Economic Research Report No. (ERR-38) 28 pp
Cost Pass-Through in the U.S. Coffee Industry
A rich data set of coffee prices and costs was used to determine to what extent changes in commodity costs affect manufacturer and retail prices. On average, a 10-cent increase in the cost of a pound of green coffee beans in a given quarter results in a 2-cent increase in manufacturer and retail prices in the current quarter. If a cost change persists for several quarters, it will be incorporated into manufacturer prices approximately cent-for-cent with the commodity-cost change. Given the substantial fixed costs and markups involved in coffee manufacturing, this translates into about a 3-percent change in retail prices for a 10-percent change in commodity prices. Coffee manufacturers do not appear to take advantage of manufacturing and production cost variation to raise retail prices; retail prices respond the same to both increases and decreases in costs of coffee beans.
Keywords: Coffee, retail prices, pass-through, manufacturer prices, price-cost relationship
In this publication...
- Entire Report
- Report summary
- Abstract, Contents, and Summary
- The Coffee Value Chain
- Data Description
- How Important Is the Coffee Bean in Determining Costs?
- Differences in Prices Across Markets
- Responding to Costs
- Asymmetric Cost Adjustment
- Pricing Strategy Patterns