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Will the Coffee Bean Shortage Cause You to Raise Prices?

Posted By Annie Pilon On March 2, 2014 @ 6:00 pm In Economy | 14 Comments

coffee prices Edit

Coffee prices are on the rise thanks to unseasonably dry weather in Brazil, the world’s largest coffee producing country. The coffee bean shortage hasn’t had a major impact on businesses and consumers just yet. But experts say a price increase may be coming.

And small cafes and roasters are likely to feel the impact more than large suppliers. That’s according to Gregg Shefler, Vice President of Coffee Direct in Frenchtown, New Jersey.

In a phone interview with Small Business Trends on the coffee bean shortage, Shefler explained:

“Larger companies are more likely to have a stockpile locked in at lower prices. But smaller businesses probably don’t have huge warehouse spaces to store coffee. So you’re forced to buy coffee at higher prices and then you have to decide if you can just weather the storm or if you’ll have to pass some of those increased prices along to your customers.”

coffee
[Photo: Finviz.com]

The chart above shows the changes in coffee prices over the past year, with the largest spike appearing at the beginning of February. And Shefler agrees that the price spikes could have an impact on small businesses. But he cautioned against premature panicking.

“It seems like we deal with similar situations almost every year, and it’s almost never as bad as some people predict. For our business, we have a little bit of breathing room in terms of supplies and finances so we’re going to take a wait-and-see approach for the time being while we evaluate where we think this situation is headed.”

However, he added that with a coffee bean shortage the smaller the business, the less time they usually have to wait.

Buying coffee from another part of the world not impacted by droughts isn’t a viable cost cutting measure. Since Brazil produces such a large amount of the world’s coffee, even a small coffee bean shortage there is enough to spur demand for coffee elsewhere, driving up those prices as well. Shefler explained:

“You don’t have a choice – you have to buy it and those are the prices. The real enemy here is the uncertainty. Exactly how bad this whole situation will be is still up in the air.”

The key question for small roasters and cafes will be whether to raise prices or take some other cost cutting measure.

Coffee prices [1]: Shutterstock


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[1] Coffee prices: http://www.shutterstock.com/pic-135286253/stock-photo-cup-of-steaming-hot-coffee-with-coffee-beans-coffee-grinder-and-coffee-beans-bag-in-background.html?src=AfjDZD1tDxPvlikwASQB-A-1-36