Feeling the grind
By Lauren Pelley
lpelley@uwo.ca
Stephanie Paplinskie recently noticed her morning java jolt was suddenly putting a bigger dent in her wallet.
“It went up I think last week, or the week before,” says the Starbucks drinker and University of Western Ontario student.
The cost to fill up Paplinskie’s reusable mug at the Western Student Recreation Centre Starbucks location rose to $1.84 from $1.64, she says. “If it’s 20 cents more, I’m still going, I’m still buying it,” says Paplinskie.
Jonathan Kravitz, a London, Ontario resident who gets his daily caffeine fix at Tim Hortons, feels similarly. He’s “not thrilled” about the fact that Timmy’s also raised prices on April 11, but he can’t go without his morning pick-me-up.
“Coffee is coffee,” he says.
And lots of Canadians would agree. According to the Coffee Association of Canada, 81 per cent of Canadians drink coffee occasionally and over 63 per cent of Canadians over the age of 18 drink coffee on a daily basis. That’s a lot of java lovers about to get gouged by rising prices.
So why the rise? Well, it’s all about economics –– the price of beans is going up, and escalating coffee costs around the world are spilling over to customers.
Global coffee prices surged to a 14-year high in February to $2.46 US per pound, and still averaged around $2.24 US per pound in March.
It was a massive jump from $0.26 US per pound just a year ago. It’s also the highest coffee futures have traded since May 1997, when beans were going for $3.20 per pound.
 |
| Infographic by Lauren Pelley |
| Average global prices for coffee beans have been on the rise. |
It was only a matter of time before consumers started feeling the grind too.
Starbucks, the iconic American coffee chain, talked about their recent price increases in a jargon-filled statement. “We continue to carefully monitor and evaluate green coffee prices and are responding with pricing adjustments that balance our need to run the business effectively while providing maximum value,” read a recent Starbucks press release. Translation: At Starbucks, a caffeine fix is getting costly for customers.
Tim Hortons also announced a small price increase this year, and a company statement in early April confirmed that the price of a large cup of coffee is set to rise by seven cents.
Store-bought packaged coffee prices have been on the rise, too. In February, Starbucks announced the price of its packaged coffee sold in American grocery stores would go up by 12 per cent. The increase comes on the heels of recent hikes by Folgers maker J.M. Smucker Co. and Maxwell House parent company Kraft Foods Inc.
So why are these little brown beans getting so pricey?
On one hand, it’s the basic economic principle of supply and demand. Poorer-than-average crops in coffee-producing countries like Colombia, Mexico and Kenya led to a dip in supply.
According to John Reed, a lecturer in the faculty of information and media studies at the University of Western Ontario, if favourable weather conditions allow farmers to produce high quantities of a particular crop, then in theory the price will drop. “If there isn’t a lot of crop produced the price will go up,” he continues.
Meanwhile, North Americans can’t seem to get enough of their brew, resulting in high demand. In particular, fourth-year kinesiology student Paplinskie’s age group is growing increasingly hooked. Forty per cent of 18 to 24-year-olds who responded to a 2011 survey by the National Coffee Association drink coffee daily – compared to 31 per cent in 2010.
But there are also other factors in the rising global cost of coffee, says Chris Hannah, the operations manager for Trees Organic, a coffee chain with shops throughout the Vancouver area.
“Think about all the added costs that you wouldn’t normally think are associated – [like how] fuel goes up, then transportation costs more,” he adds.
And stock market speculators can drive values even further, thanks to assumptions that demand will continue to surpass supply.
“If things stay the way they are, we’re certainly going to have to increase our menu prices,” Hannah adds.
Just six months ago, Trees Organic was buying a Mexican coffee for just under $3 a pound. Since then it’s risen to $4.50 a pound. “We’ve been eating that cost the whole time,” says Hannah.
However, it’s a different scene for coffee shops outside the typical supply chain – and it seems fair traders are faring better than other coffee companies.
“Traditional coffee was selling for pennies,” says Jeffrey Stinson, owner of Fair Grounds Café & Roastery, a Toronto-based organic and fair trade coffee company.
“Now that it’s going up, the companies that are usually getting it for pennies are starting to raise prices.”
Fair trade coffee, on the other hand, is always pricier – so companies purchasing from fair trade co-operatives aren’t noticing the global price increase to the same degree, buyers say.
So what are these co-ops exactly, and why are prices different?
“It’s a co-operative of coffee farmers that try to get together and obtain a better price for coffee,” Stinson explains. “What happens normally is coffee farmers who grow the coffee can’t eat or send their kids to school.”
Middlemen buy coffee from the farmers at the lowest price possible, he explains, in order to make a profit when they sell it to coffee companies.
“Coffee farmers have no way of getting it to market themselves,” Stinson adds. It’s a vicious cycle of poverty where farmers barely make enough to support themselves, since the cost of shipping their coffee to end buyers would outweigh any financial benefits. Co-operatives solve that problem by ditching the middlemen and allowing farmers to actually turn a profit on their own.
 |
| Photo by Lauren Pelley |
| Spoke & Rim Tavern server Heather Osbourne hands over a fair-trade coffee. |
Regardless of fair trade’s benefits for farmers, many North American corporations aren’t comfortable with the added cost.
“Fair trade is actually closer to what is realistic [pricing], but it’s often criticized for being expensive,” says Reed, who runs a class on the politics of food.
While fair trade is a wonderful thing, it’s an industry with a major battle to fight against the major corporate players in the coffee business, Reed adds.
“It’s really important [for corporations] that fair trade be [seen as] a luxury thing, and industrial coffee is manipulated to be cheap,” Reed explains. “It’s another war that Western corporations are fighting.”
While global coffee giants aim to get the most bang for their buck, some fair trade companies have a different agenda.
Fair Grounds’ owner, Stinson, says he isn’t in business to make a profit. “I started this company for the fair trade aspect,” he explains. “I haven’t paid myself in a year and half.”
The Spoke & Rim Tavern, an on-campus restaurant at the University of Western Ontario, buys only fair trade coffee – and it’s twice as expensive as the beans bought by Tim Hortons. But Jeff Armour, food and beverage manager for the University Students’ Council, says being socially responsible outweighs the cost.
“Fair trade coffee ensures the people who are working there get paid a fair wage,” he adds.
Wherever people buy their cup of joe, it’s doubtful price point will ever be a deterrent for them getting their daily fix. Paplinksie certainly concurs.
“If you need a coffee – you’re going to get it,” she says.
