The price of the java you drink with your morning oatmeal, or the latte you sip on your commute to work, will likely increase in the coming months as everything that goes into a cup of Joe – right down to the milk – is spiking.
At Louie’s restaurant on Madison Street, the price of a cup of coffee increased recently by 15 cents to $1.50. Liz Doyle, the owner of Blue Max, said she is soon going to raise the price of a refillable mug at her coffee house to $3.
Restaurateurs are raising their prices because distributors have raised theirs. Aroma Coffee on Industrial Drive, which roasts raw beans purchased from brokers, has raised the per pound price of its products by 25 cents already this year.
The distributors, in turn, blame several factors for the increases that are passed down the line.
The price of raw coffee beans has gone up, worldwide. According to the International Coffee Organization, the average price of a pound of beans in January 2000 was 48 cents. In January 2008 it had risen to $1.22, and right now it is selling for $1.64 on the future’s market for delivery in May of 2011.
Doyle, however, said the increases her customers can expect aren’t exclusively linked to bean prices. According to her invoices, the price she paid for a fair trade Brazilian bean has gone up only 20 cents since late 2006. One of the biggest hits, said Doyle, has come from the soaring price of fuel. Surcharges have recently begun appearing on her invoices, she said.
Add a splash of milk – which costs $1 more per gallon than a year ago – and Doyle isn’t the only one asking customers for more money.
“It’s crazy,” Sheri Ladd, owner of the Harrison Street Café said. “Every time I go shopping I see that prices have gone up. What am I to do? Pass it along to the customer and possibly lose business or absorb the increase and have it cut into my profits?”
At her restaurant, Ladd said she’s doing her best to cling to charging $1.35.
According to Doyle, another expense seldom recognized by customers is the cost of the cup itself. Of the $1.65 a Blue Max customer pays for a small cup of coffee, more than 25 cents goes toward replacing the cup, the sleeve and the plastic cover. She plans to introduce a line of biodegradable cups in the near future, but she said that will likely increase the cost even more.
In a letter being sent to customers with their order, one fair trade importer points out the macroeconomics at play, too. Equal Exchange, located in Massachusetts, claims the weakened U.S. dollar has also affected prices.
“Coffee and cocoa are traded in U.S. dollars, so our farmer partners urgently need higher prices to cover costs,” the company said in a July mailing.
The response from restaurant owners to the recent price increases can be divided into two categories. For local diners like the Harrison Street Cafe, Louie’s and Mom’s – none of which claim to be gourmet eateries – the increases get passed to customers in relatively small increments of only a few cents. As long as these breakfast and lunch places keep up the quality of their food, customers take small cost increases in stride, according to the business owners.
For specialty coffee houses like Blue Max, however, it’s a different story. Doyle is planning on raising the cost of a refillable, in-house mug of coffee from $2.30 to around $3. She doesn’t expect the increase will frighten her customers, though.
“Sixty to 75 percent of my customers are coffee enthusiasts, i.e. people who love good coffee and are willing to pay the extra money for the specialty coffee we serve,” Doyle said. “Many come in every day.”
Doyle said she is considered to be an “artisan roaster,” which means that Blue Max’s beans rank in the top 20 percent of the beans available on the market. That she roasts the beans onsite makes the coffee even fresher. Moreover, 95 percent of the beans she buys are organically grown and purchased in accordance with fair trade standards, which also increases the price.
Another segment of her customers are people who come in only occasionally for a “special treat,” a cup of coffee they know will be more expensive than what they drink at a local diner. Still others are willing to pay $3 or $4 for a cup because they want to support a locally owned business, she said.
While the quality of her coffee is more important than the price, said Doyle, price does matter. She plans to offer a discount to patrons who bring in their own travel mugs for take out orders. To provide an alternative to customers who don’t want to pay $3 for a refillable mug, she will be serving non-refillable mugs of coffee at the old price. The mugs will be of a different color, so the servers will know the difference.
Doyle used the terms “affluent” and “above middle class” to describe her clientele. She said that income levels are sufficient in the tri-village area that people can afford to pay $4 for a latte on a regular basis.
“Our cost is relatively low compared to buying a new car,” Doyle said with a laugh. “It’s not a major expenditure, but a little treat. It gives them a little perk.”