Demand for coffee jolts U.S. Consumers

CHARLOTTE, N.C. – The caffeine in your morning cup of coffee might not be the only thing giving you a jolt – the price could be, too.

Coffee prices – from generic to specialty brews – have been ticking upward for over a year with no end in sight.

The price of a pound of raw coffee beans has almost doubled in 12 months. Now consumers are cutting back, roasters are struggling and retailers are scrambling to cover costs.

With rising food and fuel prices, coffee drinkers are left to make tough choices about their caffeine habits.

Christina Sleezer of Fort Mill, N.C., isn’t willing to give up coffee, but something had to give, because “I’ve got to get gas in my car.”

So Sleezer, who works in health care, switched her family of five to generic, store-brand coffee as the price of name brands rose.

She said she refuses to pay $13 for a large can of Folgers or Maxwell House coffee when it used to cost only $8 or $9.

Kraft Foods Inc., makers of Maxwell House, raised prices 22 percent in March. Other price increases came from J.M. Smucker Co., the maker of Folgers, and Starbucks Corp.

Even discount stores have raised prices. Costco’s wholesale coffee costs increased about 25 percent over the past year. Retail prices have gone up 10 percent as a result.

Price increases are the result of higher demand worldwide. Coffee imports have increased by 23 percent over the last decade, according to data from the International Coffee Organization.

Meanwhile, coffee futures rose more than 50 percent in the past year.

“There’s a world demand for better quality coffee,” Dilworth Coffee’s Don King said. “But then speculation multiplies it. … What I hope is, somebody is going to lose their shirt.”

Specialty roasters used to be the only group buying top-quality beans. King said that has changed over the past two decades.

“We’ve got the big guys in there buying the good stuff, too,” King said.

High demand for quality coffee has made it difficult for smaller roasters and coffeehouses to survive.

Jackson’s Java Coffee House in Charlotte has been roasting and selling coffee for more than 16 years. Seven years ago, the company opened a second location uptown.

“There have been dozens of coffee shops in Charlotte that have opened and closed,” said owner Mike Jackson. “We’re one of the few people who have been able to sort of last. With the prices and the costs, taxes – you name it – we’re competing against corporate giants, and it’s a little bit of ‘Survivor.’ ”

The business, Jackson said, relies on customer loyalty.

“With us being a small sort of family – literally having customers that are still coming in from 16 years ago – we’re real sensitive to raising prices, and they are, too,” Jackson said.

Jackson said he was reluctant to pass rising costs to customers, but once the price of raw beans doubled, the coffee shop was forced to. A pound of beans from Mexico now costs $11.95, and a pound from Jamaica was marked up to $39.95.

“People actually say, ‘I’m surprised you didn’t raise prices earlier, honestly,’ ” Jackson said.

Jay Gestwicki, another Charlotte-area roaster, doesn’t expect prices to fall anytime soon.

“The biggest thing is just planning for (high prices) to stay for a while – kind of like $4 gasoline,” he said.

Prices may be higher, but both Gestwicki and King say sales have not dropped too much.

“People who like good coffee are going to have good coffee. People keep buying,” King said.