MORE ABOUT COFFEE

CLEVELAND, Ohio -- Niki Gillotta, owner of Gypsy Beans & Baking Co., has tried for months to hold off raising the price of her coffee.

But after trimming other costs, she said she's finally realized she can't afford to keep absorbing the escalating cost of raw coffee beans -- which recently touched a 13-year high.

So after Labor Day, she'll raise coffee prices by a nickel to a dime per cup at her Detroit Avenue bakery and cafe on Cleveland's West Side

A combination of bad weather, increased competition for smaller supplies and the tumbling value of the U.S. dollar has pushed raw coffee prices sharply higher. And prices are expected to stay high through the end of the year, both at the grocery store and at the coffeehouse.

Raw green coffee beans that cost 46 cents a pound in 2001 were going for $1.53 per pound last month, according to the International Coffee Organization in London. Sterling Smith, market analyst with Country Hedging Inc. in St. Paul, Minn., expects raw coffee to hit $2 a pound.

This year alone, the cost of highly prized arabica beans has jumped as much as 33 percent, to more than $1.80 per pound, a reflection of the increased demand for what is expected to be an inadequate supply.

Coffee producers, supermarkets and coffee shops are all adjusting their prices as the more expensive beans work their way through the global supply chain.

"Everybody is in the same boat that's in the coffee business," said Carl Jones, founder of the Phoenix Coffee and Arabica coffeehouses.

"The factors of it are often different, but the fact of it is always the same. . . . Everybody's been eating price increases for the last six months."

Among the increases this month:

• The J.M. Smucker Co., which owns best-selling brands Folgers, Dunkin' Donuts and Millstone, raised the prices of its U.S. packaged coffees by an average of 9 percent.

"We're pretty transparent about our pricing, and that's given us tremendous credibility with our consumers," said Richard Smucker, executive chairman and co-chief executive of the Orrville-based food maker, which buys 40 percent of its coffee beans from Brazil.

He said the company has lowered prices in the past and will do so again when coffee goes back down.
• Kraft Foods, maker of Maxwell House and Yuban coffees, announced it was raising prices as well -- by 30 cents per pound for ground coffee and 2.5 cents per pound for instant coffee.

• Sara Lee, whose brands include Douwe Egberts and Senseo, said it too, was raising prices, but it didn't specify what brands or by how much.

On the other hand, Starbucks Corp. said it expects to "absorb" nearly $30 million in higher commodity costs this fiscal year, "primarily related to higher coffee prices."

The nation's largest chain of coffee shops said because it buys its beans from multiple coffee-growing regions, it expects to weather the short-term fluctuations in coffee prices.

But shoppers are more likely to notice higher prices in the coffee aisle than at their favorite neighborhood cafe, because grocery stores make much smaller margins on sale and don't have the wiggle room to swallow big jumps in cost.

Buehler's Fresh Foods, with stores in Medina County, has raised prices for Folgers and Maxwell House about 10 percent, said Bob Buehler, vice president of marketing and merchandising. He expects the Scenic River Coffee brand to go up by about the same percentage in October.

"We are holding off on retail price increases as long as our current inventory will allow," he said. One supplier told him another 10 percent increase may be coming later this year.

Jeff Heinen of Heinen's Fine Foods said that while his stores' prices for national coffee brands have risen about 10 percent, he is not changing prices for the private-label Heinen's coffee or for Two Brothers bulk coffee.

A Giant Eagle spokesman declined to comment on that chain's pricing strategy.

The good news about coffee is that prices can fluctuate just as dramatically the other way, and an upcoming coffee harvest is expected to bring prices down by the spring, said Smith, the market analyst in Minnesota.

In the meantime, slightly higher prices don't deter most java junkies from buying their favorite brew.

"Usually you just ride this stuff out" until prices come down, said Jones, the Phoenix and Arabica founder who just opened C. Jones Books & Tea in Cleveland Heights. "You don't make as much money, but you're not beating up your customers."