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McClatchy-Tribune  06/15/2014 6:10 AM ET
Increasing coffee prices could trickle down to consumers [The Pittsburgh Tribune-Review :: ]

June 15--Rising prices for coffee could leave a bitter taste in consumers' mouths.

A drought in Brazil that sent coffee futures soaring this year has trickled down to wholesalers. Roaster J.M. Smucker Co. this month said it would raise average prices 9 percent.

Considered a trendsetter, the maker of popular supermarket brands such as Folgers and Dunkin' Donuts coffee is the first major American roaster to raise prices. It is the company's first price increase in three years.

But higher bean prices don't automatically mean that coffee drinkers in the Pittsburgh area will pay more for a cup of java.

Dunkin' Donuts said it locked in coffee supplies for 2014 "at favorable costs." The company will pay more for 2015 supplies, but Dunkin' said it averages those increases over time to stabilize pricing at its franchised shops.

"Because of this averaging, franchisees' coffee costs will remain favorable to the market and we expect minimal impact to consumers," the company said in a statement.

Starbucks did not return calls or emails seeking comment, and a manager in the Market Square location Downtown referred questions to corporate offices. Customers said they noticed no changes in the prices of cappuccinos or caramel flan lattes.

Brad Kramer, 41, of Downtown said he tried to quit his Starbucks habit several times because he was spending too much, but he's "drawn back by the flavor and the atmosphere."

As he sipped a $4.50 vanilla macchiato, Kramer said he won't stop buying his three-to-five weekly coffee drinks unless prices spike above a threshold.

"If it crossed the $5 mark, I'd seek a less expensive alternative," Kramer said.

Smaller roasters in the Pittsburgh area said they aren't ready to charge customers more, but they are watching industry trends.

"We're waiting for the major (roasters) to do it," said Eric Nolan, general manager at Allegheny Coffee & Tea Exchange in the Strip District. "We don't want to be the first."

Coffee futures fell more than 20 percent since hitting April highs above $2 per pound. Brazil, the world's largest grower, was hit by drought, and prices rose throughout the first quarter of 2014 on worries that supplies would not recover. Lately, forecasters have said the concern may have been overstated, leading the market to level off.

Still, local roasters are keeping track.

"This is how much I care," said Mike Bogdan of La Prima Espresso Company, as he showed his smartphone screen display of coffee futures prices. "I have it on my phone all day."

La Prima purchases coffee beans through long-term contracts that insulate it from daily market fluctuations, keeping the cost of its espresso unaffected by price spikes. That could change if coffee futures settle at more than $2 for an extended period, he said.

"If the prices went to $2.20 and stayed there, we'd definitely increase the price range," Bogdan said. "Let's hope it doesn't get there."

It's been two years since the cost of a cup of coffee rose at The Coffee Tree Roasters, said owner Bill Swoope Jr.

Like Bogdan, Swoope watches fluctuating coffee futures but said prices haven't risen to a point that will affect customers.

"It does deteriorate our margins," he said. "You can't help that. But your customers aren't happy if you raise prices."

Smaller roasters such as Allegheny Coffee are more affected by short-term price fluctuations. Allegheny buys coffee beans monthly, and its volume isn't enough to seek long-term contracts. However, the roaster has tried to keep prices down on popular flavors.

A top seller such as organic Sumatra has stayed the same price; the extra expense is shifted onto the price of less-established products.

If Allegheny did charge a few cents more per pound, Nolan doubts customers would change their habits.

"We're finding that most people are not sensitive to it," he said. "People are going to keep drinking coffee."

Allegheny customer Donald Tock, 59, of Miami drinks several cups of coffee a week. He considers coffee an affordable indulgence.

"Two bucks every couple of days isn't too bad," said Tock, an Oil City native who was visiting Pittsburgh.

Brooks Day, 23, of State College downs three to five cups a day. Day, drinking a $2.50 latte outside Leaf & Bean, a coffee and cigar cafe in the Strip District, said he'd pay up to $4 for 16 ounces of a good roast.

He goes to Starbucks and Dunkin' Donuts on occasion and orders "the cheapest, with cream." If the "cheapest" item on the menu gets more expensive, he might consider changing brands. "It depends on how much it went up," he said.

Chris Fleisher is a Trib Total Media staff writer. Reach him at 412-320-7854 or cfleisher@tribweb.com.

 

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