Trump Brazil tariffs could raise coffee prices
President Donald Trump’s 50% tariff for Brazil imports is a bad news for drinking coffee.
According to the data of the US Department of Agriculture, Brazil, the US largest US green coffee beans supplier, is about one -third of the country’s total supply.
The coffee beans need to grow in a warm, tropical climate, which makes Hawaii and Porto Rico suitable places to raise crops in the United States. However, as the world’s best coffee consumer, the US requires great supply to stay with caffeine. Mintel predictions The US Coffee Market reached 19.75 billion dollars last year.
The increase in trade duties can leave consumers at an even higher cost after several years of coffee prices. Inflation -sad consumers saw the prices of Latte and cold brewing prices when drought and frost hit global coffee supply, especially in Brazil. Earlier this year, Coffee Bean Futures hit the highest levels of all time. They increased by 1% on Thursday, but well below the record recorded in February.
To be sure, there is still time for Brazil to make an agreement with the White House before the tariffs entered into force on August 1st. Plus, food and beverage producers hopes that the Trump administration will exemption for key commodities. US Department of Agriculture Brooke said rollins In late June, in an interview that the White House thinks about exemptions for products that cannot be grown in the USA, including coffee in the USA.
However, if not, coffee companies such as Folgers Owner JM Smucker– Keurig Dr Pepper– Starbucks And Dutch Bros It will face much higher costs for commodity. Giuseppe Lavazza, Italian Roaster Lavazza President, He said on Bloomberg TV On Thursday morning, the latest tariff may mean “too much inflation” for the coffee industry.
Roasters will try to reduce the effect of the high tariff, but it will not be easy.
“Each company is always trying to add the next efficiency, investigate its operations or minimize inflationist pressures, but a vice president of the supply chain and logistics for the Consumer Brands Association, a trade group, supply chain and logistics vice president representing the consumer packaged goods sector.” Tom Madrecki.
A lightening tactic may be to import beans from countries other than Brazil, but companies will probably pay more for commodities.
“A feature of tariffs, especially when there are tariffs in more than one country at the same time, not only the increase in the cost. It allows the pricing base to rise.” He said. “If you have a cheaper coffee in a different country than Brazil, you are not inclined to sell 30% lower. You will try to raise your coffee a little more.”
JM Smucker’s Dunkin and Kraft Heinz’s coffee brands at home like Maxwell House are already walking their prices this year in response to commodity costs. Although retailers can be withdrawn, there may be more price increases for consumers.
CEO Tim Cofer, after introducing Trump’s first round of mutual tasks, Keurig Dr Pepper’s second half of the year will think of additional price increases to reduce the impact of tariffs, he said.
And Smuckers warned investors in the three -month conference meeting in early June, that coffee tariffs focused on the profit. Coffee constitutes about one third of the company’s income.
“Green coffee is a natural resource that cannot be raised in the United States because of its trust in a tropical climate,” Smuckers CEO Mark Smucker said. He said. “We are currently buying about 500 million pounds green coffee a year, it comes from Brazil and Vietnam, most of which produces two largest coffee.”
Vietnam, who announced a temporary trade agreement with the White House at the beginning of this month, supplies about 8% of the US green coffee beans. In accordance with the agreement, the US will apply 20% task to Vietnam imports.
Consumers who prefer a caramel Macchiato from Starbucks for caffeine strokes will see a quieter effect on their wallets.
After a few quarters of US sales, Starbucks CEO Brian Niccol said at the end of 2024, the company in 2025, hoping to recover the prices of customers who complained about how expensive their beverages are, he said. While waiting for his return to be kept, Starbucks can choose to swallow higher coffee costs.
The coffee giant also takes advantage of the diversity of the menu, which contains the popular refreshing line both in suppliers and now. Starbucks imports its coffee from 30 different countries and comes from coffee about 10% of the cost of goods sold in North America.
TD Cowen Analyst Andrew Charles TD Cowen Analyst Andrew Charles, written as a note to customers on Thursday, assumes that approximately 22% of the beans come from Brazil, the new trade mission may mean a 0.5% increase in the cost of goods sold in North America. Starbucks’ packaged drinks distributed by Nestle may see that the costs of goods sold increase by 3.5%. According to Charles, it represents a 5 -cents drag in annual earnings per share.
For the rival Holland Bros, higher coffee costs do not harm the profitability. Coffee constitutes less than one tenth of the cost of goods sold for the driving coffee chain. Assuming that Charles’ estimates, the Netherlands Bros, assuming that more than half of Brazil caused by Brazil, assumes that the cost of goods sold will only increase by 1.3%.
