The price of raw green coffee plummeted last year to its lowest price in more than six years, but coffee drinkers haven't noticed a difference at the drive-through window. The price of your morning brew at Omaha coffee shops like Starbucks, Scooter's, Aromas and Crane Coffee hasn't budged in over a year, except, in a few cases, to go up.
Are coffee shop owners pocketing greater profits at their customers' expense? Not exactly, they say.
Coffee shops haven't seen much of the benefit of the commodity price drop, by the time transportation and roasting costs are factored in, they say. Meanwhile, the cost of other coffee-shop essentials like milk and barista labor has gone up. And some local shops and roasters say they've plowed any price savings back into their businesses, buying better equipment and higher quality coffee to keep up with customers' increasingly gourmet tastes.
The benchmark arabica coffee futures price fell 23 percent in 2013, closing the year at under $1.11 per pound, a big drop from its recent high of $3.05 per pound in mid-2011, according to the Intercontinental Exchange.
At the peak price for beans, several chains raised their prices. Retail coffee prices — for example, the grocery store can of Folgers — jumped more than 55 percent in the three years starting in 2010.
But while commodity prices have now returned to 2009 levels, the costs for retail and brewed coffee have not. Retail prices fell off somewhat in 2013, about 15 percent to an average of $5.04 per pound, but coffee shops haven't been giving any discounts.
A Bloomberg review of Starbucks price hikes over the past 20 years showed the price of a tall brewed coffee has risen more or less in relation to other goods, going from $1.25 in 1994 to $1.85 today. Through the years, Starbucks has cited rising coffee prices as a factor, but also the costs of dairy and fuel. Starbucks last raised its drink prices in June 2013, by about 1 percent, its first increase in 18 months.
Scooter's has not changed the prices it recommends for its franchise locations in two years.
“We try to price our coffee so that we can tough it out when it's high and we can make some profit when it's low,” said Don Eckles, president of Scooter's owner Boundless Enterprises, which also owns Scooter's supplier Harvest Roasting. “We don't want our prices to fluctuate. We can't be like a gas station where you just go out and change the banner.”
Eckles said he buys raw coffee on six-month contracts and has seen the price fall about 25 cents per pound in the last buying cycle for the specialty-grade coffee he buys at about $3 a pound.
Drink prices also have been steady at Aromas, and owner Autumn Pruitt said it's probably time she revisit prices — to consider raising them. That's because she has been putting more expense into high-quality coffee and better-trained baristas since purchasing the Old Market shop in 2012 and expanding this past December into Benson.
“Omaha is still catching on to specialty coffee,” she said. “We try to ease people into those changes.”
Pruitt and Crane Coffee general manager Rachel Ayala-Johnson said they have not seen their coffee suppliers charging less.
“We're more impacted by dairy prices,” Ayala-Johnson said. “Those increased significantly in 2013.”
Crane raised its prices in February 2013 by 2 percent to 3 percent across its products as it reformulated some products with better ingredients, Ayala-Johnson said.
Coffee bean prices are influenced by factors far from a Dodge Street drive-through. Last year's plummet was due to a production surplus, as global output rose 7.8 percent. Farmers had planted more coffee in response to 2011's high prices.
“The world economy does have a major role in terms of our pricing that we're receiving,” said Chris Smith, owner of Beansmith roasters in La Vista.
He pays anywhere from $4 per pound up to $25 per pound for very high-grade beans. Roasters lose about 20 percent of coffee volume during the roasting process.
In the short term, world output could keep rising. The International Coffee Organization said in December that Brazil is expecting a record off-year crop this year (coffee is grown in two-year cycles), which will likely put further downward pressure on prices. But the group said coffee consumption will grow at 2.4 percent per year.
“Demand for coffee remains buoyant and should provide potential for further growth in the longer term,” the group said.
The growing demand is felt here. Besides Aromas' second shop, Crane Coffee is considering new locations, and Omaha-based Scooter's recently announced a deal to open 20 stores in Iowa. Dunkin' Donuts — which sees more sales from drinks than it does from doughnuts — opened 371 net new restaurants in the United States in 2013, including several in the Omaha metro area, and plans hundreds more openings in 2014.
Buyers at Omaha's La Rue Coffee Roasterie, a supplier to restaurants, convenience stores, offices and coffee shops, have noticed the cheaper raw bean prices, but haven't passed on all the savings to customers.
“We've increased the quality of our beans as opposed to pocketing the cost,” Vice President Terry Herr said.
Even gas station coffee drinkers are looking for a better roast, he said, with more aroma and a richer color.
Herr said LaRue has also invested in equipment that leads to better coffee, such as equipment needed to pack bags of coffee that have a one-way valve, so roasted beans can “de-gas” in the bag, not out in the open air.
There's more that goes into the price of a cup of coffee than just the bean, he said.
“When you look at the true costs, coffee is not as cheap as everyone thinks it is.”