calls commercial grade beans, lower quality arabica and robusta beans that go into the mass-market brands.

"It's a lot worse at the lower end of the market," said Karno, who owns the six-store Groundwork Coffee Co. chain in Los Angeles. "We already pay a premium for our organic, sustainable and good arabica beans, so the increase hasn't been as much."

Looking ahead

Karno doesn't plan a price increase for now. Neither does Starbucks, which raised the price of its coffee drinks by an average of 9 cents, or 3 percent, in July. Coffee Bean, a large regional chain, raised prices in September but has held the line since then.

"We have no immediate plans to raise prices again at present. However, this could change if green coffee prices continue to climb," said Chas Hermann, the company's senior vice president of marketing.

How fast the recent price increases will show up at supermarkets, which are free to set their own prices, isn't clear.

But if you think higher coffee prices will prompt American consumers to kick the habit, forget it, said Richard Hassebrock, who considers coffee one of life's staples.

"I am going to drink it even when the price goes up," the Starbucks regular said. "I like coffee."

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