Sara Lee Raises Retail Coffee Prices

Sara Lee Coffee & Tea (search) said Wednesday it was raising its retail coffee prices to keep pace with 14 percent hikes by other major roasters as global bean supply next year shifts from surplus to deficit.

The retail coffee division of Sara Lee Corp. (SLE) said it will increase prices on Monday by 8 cents per 13-ounce equivalent can, following a 20-cent increase in July, for an increase of about 14 percent in the past five months.

"We increased prices by 20 cents back in July, so over the last five months it's gone up 28 cents," Julie Ketay, a company ent.

Sara Lee said the increase will affect all retail roast and ground products under the Hills Bros, Chock Full o'Nuts (search), MJB and Chase & Sanborn (search) brands. The company's Douwe Egberts-Senseo (search) brand, instant coffee and Hills Bros cappuccino products are not affected by the increase, it said.

In addition, the company's food service division will increase its prices 35 cents per pound on all roast and ground products, effective Jan. 17.

U.S. roasters Procter & Gamble Co. (PG) and Kraft Foods Inc. (KFT) over the past week each increased retail prices by 28 cents per 13-ounce equivalent, or 14 percent, on their Folgers and Maxwell House roast and ground brands, respectively.

The roasters attributed the price hikes to higher prices for green coffee beans on the futures market, which have risen to levels not seen in more than four years on prospects for global consumption to outpace production next year.

The International Coffee Organization (search) expects global demand for coffee to surpass output by about 7 million 60-kg bags next year. The ICO predicts 2005/06 world production at about 107 million bags, down about 6 percent from 114 million bags for the 2004/05 season.

Brazil, the world's biggest coffee producer and exporter, is expected to have a 17 percent shortfall in its 2005/06 production from this year's harvest of 38.6 million 60-kg bags, according to the country's agriculture ministry.

A downturn in Brazil's biennial crop cycle, increasing fertilizer costs and poor weather are the primary reasons for the expected drop.

"Reduction in the size of this year's Brazilian coffee crop, and estimates that next year's crop will be lower, have caused significant movement in the NY "C" market," Sara Lee said in a statement.

On the New York Board of Trade (search), the price of the most-active arabica coffee contract for delivery in March rose to a peak $1.025 per pound on Dec. 2 -- its highest level since July 2000.