With the costs of coffee beans, sugar, milk and rentals shooting up, coffee retailers in India are looking at a 10-12 per cent rise in prices in the next few weeks.
While Arabica prices in ICE Futures are now ruling at 14 years high of $2.72 per pound for March delivery, Robusta is at $2,290 per tonne for the same month in Liffe futures. Arabica prices are higher due to supply concerns in Brazil and Columbia, two significant contributor of the coffee variety. This variety is expected to reach $2.90 per pound in the near term.
As far as Robusta is concerned, prices are expected to touch $2,400 per tonne of coffee.
Café Coffee Day is looking at the price trend of coffee as well as other commodities and is expected to take a decision on increasing price soon. “While coffee beans are from our captive plantations, it really does not affect us to a large extent. But the rentals and prices of sugar and milk have shot up and we may have to take a decision on increasing prices,” noted a senior official of Café Coffee Day. The coffee chain shop last effected a six per cent price rise last April.
Costa Coffee, too, may be looking at increasing prices. Costa Coffee India CEO, Santosh Unni, said they usually review prices twice a year and had last effected an eight per cent increase in November. “Inflation is extraordinarily high and we will have to see how to manage costs. While we may have to take a price rise, we cannot pass on totally to the consumer as we are still growing this segment,” Unni noted.
India has around 1,500 cafes and this is expected to cross the 2,000 number mark this year. “There should be a smart mix of price rise and not at the cost of losing consumers,” he said.
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Harish Bijoor, a noted consultant on the coffee industry said the industry does not have any choices but to go in for the rise. “Garnish this price increase in the coffee commodity with that of what has happened to milk and sugar, and literally everything else that goes into a cup of coffee, and there is a potential threat of high end coffee prices for all. Many players have actually announced successive sets of price increase in roast and ground coffee prices in installments of Rs 5-10 each item, to soften the hit. A few have focused on back end cost cuts...therefore, the price increase, more often than not, will be passed on to the consumer,” Bijoor noted.
Ramesh Rajah, president of Coffee Exporters Association, said cafes should not resort to a price rise on the sole reason of a jump in coffee prices. “On an average, around 8 gm of coffee powder goes into a cup of coffee and many of the cafes blend chicory as well. In this scenario, giving the reason of escalation in coffee prices does not hold good,” he said.