Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, August 10, 1994 TAG: 9408110018
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: By MELISSA CURTIS and JOHN LEVIN STAFF WRITERS
DATELINE: LENGTH: Medium
Although bean costs have risen 50 percent or more in recent weeks, some Western Virginia retailers and wholesalers say they've been able to hold the line on prices, at least temporarily.
But they're making no promises about the future.
"Eventually it will go up, but I have not increased my price yet," said Louis Tudor, whose downtown Roanoke shop, Tudor Biscuit World of Virginia, hasn't had a price hike from its wholesale supplier.
"I'm going to wait until my costs go up, then I'll raise my price."
"We're trying to hold the price down," said Wood Britton, director of marking for Krispy Kreme Doughnut Co. in Winston-Salem, N.C.
"It's a complementary product" that helps to sell doughnuts, he said, "so we like to keep it as low as possible."
His company's shop in Roanoke sells an 8-ounce cup of java for 65 cents, including tax.
For restaurants and others selling coffee by the cup, there's generally enough profit to absorb some increase. With a pound of ground coffee making 50 cups, 65 cents a cup grosses more than $32 on a pound that likely cost the restaurant about $5.
The price increases have had greater impact in sales of roasted coffee beans and ground coffee.
With shelf prices doubling in the past month, customers have all but quit buying some brands and the larger containers of coffee, said Gina Edwards, customer service manager at the Food Lion supermarket on Williamson Road.
"They're buying less," she said. "They don't like it, but they know it wasn't our fault."
But at Mainstreet Bazaar, a Blacksburg gourmet-food shop, there's been no slowdown in sales of whole bean and ground coffees that now sell for $7 to $11 a pound, said Julie Cox, assistant manager. That's despite an average 68 cents-per-pound increase July 1.
"We talked to our regular clientele," the coffee club members who get a free pound for every 10 pounds they buy, she said. "We put up signs warning them the prices were going up."
The lack of reaction, Cox said, means "people are willing to pay more for good coffee. Also, they were reading about it and knew it was hitting everywhere."
Cox said her wholesaler has promised last month's price increase will be the last this year.
"But who knows about 1995?" she said.
Coffee prices have increased because of three major factors:
Coffee-producing nations have been eager to stabilize prices since 1989, when the International Coffee Organization collapsed and world markets were flooded with beans.
Prices dropped so low that they did not cover production costs, growers said. The Association of Coffee Producing Countries, adopting tactics that OPEC has used to boost oil prices, in 1993 began limiting world supply.
Growing coffee has become more difficult. Economic factors have prompted some South American growers to give their land over to more-profitable cattle raising.
African crops were all but wiped out by war and unrest, pests have damaged Colombia's crop, and production in Haiti fell after the U.S. trade embargo began.
A late July frost in Brazil destroyed the buds on about 40 percent of the crop that would be harvested next year and in 1996. Although that means higher prices for coffee in the future, the commodity markets' reaction meant current prices rose as well.
"I don't foresee it ever getting bad enough that people will stop serving coffee," said Mark Wilder, regional manager in Roanoke for S&D Coffee. The change he already has seen is that area companies that used to provide coffee to employees as a workplace benefit have begun charging a dime to 20 cents a cup.
"But people aren't going to quit drinking coffee," Wilder said. "At least, I hope not."
by CNB