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Thursday, March 10, 2011

Will the price of coffee go a little too Venti?

Insects and infection are cutting into the production of coffee in Columbia, according to this story found in today’s New York Times. Click here to read it.

Implications: Consumers cut back on their visits to designer coffee shops during the great recession. With the recovery underway—to different degrees, depending on your business category or region—media reports suggest that people have been returning to their previous patterns, in terms of visit frequency and expenditure per purchase.

If supply and demand issues cause significant increases in coffee prices, it will be interesting to see whether this category represents a good case study… as to where the tipping point of spending control might be, post-recession. It might be smart to watch revenue reports from companies like Starbucks, Caribou Coffee, and Seattle’s Best… just to see whether their income reflects a consumer whose love of coffee is resilient enough to survive a more expensive indulgence, or whether some folks might be inclined to draw the line on that expenditure, either through fewer visits, or lower-priced options once they arrive.

Sidebar: Starbucks seems to be getting a lot of press about their new “Trenta” option. (See this story from the Dallas Morning News for one example of the coverage.) But I’m not sure whether this super-sized cup of coffee was invented out of consumer demand (is this a response to something consumers have asked for), or just someone’s big idea of a big idea.

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

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