Dunkin' Donuts customers across the U.S. are about to feel the impact of the growing coffee shortage.
The company is finally being forced to deal with the fact that coffee prices have climbed 50 percent in the last six months, according to an interview with Nigel Travis, the CEO of Dunkin' Brands, the parent company of Dunkin' Donuts and Baskin-Robbins. In an interview with The Daily Ticker, Travis said that Dunkin' Donuts's coffee prices will likely soon be increasing -- but only a little bit.
Travis reports that coffee price increases will depend on franchisees, who set the price for products featured in their stores.
"All our franchisees understand one thing: keeping our coffee prices very competitive and [a] great value is very important to compete with all that competition," said Travis in the interview. "Coffee is where the war is fought."
Some franchisees may spread the price increase across both food and coffee items, to insure prices stay low for their cup of joes.
This move comes after J.M. Smucker announced last week it would raise coffee prices by 9 percent for its Dunkin' Donuts and Folger supermarket brands. Kraft increased the prices for its coffee brands Maxwell House and Yuban on June 6 by an average of 10 percent. Travis stated the industry as a whole is experiencing price increases due to upward pressure.
At the root of the coffee price hike is shortages stemming from drought in Brazil and increasing outbreaks of coffee rust, a fungus that destroys coffee leaves. The U.S. Agency for International Development predicts that global coffee production will fall by as much as 15 to 40 percent in the coming years due to the coffee rust, which has caused more than $1 billion in economic damage across Latin America and the Caribbean over the last two years.
Thus far, small, specialty shops have shouldered the majority of the coffee rust burden. Dunkin' Donuts and other mega-chains like Starbucks have been able to avoid significant price increases by buying from a varied wealth of supplier, penning advanced purchasing deals and utilizing a more long-term approach to buying coffee. However, with Dunkin' increasing its prices, it's clear that no coffee shop is safe from the effects of the coffee shortage.
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