Starbucks says it's paying more for coffee

Starbucks says the average price per pound it paid for all its coffee increased from $1.28 in 2005 to $1.42 in 2006. During the same period the industry average market price was $1.04 per pound. "Our commitment to pay premium prices for premium quality coffee has not wavered over the years," says Starbucks exec Dub Hay. "It's an approach that not only serves the short- and long-term economic interests of coffee farmers and suppliers; it also serves our needs by creating an incentive for farmers to improve quality and increase production." (Starbucks news release)

Comments

[iheatstarbuckslattes]

just a question- doe the "industry" mentioned above include non-premium coffees? If so, I can see how the industry-wide coffee price is low since the major purchasers are still for products like folgers.

I wonder what the average price per pound is for premium coffee exclusively and if Starbucks is signifigantly over the average? does anyone know?

[Speedmaster]

I suspect that they feel obligated to justify their retail prices. Of course, prices aren't the results of production costs.

[Tim]

From what I hear the market average actually dropped to $1.04/lb in 2006, or a decrease of five cents.

This is sort of leaving out some info... what was the 2005 and 2006 industry average price for each of the two years... probably went up by the same amount.

[Chai Bob Soy Pants]

Refering to another thread...the hell with me making more money. How bout the CEO and a few others take a small pay cut....lets say 4-8 million a year and pay the farmers what they deserve.

My 2 cents.....

[NOT A CEO]

What does a farmer "deserve"? Why?

[Boston Starbucks Rebel]

I would give my first born to have the best cup of coffee ever. My first-born could simply be raised on a coffee farm in like Colombia or somethingl. Just for that one moment and touching the DIVINE ESSENCE itself would be enough to give up anything.

[Tim]

Anonymous = market and industry averages are the same thing.

$1.09/lb in 2005.
$1.04/lb in 2006.

Read the article more carefully.

What are you talkinga bout Tim? Where is 1.09 per lb in the article. I have pored over it 3 times and am still missing the 1.09 you reference.

"Starbucks Coffee Company announced today that the average price per pound it paid for all its coffee increased from US$1.28 in fiscal year 2005 to US$1.42 in fiscal year 2006. During the same period the industry average "C" (commodity) market price was $1.04 per pound."

The article give Sbux price in 2005 and 2006 and then compares it to a single average across the 2 years. I want to know the market price in 2005 and 2006 separately. There are many pairs of prices that average to 1.04.

[SuperBarista]

Anonymous, the average is'nt going to make that huge of a difference. Even if one psycho went out and bought coffee from a farm for $5 a pound, it's not going to skew the average that much. Thats why averaging works. And by the way if you REALLY want the seperate values used to make that average im sure there are some business stats formulas floating around online

[griffin911]

Keep in mind that it is only Starbucks massive buying power that allows them to get coffee for that price. Most roasters for the specialty coffee industry are buying coffee for $3-5 per pound and are selling wholesale to independent shops for $5-7 per pound.

[Superbarista2]

So the above statements about starbucks purchasing premium coffee at an average of 1.24 per pound is accurate.

Starbucks standards on purchasing premium coffee is incredibly high. They are trendsetters in the industry, and their relationships with farmers are excellent (I don't advocate they have given enough, if they really wanted to, they could give even more, but as for now they are trendsetting for all coorporations). The leading sellers in the coffee industry have purchased coffee at prices as low as 40 cents per a pound in the past (that's why they're leading sellers, cause their coffee is so cheap).

Starbucks is also well known for not buying coffee at auctions in which coffee farmers have to gather and sell their coffee cherries to roasting plants of all over the world. These auctions can be brutal as many farmers are desperate to have their crop purchased that they will unjustly lower their price.

Starbucks has taken part in auctions in the past, but their goal is to not be involved in the competitive auction market cause farmers get screwed. As a result, starbucks works closely with farms and families growing coffee in the "shade grown" agriculture where coffee cherries are grown in natural ecosystems with no pesticides or destruction to the ecosystem. Starbucks also provides full medical coverage for farmers and their families. Starbucks is also known for donating large amounts of money to communities not even closely related to coffee farms. In 2005 Starbucks gave over 2 million dollars strictly to schools in Guatamala. That's more money than my state put into Education.

Overall, starbucks gives farmers far more money for their coffee, they keep relations with farmers over generations withouth forcing them to auctions, they grow their coffee in practically organic conditions, and they are known to help commnities by donating millions or building civil projects, and they provide medical benefits for farmers and their families while actually giving them enough money to make a living that doesn't involve an 8 year old girl working 13 hours for 2 dollars.

Starbuck is a leader in the coffee industry.

[some guy]

So let me get this straight, since I buy coffee by the pound at Starbucks and brew it at home. It costs them on average about $1.10 a pound and they sell it to me, depending on the kind of coffee, for anywhere between $11 and $13 a pound?

Nice business!

[Seth]

Just a quick follow up to "some guy" above me...

Yes, they buy GREEN coffee for $1.10 a pound. Then...

They roast it. Roasting ain't cheap.

ALSO, by roasting GREEN coffee, you are removing water from it and drying it out. This greatly reduces the weight of the coffee so much that in some roasts it takes almost 4 pounds of GREEN coffee to equal 1 pound of roasted.

Then they package it. Also, not cheap.

Then they ship it to distribution centers. Also, not cheap.

Then they ship it to stores. Guess what? Still not cheap!

THEN they pay labor wages to a barista to maintain a full coffee display in a store... and, wouldn't you know it, NOT CHEAP!

Then they pay labor wages to grind your coffee, bag your coffee, and answer your silly questions.

Do you feel better about that $11-$13 a pound now?

[Sydney Johntson]

Keep up the good resource. Best greetings to all!

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