Brazil’s top coffee roasters, including JDE Peet’s, are poised to raise prices domestically starting next year due to a surge in raw bean prices driven by adverse weather conditions. This increase is expected to impact consumers both in Brazil and internationally.
Key Highlights:
Price Increases:
JDE Peet’s, which produces brands like Jacobs, L’Or, and Douwe Egberts, is set to raise its prices by an average of 30% in Brazil, according to documents shared with clients.
Other major Brazilian roasters are also following suit:
3 Coracoes plans an 11% increase in January after a 10% hike in December.
Melitta has raised prices by 25% this month following a previous 12% increase.
Global Context:
Global raw coffee prices have soared to record highs, increasing approximately 80% this year due to erratic weather in Brazil and Vietnam, the leading coffee producers.
Price hikes are anticipated in other markets as multinational companies look to adjust their pricing strategies when long-term contracts with retailers expire.
Impact of Climate:
The rising costs are attributed to “climate issues,” with both Brazil and Vietnam experiencing significant droughts this year. This has led to a substantial reduction in crop yields and heightened demand.
JDE Peet’s has indicated that the price adjustments will affect a range of products, including roast and ground coffee, whole beans, and capsules.
Consumer Response:
Although coffee consumption is generally inelastic, rising prices could prompt consumers, particularly in developing nations, to reduce their coffee intake.
Experts predict that demand growth from roasters may slow, as companies can manage high prices by utilizing stockpiles.
Market Reactions:
Coffee companies, especially those selling primarily to supermarkets, have struggled to pass on rising costs as consumers seek cheaper alternatives amid a cost of living crisis.
The CEO of Nestlé, the world’s largest coffee company, was ousted earlier this year due to weak sales growth linked to price increases.
Stock Market Performance:
Shares of Nestlé and JDE Peet’s have fallen over 20% this year amid a margin squeeze, while global share prices have risen nearly 20%.