A week after Starbucks (NASDAQ: SBUX) said that it would raise prices, coffee competitor Peet’s Coffee & Tea (NASDAQ: PEET) said it will follow suit. After an approximate 35% increase in green Arabica coffee prices year-to-date, the coffee retailer has no other choice.
The price of coffee has reached a 13-year high at $1.8865 a pound for December delivery. Peet’s CEO Patrick O’Dea said prices on most coffee drinks will rise about 10 cents, and that price of beans sold in Peet’s stores will climb around 8%.
“The cost of coffee has risen dramatically this year and is now close to a 13-year high,” O’Dea said. “We’ve been successful in offsetting a significant portion of these costs, enabling us to delay action until now and keep the price increase to a minimum.”
As InvestorPlace reported last week, Starbucks had tried to absorb coffee price increases, but it recently raised its drink prices.
Peet’s has had successful numbers as of late. Since January, the coffee stock is up nearly 4%. More impressive, Peet’s shares have jumped 22.2% over the past 52 weeks, while also outperforming earnings estimates three of the last four quarters.
Starbucks shares have gained 27.1% over the last 12 months. McDonald’s (NYSE: MCD), which launched its McCafe specialty coffee drinks last year, has seen its share price jump 30.4% since October.
Numerous coffee companies have even started their own lines of single-brew coffees, perfect for the Keurig machines that have grown in popularity. Earlier this year, Starbucks launched its Via line, which retails for about $1 per packet. With consumer spending down, companies like Starbucks are hoping they can still retain customers who are avoiding specialty drinks and looking for cheaper coffee options.
So far in 2010, the rising price of Arabica coffee has not adversely affected coffee stocks. However, if the price of coffee beans continues to balloon, it may just be a matter of time before consumers stop treating themselves to specialty coffee drinks. Expect to see more instant-brew coffee lines at the grocery store as fancy coffees become more and more expensive.
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