Will a cup of coffee get more expensive in Sisters?
Last updated 12/21/2021 at Noon
No, you won’t need a bank loan for a cup of coffee. But you will pay more.
The business press has been ablaze about the rise in the price of coffee beans — by some accounts over double in a few short months. Arabica coffee bean futures slated for March delivery rose as high as 4.8 percent to $2.235 a pound a month ago, Bloomberg reported. Prices on November 12 were up more than 90 percent over the prior year and reached their highest level since October 2014. And rose further.
On December 14, the futures price dropped to $2.35 from the December 6 high of $2.50 per pound. Commodity prices fluctuate widely and are often wildly sensitive to virtually every facet of trading — weather, shipping delays, pandemics, political uncertainty, monetary policy, etc. Trading in commodities is not for the faint of heart.
So if coffee beans have doubled or will double in price by March, will a trip to Fika, Dutch Bros., Twisted Juniper, or Sisters Coffee Co. necessitate a bank loan? Not even close. Only five percent of that cup of joe on average is for the beans. Cups, stir sticks, lids, and sleeves are about a dime of the total. Labor, also on the rise, is 30 percent, as is overhead — rent, insurance, utilities. Espresso drinks have added costs: flavors, syrups, lots of milk, some of which may be the more expensive soy or almond variety. All of these are up substantially since January.
Say the cost of beans doubles. Roughly 15 to 20 cents of your caffeine jolt might bump your total price by no more than 25 cents, and only if the shop passes on the entire cost. Michele Hammer, manager of Fika Sisters Coffeehouse, has seen these bean cost spikes before. Her greater worry is shortages, not prices. Paper cups are the hardest thing to find, and the popular café has been forced to take odd-colored cups not characteristic of the season to fill drink orders.
Hammer said, “We have held our prices through the holidays to benefit our customers but we will have no choice other than to increase prices in January — our first, really, since opening.”
Where it gets tricky is with packaged coffee that is mostly beans — whole or ground. Again, don’t expect a bag of coffee to double if the price of beans doubles. Of that bag, roughly 11 percent goes to the grower. The processor and exporter get around 26 percent of the total, and the roaster gets about 55 percent, according to Visual Capitalist. Thus, if the grower gets twice last year’s take, that’s 11 percent doubled, not 100 percent doubled.
However, the price of beans is no small matter to Sisters Coffee Co., where a bag of their prized Mekurya Basa already retails for $21.25. Nothing on their shelf is under $14. And it’s not just the price at the source but the cost and frustration of getting a 152-pound burlap bag of green beans from as far away as Ethiopia to Sisters, Oregon — an 8,500-mile journey.
Most of Sisters Coffee’s bean purchases come from Central America: Guatemala, Honduras, and Panama. Not exactly around the corner. The logistics involve three federal agencies: Customs and Border Protection, the Food and Drug Administration, and U.S. Department of Agriculture. We take a lot for granted when we consume coffee.
It’s not only the cost of beans that gets the attention of Justin, Jesse, and Jared Durham, the sibling trio who own Sisters Coffee. Every component of their operation costs more, from baking flour to fillings. They believe they can manage the cost side of the problems fairly well. The bigger issue is supply. Like Fika, “hot to-go cups, for example, are out of stock,” Jesse laments. “Things that used to take eight weeks to get are now 24 weeks.”
The Durhams have reached the threshold where they now must pay the new Oregon Corporate Activity Tax (CAT) imposed on businesses with gross receipts in excess of $1 million. “That’s another cost we have to contend with and that inevitably has to factor in to our pricing,” Jesse said.
The Durhams usually adjust prices annually. This year will take extra scrutiny.
Sisters Coffee Co. may be the best local example of the impact of global commodity issues. They are not alone. Laird Superfood, whose key products are complementary to coffee consumption, import large quantities of ingredients, including coconut milk, coconut oil, organic red palm oil, cocoa, and Peruvian coffee beans.
Their sales growth has been nothing short of spectacular, rising 45 percent when comparing the last quarter to a year ago, although their coffee, tea, and chocolate products actually declined from $2.15 million to $1.72 million. Coffee creamers grew from $5.3 million in the quarter to $6.5 million, illustrating the impact of the coffee-related business in Sisters.
Holy Kakow, a Sisters company The Nugget wrote about last spring, makes syrups for coffee shops. Wyatt Woods, founder and CEO said, “We are seeing raw material costs, depending on the product, increase from 25 percent to, in some cases, over 100 percent and lead times for some of our needs clear into the third quarter of next year.”
The bulk of their packaging and ingredients are foreign-sourced.
In spite of it all, coffee consumption shows no letup. In the United States, annual per capita consumption is about 9.7 pounds, a slight gain over 2020, making the U.S. only the 25th biggest consumer of coffee worldwide on a per-person basis. The average American consumes about three cups of coffee per day.