* Massimo Zanetti raises coffee prices by about 12 pct
* Price hike effective March 16
NEW ORLEANS, March 20, 2011 - Massimo Zanetti Beverage USA has joined other U.S. roasters and passed along costs for its coffee after the beans soared to a 34-year high, the company's second hike in three months, a spokesman told Reuters on Saturday.
"The percentage basis was around 12 percent and we felt that was very much consistent with what we're seeing as the sustained increases in the coffee market," John Boyle, chief operating officer for Massimo Zanetti Beverage USA, said on the sidelines of the National Coffee Association meeting in New Orleans. The price hike affects most of their well-known brands that include Chock Full o'Nuts, Hills Bros, MJB, Chase & Sanborn, and went into effect on March 16, the same day major U.S. roaster Kraft Foods Inc raised its prices for its roast coffee by 22 percent. [On Friday, the world's biggest coffee chain, Starbucks Coffee Co , said it would raise the price of its packaged coffee by an average of 12 percent.
Major U.S. roaster J.M. Smucker Co , the maker of Folgers and traditionally considered the trendsetter for coffee prices, most recently upped its list prices for coffee by 10 percent in February.
Arabica coffee futures more than doubled by early March in a rally that began in June 2010 on fund buying and tight supplies, with the benchmark May contract reaching a 34-year high for the second position at $2.9665 per lb this month. Although global stocks are at the lowest level since the International Coffee Organization began keeping records in 1965, speculators have also been blamed for helping to lift prices.
Many in the coffee industry expect futures prices to continue to rise to $3 per lb, as the combination of speculative dealings and tight global supplies raise bullish flags. While coffee demand is often referred to as inelastic, with an average demand growth of 1 percent to 2 percent, Boyle said it would be naive to believe that rising prices aren't having an impact on consumption.
Consumers will make different choices as prices rise, perhaps opting to buy one package instead of two, or shift from a large size to a small size, Boyle said.
"On a worldwide basis, demand is continuing to go up. Certainly the developing countries are driving a lot of that, so there's really no reason to believe that won't continue," Boyle said.
Andrea Thompson, analyst with the coffee information company CoffeeNetwork, projects that global coffee demand growth will be up 1.4 percent in the current 2010/11 crop year, compared with 1.6 percent in 2009/10. She forecast it will return to a 1.6 percent growth in 2011/12.
"Prices are higher than they were, but as an overall expenditure, it's pretty small compared to other things you'd spend your money on. It's not something that people really want to cut," Thompson said.
"Coffee is inelastic to price movements. We've seen that in the past number of years."
Rather than drinking less coffee due to high prices, coffee drinkers will reduce the number of times they buy the drink in coffee shops and, instead, make their own coffee at home, she said.
