Starbucks has announced plans to raise the price of the packaged coffee it sells in its stores by 17% in July. But don’t blame the company: CEO Howard Schultz says speculators have pushed the price of coffee to a 34-year high. “This is the first time in my 30-years of being in the coffee business where this exists,” he said earlier this month. In March, Starbucks raised the price of the coffee it sells in supermarkets by 12%.
Speaking in the UK as part of a book-promotion tour earlier this month, Schultz said that speculation has resulted in price increases that he believes are “not based on supply and demand” and are unsustainable.
Right now we are experiencing a very strange and almost inexplicable phenomenon in the commodities market. Without any real supply or demand issues we are witness to the fact that most agricultural food commodities are at record highs at once, and coffee is at a 34-year high.
Through financial speculation – hedge funds, index funds and other ways to manipulate the market – the commodities market is in a very unfortunate position. This has resulted in every coffee company having to pay extraordinarily high prices for coffee.
The higher costs, however, do not appear to have hit the company’s bottom line: “Fiscal year 2010 was a record year and the last two quarters were record quarters in our 40-year history,” Schultz pointed out. A spokesman for the company said he didn’t know whether Starbucks would lower prices if its coffee costs come down.