As Coffee Prices Drop, Starbucks Costs Don’t Follow Suit

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Coffee bean prices are at their lowest point in nearly two years
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Analysts say coffee beans make up about 20 percent of overall costs at Starbucks.

Coffee bean prices are at their lowest point in nearly two years, reports CNN Money, which is attributed to officials in Brazil forecasting a huge harvest season this year for coffee farmers. A pound of Arabica coffee has fallen from $1.65 to around $1.11, a 33 percent drop. Before you start celebrating and further feeding your caffeine addiction, know that latte prices aren’t expected to come down.

Peter Saleh, an analyst at research firm BTIG, who covers Starbucks, says, “You'll never really see anyone cut menu prices. You're seeing a pretty big rise in wages, which is the other component of making your coffee.” Analysts say that coffee beans only make up about 20 percent of overall costs at Starbucks. Rising minimum wages, rising rents in many Starbucks markets, and the company’s initiatives in paying college tuition for 4,000 of its employees are all attributed to rising costs.

Not all hope is lost for coffee lovers, especially those that buy their coffee at the supermarket. CNN Money says J.M. Smucker cut prices by 6 percent for Folgers and Dunkin Donuts coffee sold at grocery stores last year.  R.J. Hottovy, an analyst at Morningstar, says Starbucks can do the same for its sold-store coffee, but we’re guessing things won’t go in that direction. “Starbucks is able to charge those prices... [because] consumers are willing to pay for it,” says Hottovy.

Starbucks could not immediately be reached to comment.

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