[Asia Economy Reporter Byunghee Park] Coffee prices are expected to rise consecutively due to the increase in coffee bean prices, rising logistics costs caused by supply chain disruptions, and labor cost increases.
According to the Wall Street Journal (WSJ) on the 12th (local time), Folgers plans to raise coffee prices soon, and Starbucks and Nestl? have also indicated that they may increase prices.
On the same day, coffee futures prices on the ICE exchange closed at $1.90 per pound, up 1.4% from the previous day. This is a 66.7% increase compared to a year ago and a sharp 23.4% rise in the past month alone. According to market research firm Macrotrends, the average coffee futures price on the ICE exchange this year is $1.43 per pound, marking the highest level since 2014.
The recent volatility in coffee futures prices is due to forecasts that coffee production in Brazil, the world's largest coffee producer, will sharply decline. Brazil is experiencing its worst cold wave in nearly 30 years this year. Locally, it is forecasted that coffee production, which was 70 million 60kg bags last year, will drop to 55 million bags.
Companies have announced consecutive coffee price hikes. J. M. Smucker, which operates Folgers and produces Dunkin' coffee, stated that increased costs are affecting fiscal year performance and thus they will raise prices.
Starbucks has about a year's worth of stock secured when coffee bean prices were not high, so it is relatively comfortable. However, rising logistics and labor costs are increasing pressure on profit margins. Starbucks plans to run promotions for premium beverage sales and stated that prices may be raised in some regions.
Nestl? also said that cost pressures from supply chain disruptions are expected to increase in the second half of the year, and product prices may be raised.
Due to COVID-19, sales of major coffee brands have stagnated. According to consulting firm Technomic, sales of major coffee brands were $34 billion in 2019 but dropped to $30 billion last year when the COVID-19 pandemic occurred. With the lifting of COVID-19 restrictions this year, sales are expected to approach the 2019 level.
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