Will Rising Coffee Prices Bite Into Coffee Brewers' Profits?
There has been a lot of talk lately concerning the soaring prices of Arabica coffee and the weak Brazilian coffee in 2013, and how these will impact coffee brewers' such as Starbucks' and Dunkin' Brands Group's profits. These two companies buy, roast, and brew huge mountains of coffee each year, and sharp spikes in coffee prices can negatively impact their bottom lines. Starbucks alone purchases about 500 million pounds of coffee each year, representing about 3% of world supply.
Starbuck sports a significantly lower operating margin than peers Dunkin' Brands Group, Krispy Kreme Doughnuts, McDonald's , and Tim Horton's , implying that it's more vulnerable to sharp increases in operating expenses.