By Mark Seavy

In response to surging costs for whole-bean coffee, some licensed brand suppliers are narrowing their IP assortments and raising wholesale prices.

The cost for arabica beans (approximately 60% of coffee production) and robusta beans (approximately 40% of coffee production) has steadily risen over the past year. In response, licensees have raised their own prices and have also worked in recent months to reduce packaging costs and increase, in the case of K-Cups, the number of pieces in a box.

These strategic adjustments are being done against a backdrop of licensed coffee that typically carries a 10-15% price premium over non-licensed goods.

White Coffee Co., for example, raised its wholesale prices 10% and increased the number of K-Cups in a box to 16 (up from 12). White Coffee sells ground, whole bean, and K-Cups under a range of licensed brands, including Entenmann’s; Mars’ M&Ms, Twix, and Snickers; and Bailey’s Irish Cream. However, White Coffee has narrowed the number of licensed brands and SKUs it sells, said Jonathan White, EVP at White Coffee.

“We’ve increased prices but haven’t been able to get the full amount needed, so we look for each little piece to grab some savings,” White said. “The challenge is the distribution. A lot of the licensed property coffees are in mass and off-price channels, which have gotten squeezed the past couple of years. We are seeking out brands that people will value and will pay a premium for. That way, I do not have to introduce those brands to consumers, and they are willing to pay an extra premium for it.”

The premium that consumers are paying also depends on the coffee beans used in manufacturing. Robusta beans, a key ingredient in expresso and cappuccino, saw prices soar to $5.25 per kilogram in May (pre-pandemic, the price was $2.40 per kilogram). The majority of robusta beans are sourced from Vietnam, where high temperatures and droughts have cut into recent coffee bean production. And, in the case of arabica—much of which is sourced from South American regions that also have suffered droughts recently—prices rose to $5.27 per kilogram in May.

“We have seen inflation in green coffee, both within the robusta bean and also the arabica bean,” said Mark Smucker, CEO at The J.M. Smucker Co., which produces ground coffee under the licensed Dunkin’ brand. “We’ve taken pricing on more of the mainstream aspect of our portfolio. It is a recognition of the increase in our cost basket and the way that we pass along pricing in both inflationary and deflationary environments.”

Increasing coffee prices have not slowed licensing agreements or production, however.

Keurig Dr. Pepper, for example, signed K-Cup licensing deals for Brooklyn Roasting Co.’s Kahawa 1893, Black Rifle Coffee, and Canada’s Kicking Horse, and is transitioning Lavazza from a partnership to a licensed label. It also unveiled a $100-million plan to increase coffee production at its Spartanburg, S.C. plant. Keurig Dr. Pepper also signed a licensing agreement with country music star Kelsea Ballerini for a limited “Ballerini Blend” coffee under its The Original Donut Shop label. Additionally, actress Sofia Vergara recently launched a women-focused Colombian coffee brand.

“The increased prices are definitely going to affect the number of licensing deals that are reached, but at the end of the day a licensed brand helps distinguish your coffee on increasingly crowded retail shelves,” a licensing executive said.