Counting the (coffee) beans

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Coffee beans at Atomic Cafe's roasting facility in Salem. Mark Lorenz
John Mahoney, one of the owners of Atomic Cafe in Beverly, watches coffee beans at the cafe's roasting facility on Mason Street in Salem. Mark Lorenz

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September 9, 2010

Getting that caffeine fix will soon cost more

By Stacie N. Galang Staff Writer The Salem News Thu Sep 09, 2010, 05:58 AM EDT

The cost of a cup of joe is jumping.

Fluctuations in the coffee commodities market, namely a near 15 percent spike earlier this summer, are trickling down to purveyors like Louis Mario of Custom Cup Caffe in Danvers Square.

Mario, who buys 150 to 200 pounds of coffee a week, said his vendors have warned him that prices will go up next week. Because 80 percent of his sales come from coffee, he said he will be forced to pass along the expense to his customers. It may cost him only a few cents more per pound, he said, but those pennies add up.

"A lot of small cafes, they're going to get hurt the most," Mario said. "Starbucks won't feel the pinch as much."

Large buyers like Starbucks and Dunkin' Donuts would have purchased their beans before the price increase, said Mario, who sold coffee prior to opening the shop. While the higher prices will eventually reach them, they probably won't feel the effect for some months.

From January to May, the price of coffee hovered between $1.23 and $1.28 per pound, according to the International Coffee Organization's composite price index. Then the average price per pound went up to $1.42 in June, $1.53 in July and $1.57 in August.

Mario said he buys coffee about two weeks out to ensure the freshest supply. He purchases in 5-pound bags, which he tries to use within two months.

"It's harder on our end to have a buffer because you really can't stockpile coffee," said Mario, whose restaurant specializes in international coffees and also sells baked goods and light lunches.

The price spike in coffee may not reach businesses for a few months because many coffee suppliers locked in prices before the price spike, said Peter Christie, president and CEO of the Massachusetts Restaurant Association.

"Many of the independents may not be aware of this," he said.

Some restaurants will simply eat the cost, in part, because it may take a while for owners to realize the impact, Christie said.

Restaurant owners may also wait to raise prices until they reprint their menus or know the increase is permanent for them.

Rob Liani, owner of Salem's Coffee Time Bake Shop, said changes in the price of coffee tends to take three to six months to filter down to him.

"It hits at some point," said Liani, who estimated coffee comprises 30 percent of his business.

These days, the overall cost of doing business has grown more complex and expensive, he said. Coffee Time makes most of its baked goods from scratch, and labor — with related expenses such as health care — affects his bottom line more swiftly and dramatically than coffee prices.

"I don't want to minimize it," he said, "but it's a small cost of anything."

Chris Silva, owner of Front Street Cafe, agreed other expenses are more significant.

"In the grand scheme of things, coffee going up is less than the cost of paper going up," he said.

Insulated cup of joe

Some local roasters hope their foresight in locking in prices months ago, combined with their high-end bean purchases, will buffer them a little from higher prices.

John Mahoney, who owns Atomic Cafe in Beverly and Marblehead with his brother Andrew, said the bulk of the coffee on the market is considered commercial grade and subject to conditions like availability and demand.

"We buy only special-grade coffee and also buy fair-trade organic coffee," Mahoney said. "That actually tends to be more price-stable than the cheaper, commercial-grade coffee."

Atomic is considered a micro-roaster, roasting under 100,000 pounds of coffee a year and selling it to restaurants and cafes in the Boston area. The wholesale side of their business is their fastest-growing.

Atomic follows the seasonal coffee market, receiving beans shortly after they are harvested and planning their supply so they have none left over. He estimated the green beans last only about nine months.

"We want it fresh, and we want it tasting the best," Mahoney said. "We aim to run out."

But if Atomic runs low and must order more of a certain kind of bean, they may be affected. The daily cost of specialty-grade beans is based, in part, on the commodities market.

"We're not totally insulated by it," John Mahoney said.

Anil Mezini, who owns Salem's Jaho Coffee and Tea, also purchases higher-end coffee.

"I don't think we're going to be affected for now," said Mezini, who also roasts beans and sells wholesale to about 25 businesses.

Eleni Valverde, who owns Cafe Valverde Coffee Roasters in Salem with her husband, Nelson, said they have direct relationships with coffee farmers, which allows them to negotiate prices outside of the market.

"It doesn't affect us as much as other companies," she said.

The Mahoney brothers understand there's only so much they can plan for in business.

"Most of these price spikes are due to Mother Nature, which we don't have control over," John Mahoney said.

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