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By May Angel, Marcelo Teixeira and Jessica DiNapoli
LONDON/NEW YORK (Reuters) - If your favourite coffee beans have vanished from the shelves, don't worry - they will return soon. The bad news is they will be up to 25% more expensive.
Roasters such as Lavazza, Illy, Nestle and Douwe Egberts maker JDE Peet's are currently in talks with retailers about passing on costs from a near doubling of arabica coffee prices over the past year, according to eight industry sources.
Raw arabica prices have spiked due to four successive seasons of deficit as adverse weather makes it harder to grow enough of the delicate beans to meet consumer demand.
As roasters press for price hikes, grocery stores and supermarkets push back, postponing signing new supply deals to the point where some have run out of coffee stock.
In one such example Dutch supermarket chain Albert Heijn, the country's largest, ran out of coffee products like Douwe Egberts and Senseo.
The products returned to the shelves on March 20, albeit at higher prices, a spokesperson for Albert Heijn said after the firm concluded talks with JDE Peet's, one of the world's top coffee roasters.
"JDE's purchase prices have increased significantly. We will absorb part of this price increase to keep the products affordable," the Albert Heijn spokesperson said.
JDE Peet's, which has warned of a profit decline this year due to surging coffee costs, said the stand-off with buyers in the Netherlands and Germany resulted in some of its products missing from the shelves. It added, however, that it has since concluded 90% of its price negotiations globally.
Global prices for arabica, typically used in roast and ground blends, have gained more than 20% this year after soaring 70% last year as Brazil - producer of nearly half the world's arabica - suffered one of its worst droughts on record.
On average, the raw beans account for about 40% of the wholesale cost of a bag of roast and ground coffee.
That means that if last year's raw bean price jump was passed through in full this year, it would equate to a 28% price rise to the consumer, said Reg Watson, director of equity research at Dutch Bank ING.
Watson believes prices will rise 15%-25% and that in some markets consumers may feel the hike in one shot.
RATIONING
Even steeper rises are taking place in countries whose currencies have weakened significantly against the dollar. These include Brazil, the world's second largest consumer of the beverage as well as the top grower.
According to documents sent to clients and seen by Reuters, 3 Coracoes, a large Brazilian roaster, raised roast and ground prices by 14.3% on March 1, having previously hiked them by 11% in January and 10% in December.