Java lovers swallow rising coffee costs

May 25, 2011: 2:46 PM ET
coffee prices

Prices on packages of Folgers and Dunkin Donuts coffee are going up 11%. Click photo to track coffee prices.

NEW YORK (CNNMoney) -- Your caffeine kick is getting more expensive by the day.

Starbucks said Wednesday that it's hiking prices of its packaged coffee by an average of 17% in its U.S. retail stores. The price increase goes into effect July 16, and will mark the first time Starbucks (SBUX, Fortune 500) has raised prices of packaged coffee in Starbucks stores since September 2009.

Coffee prices
Click chart to track coffee prices.

In March, Starbucks announced a 12% hike for the packaged brand that's sold in grocery stores. The café-chain also raised prices of some of its more "labor intensive" drinks late last year.

And Starbucks isn't the only one inflicting higher prices on its customers.

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Coffee makers across the country are doing the same as they struggle to absorb the surging cost of green coffee.

Green coffee is used to make the different blends of coffee you buy at cafes or grocery stores, and poor growing conditions in South America and other coffee-growing countries have led to fears of an imminent supply crunch.

Those supply fears have also caused coffee futures to soar. Prices on the futures market are up a whopping 95% over the past 12 months.

As a result, some brands have been forced to make even more drastic increases than Starbucks.

Both J.M. Smucker (SJM, Fortune 500), the owner of Folgers, Dunkin' Donuts and Millstone, along with Kraft Foods (KFT, Fortune 500), owner of Maxwell House Coffee and Yuban, have raised prices of coffee products more than three times in just the past year.

J.M. Smucker said Tuesday that it was increasing prices by an average of 11% for most of its coffee products. That follows a 10% hike in February, and another 10% increase in August last year.

Meanwhile, in March, Kraft hiked prices of select coffee products by 70 cents per pound on ground coffee, and 6.25 cents per ounce of instant coffee. Kraft had already raised those prices in December 2010.

"Both increases were due to the significant, sustained increase in the cost of green coffee," a Kraft spokeswoman said. Kraft's first price hike came in August 2010, when the company announced a 9% increase.

And it's not alone.

"In an attempt to offset rising green coffee costs as well as increases in other input costs we are currently in the process of raising prices for all package types," said Green Mountain CEO Larry Blanford said on the company's earnings conference call on May 3.

Green Mountain Coffee Roasters (GMCR) said consumers can expect to see an increase of about 10% at the point of purchase.

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These unavoidable price increases at suppliers have had a ripple effect on grocery stores.

Publix, for example, has been forced to raise prices by 10% to 12% each time its suppliers increase their prices.

While prices vary weekly, a pound of national brand coffee could roughly have been around $3.71 last year and $4.79 today, a spokeswoman said. That's a 29% jump. And unless growing conditions improve and supply fears ease, even higher prices could be on their way.

But so far, this hasn't stopped java lovers from slurping down their caffeinated beverages.

The International Coffee Organization expects global coffee consumption to continue to rise this year despite higher prices. Consumption increased an estimated 2.4% to a record 134 million 60-kg bags last year. To top of page

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