Coffee prices stay higher as bean costs fall back to earth

The price of a Tim Hortons coffee was increased by 10 cents on average in November.
The price of a Tim Hortons coffee was increased by 10 cents on average in November. Brent Lewin/Getty Images

Tim Hortons raised coffee prices in November by about a dime a cup, saying the bump stemmed from “significantly higher operating costs.”

Chief among those was a doubling of coffee bean prices last year as the worst drought in eight decades dried out crops in Brazil, the world’s largest exporter of beans.

Though the donut chain buys its supply well in advance, meaning the cost of coffee it was serving in restaurants wasn’t immediately affected by last year’s spike, Tim Hortons was paying more for coffee it would be selling to customers this year.

“Actions may be necessary,” Cynthia Devine, Tims then-head of finance, said two weeks before the announced price hike.

But as fast as prices surged last year, they’re now coming back to earth – down 27 per cent since peaking at $2.21 per pound in late October. Bean prices were floating toward $1.60/lb on Monday (see chart).

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The reason: Rains have returned to Brazil, which has enjoyed favourable growing weather since November.

Further declines

Experts suggest prices could drop to $1.50/lb by the spring. “The November rainfall was pretty good, and we also have adequate global supplies,” Paul Christopher, the St. Louis-based chief international strategist at Wells Fargo Advisors, told Bloomberg on Dec. 30.

MORE: Coffee chains, cafes, K-Cups feel heat from rising bean prices

Higher coffee bean prices through 2014 resulted in most major coffee sellers lifting retail prices. Tim Hortons followed increases at Starbucks, and others. Folgers and Keurig Green Mountain, which makes the Keurig single-cup coffee machine, also raised prices for home brew products.

A request for comment on how the lower bean costs would affect menu prices at Tim Hortons, the country’s largest coffee chain, wasn’t immediately responded to.