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Coffee drinkers get less buzz for their buck as chains up prices

Feb. 3, 2022 - 21:35 By Bloomberg

(Herald DB)
From Seoul to Seattle, the soaring cost of coffee beans is trickling into the cups of consumers.

Some of the world’s biggest roasters and sellers of coffee are upping menu prices, having flagged that customers would be paying more as beans began to surge last year. Higher wages and other costs have also added to the rising charge for a daily cup, which is in turn increasing the inflationary pressures coursing through the global economy.

Futures for arabica coffee jumped 76% in 2021, hitting decade highs after droughts and once-in-a-generation frosts damaged crops in Brazil, the world’s top producer. Most-active futures this year are up more than 5%. Big roasters will generally buy inventory months or years in advance, meaning a further price onslaught could be in store.

“The next 12 to 18 months will be tough for the consumer and we expect prices to rally further this year,” said Geordie Wilkes, head of research at brokerage Sucden Financial in London. “We do not anticipate a proportionate change in consumption as a result of higher prices; we could see a shift toward different blends or from roast and ground to soluble.”

A fractured supply chain, where roasters are having to pay exorbitant rates for shipping containers, has forced some coffee traders to revert to chartering break-bulk vessels.

“Margins have been squeezed but also various market participants were behind the curve and were waiting for a dip in the market that never came,” said Wilkes.

In the UK, Pret A Manger said Wednesday that it was hiking the price of its monthly subscription to 25 pounds ($34) from 20 pounds as a result of inflationary pressures. Customers receive as many as five coffees a day through the program.

That comes after Pano Christou, Pret A Manger’s chief executive officer, told Bloomberg in an interview that the cost of the sourced arabica beans that make up the bulk of its blends has risen 40% since 2020.

Starbucks plans to continue raising menu prices again this year, after doing so in October and January, CEO Kevin Johnson told investors on an earnings call Tuesday.

That follows South Korea’s Tom N Toms, which said last week it would be increasing the retail cost of cappuccinos, lattes and Americanos by 300 won ($0.25), citing the higher price of beans. (Bloomberg)