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Coffee price hikes even outpace those for gasoline in past year

NEW YORK — People are paying more to fuel up these days — on coffee.

From high-end prepared drinks to store-brand ground beans, coffee price increases have outpaced even the hike in gasoline prices the past year.

J.M. Smucker, the maker of grocery store stalwart Folgers and of packaged varieties of Dunkin' Donuts coffee, said Tuesday that it is raising the price of most of its U.S. coffee products by 11 percent, its fourth increase in a year. And Kraft Foods, Peet's Coffee and Tea, and Starbucks also have recently raised their prices for brewed and packaged coffee.

A 1-pound can of ground coffee sold for $5.10 in April, up 40 percent from $3.64 the year before, according to the Department of Labor. By comparison, a gallon of regular gasoline averaged $3.83 in the United States on Tuesday, up 37 percent from a year earlier.

And, in contrast with expected stabilization in fuel prices, the coffee increases could continue for a while because the prices coffee companies pay for unroasted beans are still climbing — and fast. Coffee futures were trading for $2.61 per pound Tuesday, roughly double a year earlier.

Unlike many other discretionary items, coffee usually emerges from a recession relatively unscathed, economists say. That's because when money is tight, people may buy cheaper brands of coffee, but they won't give it up completely. Americans consumed 21.7 million 60-kilogram bags of coffee in 2008, during the depths of the recession, up from 21 million the year before, according to the International Coffee Organization.

Coffee is part of a bigger story about rising prices for household staples as diverse as food, clothing, diapers and batteries. In the most recent quarter, 89 percent of consumer product makers tracked by FactSet said they had raised some prices or planned to. But, even after food prices soared 5.5 percent in 2008, they leveled off in 2009 and 2010, rising 1.8 percent and 0.8 percent, helped by steadying meat and produce prices.

Smucker said Tuesday that its latest price increase includes Smucker's Millstone and Folgers Gourmet Selections packaged coffees. For the Dunkin' Donuts brand, the increase affects only packaged coffee sold in grocery, club, drug and general-merchandise stores. Items sold at Dunkin' Donuts shops are not Smucker products.

The company also raised coffee prices 10 percent in February, 9 percent in August and 4 percent in May.

Sara Lee Corp., which sells Maison du Café, L'Or and Café Pilao, said this winter that rising green coffee costs led it to raise its prices. Kraft, which sells Maxwell House coffee, cited rising coffee prices in a broad price hike it levied this winter. Peet's Coffee and Tea Inc. has raised its retail prices twice recently in response to raw costs.

And in March, Starbucks, the world's biggest coffee chain, raised the prices it charges retailers for packaged Starbucks and Seattle's Best coffee by 12 percent, citing higher bean costs. Starbucks left up to grocers and other retailers whether they passed along the increase to consumers. But it said it had locked in the prices it pays for beans the remainder of the fiscal year.

Up 40 percent

$5.10 Price of 1-pound can of ground coffee in April.

$3.64 Price of 1-pound can of ground coffee in April 2010.

U.S. Department of Labor

Coffee price hikes even outpace those for gasoline in past year 05/24/11 [Last modified: Tuesday, May 24, 2011 9:38pm]
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