Starbucks has stopped buying Coffee

01-Jun-2011 | kate | New Announcements Other Strategies Stocks

As crazy as it sounds, Starbucks (SBUX) has stopped buying coffee. That’s right, the worlds best known coffee shop, has ceased buying coffee due to high bean prices. 6 months ago, the Starbucks team announced that high coffee prices were cutting into their companies’ profitability, but they weren’t ready to raise prices. 6 months later, with higher bean prices than in January, Job Culver, Starbucks President announced that he “believed, however, that prices are going to fall again. For this year, we have locked in our coffee but we watch the market closely.”

What this means, is that Starbucks has locked in their coffee prices for the remained of 2011, paying a small premium for price certainty as, coffee prices climb to their highest point in over 34 years. The goal of the contract is to keep the price of their already, overprice latte’s at the same level for the time being.

Starbucks CEO, Howard Schultz, says that in his “history of following this for 30 years, coffee has never stayed very long at these kinds of levels without some king of catastrophic event like weather and we don’t have that.” Analysts are claiming that high prices are due to increasing demand from a growing world population and new growth in coffee beverages in emerging markets.  Other analyst says that poor crops are leading to a shortage of coffee beans. Culver does not agree with the analyst though, stating in an interview that there is no shortage and the high prices are due to market speculators.

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