Coffee prices leap on fear of beans shortage
The price of coffee in supermarkets and cafes could increase as a result of a shortage on the world market, which yesterday sent robusta futures prices to a six-and-a-half-year high.
The price of robusta beans, which are mainly used for making instant coffee, has risen by 11% since the end of July and yesterday went up 3% to $1,477 a tonne on the London futures exchange, before ending down at $1,434 as traders took profits. Although the effect on the high street may not be immediate, experts say the trend is unmistakable.
"Prices will gradually go up," said Helmut Ahlfeld, managing director of Hamburg-based coffee and sugar analyst FO Licht.
The recent dramatic increases in prices were triggered by fears of a lower than usual harvest this autumn in Vietnam, the world's largest producer of robusta beans, caused by heavy rains in the Central Highlands region.
Robusta is used to make 40% of the world's coffee. Filter coffee tends to use more of the higher-quality arabica beans, which are traded in New York.
"In London, it's been going crazy," Neil Rosser of Neumann Kaffee Gruppe, one of the world's largest coffee traders, said yesterday.
Coffee prices have been rising since they hit lows in 2001 caused by over-production. Since then, production levels have fallen, while consumption has risen in some countries, notably Brazil, which produces 35% of the world's coffee. That has led to demand almost exactly matching supply and pushed prices up.
"We are going through a year in which there is a balance between consumption and production for the first time in many years," said Néstor Osorio, executive director of the London-based International Coffee Organisation.
Mr Osorio said it was unlikely that prices would fall in the foreseeable future. "The levels we are seeing today are realistic prices. There is reason to believe that the present prices will remain for the rest of the year."
As a result of shrinking production, stocks of coffee have dropped, leaving few reserves to compensate for short-term shortfalls such as that in Vietnam.
Zoe Wheeldon, a spokeswoman for the British Coffee Association, which represents coffee manufacturers based in the UK, stressed that the raw commodity price was one of several factors determining the price of coffee in supermarkets and cafes, but "when there is a big change [in the commodity price], it does have a knock-on effect".
Douwe Egberts, which is owned by American foods group Sara Lee, said it had no plans to increase the prices of its coffee products. Nestlé, the world's largest producer of instant coffee, declined to comment.
The interest in coffee extended beyond the trading floors yesterday with the Caffè Nero coffee bar chain saying it had received an informal takeover approach from its chief executive, Gerry Ford, but he had yet to make an indicative offer.
Bakers have already warned that bread prices are likely to increase as a result of lower wheat yields caused by July's heatwave.
The price of crude oil fell by more than $1 a barrel and hovered near $70 a barrel yesterday as the ceasefire in Lebanon held for a fourth day.
http://business.guardian.co.uk
Earnings: Tully's Coffee losses jump to $2.35 million
Tully's incoming chief executive, appears to have his work cut out for him following the lousy first-quarter earnings the specialty coffee company released.
Seattle-based Tully's Coffee Corp. said it lost $2.35 million for the quarter ended July 2, more than double the $885,000 the specialty java retailer lost in the same quarter a year ago.
Chief Financial Officer Kristopher Galvin said Tully's expected to have deeper losses because of heavy spending on advertising, promotional discounts, remodeling of stores and training. The company went on a spending binge with hopes of attracting more customers and making the company profitable.
Tully's, however, didn't reap many benefits.
Retail sales for the chain dropped 2.3 percent to $9.577 million. Same-store sales dropped 2.6 percent.
"We are certainly not happy about that," Galvin said.
But Galvin said Tully's may be seeing some results from the increased spending. He said same-store sales for the first six weeks of the second quarter have increased 2.2 percent.
"We are now in the positive territory, and we are starting to build on that," he said. "We didn't expect the full benefit from all of these programs we were kicking in this quarter. We expect that will occur during the summer and beyond. ... It takes a while for consumers to become aware of these programs. Now we are shouting a little more."
The quarterly losses came on net sales of $14 million, a slight increase from the $13.7 million in sales for the quarter a year ago.
Shareholders, who cumulatively have invested $62 million in private funding since the company started in 1992, have yet to see a return on their investment.
Tully's, while a closely held company, files earnings with the Securities and Exchange Commission because it has more than 500 shareholders.
Shareholders lost 13 cents per share for the quarter; a year ago the loss was a nickel per share.
The company increased the number of U.S. stores by six, to 117, with 90 of those being company operated.
The earnings were released a day after Tom O'Keefe, chairman and founder, announced that the company had hired Buller, a board member, to become the new chief executive and president.
After that announcement, O'Keefe told the Seattle P-I he was unhappy with recent retail sales. On Wednesday, O'Keefe declined to comment on the quarterly losses and referred questions to Galvin.
Galvin said a bright spot was that wholesale sales jumped 40.5 percent to $4 million.
Buller, who takes over Monday, declined to comment on Wednesday. He said it was inappropriate to make remarks about the earnings until he begins running the day-to-day operations.
Buller replaces John Dresel, the president and chief operating officer who was on the job less than two years.
|
