Keurig hikes cost of K-Cups by 9%

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Coffee is about to get more expensive for K-Cup users.

Keurig Green Mountain said Thursday it will hike the price of all its portion packs and bagged coffee products by nine per cent, effective this November.

According to Keurig, a huge jump in the price of coffee is behind the
move. A severe drought in Brazil, which supplies 80 per cent of the
world’s coffee, has ravaged Arabica bean crops and pushed up the cost of
coffee by 50 per cent.

“Many of our competitors already have implemented price increases in
light of the reality of sustained input cost increases,”
said John Whoriskey, Keurig’s president of U.S. sales and marketing.
“After careful review, we determined that it is necessary for us to
adopt a small price increase in light of these higher costs.”

Keurig is late to pull the price lever. In June, J.M. Smucker raised the price of its Folgers and Dunkin’ Donuts coffee brands by nine per cent. Days later, Starbucks gave the price of its cafe coffees a boost of one per cent.

But the convenience of the single-serve pods makes it far
costlier than the bulk option. On Walmart’s site, a 11-ounce tin of
Folgers Classic Roast costs $5.97, while a 5-ounce pack of Folgers
Classic Roast pods costs $11.47 — nearly double the price for less than
half the coffee.

Prepare for more sticker shock

“The rallies that we’ve seen in the futures market in the last
several months are finally starting to filter down to the retailers,” 
said Jack Scoville, an analyst at Price Futures. 

Both the Brazil drought, as well as a coffee rust fungus that plagued production throughout Central America in May, has lifted the benchmark contract to
about $1.83 US per pound. That’s a bit of a relief from April, when it
nearly doubled within three months to a 26-month high above $2. 

Scoville says it could reach as high as $2.50 within the next 12 months, forcing other brands in the industry to follow Keurig’s lead.

“We’re trying to put a huge bull flag out right now,” he said.
“There’s a lot of talk that the Brazil crop won’t be any better next
year than this year.”

 

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