Coffee prices
going up

Demand for quality and poor
harvests may raise the cost of a cup

By Peter Wagner
Star-Bulletin

Expect to pay more for that cup of coffee -- if you aren't already.

Wholesalers in Hawaii say sharply rising coffee prices in restaurants, coffee shops and retail stores reflect a volatile world market for the popular bean.

"My wholesale cost is going up 30 percent in June," said Mark Tagawa, owner and manager of the Coffee Haven on Kapahulu Avenue. He's considering a 5- to 10-cent increase on a cup of coffee, now $1.

At Lion Coffee, prices have gone up between 10 and 20 percent.

Superior Coffee Co., the largest wholesaler in Hawaii, on Monday announced a 38 percent price increase for its products. Superior supplies hotels, restaurants, supermarkets and other outlets with its line of Royal Kona Coffees.

"There's an unprecedented demand for specialty coffees, like high-grade arabica coffee, coupled with a worldwide shortage," said Al Kam, president of Superior. "Those two factors combined have created the highest prices for coffee products in the last 20 years."

Superior, a C. Brewer & Co. subsidiary, buys beans from growers in Kona and South America. The company markets pure Kona and blends with Colombian and Brazilian beans.

"I think consumers have already noticed some national brands have taken price increases," Kam said. "I would expect local prices will start to rise very soon as well."

Experts say the shortage is due to a poor season in Colombia, a major exporter of high-grade beans. Tight inventories have raised concerns that a bad winter season, which begins in July in South America, could push prices up further.

Coffee futures yesterday hit $3 a pound, more than double the price in January.

Some analysts say the price could double again with a winter frost in Brazil.

Seattle-based Starbucks Corp. on Wednesday announced plans, effective today, to raise prices for the second time in three months, blaming the increase on the soaring cost of high-quality beans.

Coffee growers in Kona, meanwhile, are enjoying record high prices -- $10 to $12 a pound -- for green coffee beans. But not without some trepidation.

"We coffee farmers are concerned about this because it looks like prices could get very high, and when that happens, prices can also come down," said Bob Smith, who farms 35 acres in Hoonaunau. "We're in a market that experiences extreme swings."

He notes that the price of "cherry" coffee -- the rough fruit -- has gone from 45 cents a pound to $1.11 in the past five years.

While prices are climbing in Kona, it isn't because of the world market or weather in South America, Smith said.

Last year's indictment of a California coffee distributor for allegedly selling 3.5 million pounds of fake Kona coffee actually brought new interest -- and a new market -- in the real thing, Smith said.

The approximate 2 million pounds of Kona coffee grown per year has since been quickly snapped up by bilked customers who want the real thing.

"It turned out wonderful for us," Smith said.

The scarcity of Kona could push prices up again for local blenders.

"I would expect Kona prices to start rising with the upcoming crops of 1997 and 1998," he said.

But Kam, of Superior Coffee, believes people will continue to pay higher prices for coffee because, unlike a car or a television set, it's an affordable luxury.

"It's one of life's small indulgences," he said.