U.S. coffee roasters weigh price increases, cite shipping inflation
03/03/2021 06:00
By Nivedita Balu and Marcelo Teixeira
March 3 (Reuters) - Coffee processors in the United States,
the world's largest consumer of the beverage, are reporting
significant cost increases in their operations, mostly related
to transportation, and expect to raise retail prices soon.
Mid-sized and smaller roasters, particularly specialty
coffee companies, have been hit hardest, company executives
said, but even larger companies such as Peet's and JM Smucker Co
SJM.N say they are coping with higher costs.
Other U.S. business sectors also face shipping
inflation. urn:newsml:reuters.com:*:nL1N2KP2R9 Market intelligence provider S&P Global
Platts reported that freight may have added nearly $10 billion
to corporate costs on U.S. inbound routes in the fourth quarter
of 2020, a bill that could grow. urn:newsml:reuters.com:*:nL8N2KU302 urn:newsml:reuters.com:*:nL1N2KB0EJ
Last week, transportation backlogs helped push coffee prices
to their highest in more than a year. KCc2
"We're currently signing contracts for delivery in the
summer and fall, and those prices have gone up quite a bit,
about 15% increases on everything," said Oliver Stormshak, chief
executive at Olympia Coffee Roasting, based in Olympia,
Washington.
"I'm trying to decide right now whether we eat
the costs or restructure our pricing and raise it", he added.
Coffee executives said higher demand for shipping services
as more consumers shop online and extra safety procedures during
the pandemic are increasing costs in the United States.
"There are supply constraints, not because of production,
but simply hurdles brought upon us by COVID-19 and safety
guidelines. It is a systemic issue," said Jorge Cuevas, an
executive at Sustainable Harvest Coffee Importers in Portland,
Oregon.
"It is now more expensive than in the last five to 10
years to bring coffee to the consumer," Cuevas said.
Coffee companies also said costs on transoceanic shipping
are rising due to imbalances in the flow of containers caused by
the pandemic. On some routes, demand for containers is
increasing, while others are less-traveled, causing an uneven
flow and raising costs. urn:newsml:reuters.com:*:nL4N2KV3TX
"The container cost is a major issue in the coffee market,"
said Rabobank's analyst Carlos Mera, adding that routes from
Southeast Asia to Europe and the United States are seeing higher
prices due to container shortages. "Even if you are willing to
pay, you may not find availability."
Commodities including coffee, cocoa, cotton and refined
sugar are usually transported in containers, while others such
as soybeans, corn and raw sugar use bulk carriers.
Roasters reported delays for receiving coffees from Africa
and some South American nations.
Lee Harrison, a senior director at New York-based Joe Coffee
Company, said one coffee cargo from Burundi scheduled to arrive
at the beginning of the year has been pushed back to March. He
said he would likely substitute that origin.
JM Smucker, owner of brands such as Folgers and Dunkin, said
in a statement: "Like others in the industry, we have
experienced some recent coffee supply chain challenges."
Smucker added: "While we regularly evaluate costs to
determine appropriate actions, we do not have any imminent
planning to share at this time."
Large coffee companies boosted stocks last year as a
precaution during the pandemic.
"We are not worried about supplies, as we have good
inventory positions," said Eric Lauterbach, president & chief
operating officer at Peet's, who said the company had
encountered shipping issues in the United States and Asia.
Starbucks SBUX.O , the largest U.S. coffee retailer, did
not respond to a request for comment.
(Reporting by Nivedita Balu and Marcelo Teixeira; additional
reporting by Praveen Paramasivam and Lisa Baertlein; Editing by
David Gregorio)
((marcelo.teixeira@tr.com; +1 332 220 8062; Reuters Messaging:
marcelo.teixeira.thomsonreuters.com@reuters.net - https://twitter.com/tx_marcelo))