Coffee drinkers aren't giving up their daily cup of joe as bean prices rise, but they are leaning toward options that offer better value.
That shift is producing sharply different results for companies that sell ground coffee, pods, and made-to-order drinks. The question is which companies can keep passing along higher bean costs without losing customers.
Raw coffee costs have eased from last year's highs, but remain historically elevated. Benchmark Arabica coffee futures, at about $3.30 a pound, are roughly 45% above 2024 levels.
Consumers aren't necessarily moving to products with the lowest sticker price-they are gravitating toward those that offer the best combination of quality, convenience, and cups-per-dollar.
J.M. Smucker's packaged-coffee business is still growing despite higher prices, while Keurig Dr Pepper has seen a much sharper volume decline in K-Cups. Nestlé shows a split between stronger Nescafé and softer Nespresso capsule demand. Coffee chains such as Starbucks and Dutch Bros, meanwhile, have continued to grow traffic and sales despite higher bean costs.
In its latest earnings report on Wednesday, J.M. Smucker said sales in its U.S. retail coffee business rose 13% from a year ago. While higher prices contributed to much of the growth, surprisingly, sales volume went up as well-helped by brands like Café Bustelo and licensed Dunkin' packaged coffee.
Keurig Dr Pepper's results told a very different story. Its U.S. coffee sales fell 3.2% in the June quarter. Falling sales volume and consumers switching to cheaper products negated the pricing benefit. K-Cup pod shipments fell 8.3% from a year ago, excluding accounting changes caused by the firm's acquisition of JDE Peet's.
Nestlé offers telling insight because it competes across several formats. The company noted that Nescafé, which mainly sells instant and soluble coffee, was a major growth driver in the second quarter, while Nespresso, its proprietary coffee capsules, reported softer consumption in some markets.
Nestlé CFO Anna Manz told investors that coffee demand has been historically resilient to price hikes, especially for portioned products like capsules. More recently, however, newer Nespresso customers tend to have less purchasing power, the company said, making affordability increasingly important.
Fresh data from Circana, a Chicago-based market research firm, suggest that consumers seem to prefer cheaper options lately. Over the 52 weeks ending on Aug. 9, prices per unit of ground coffee increased 22%, outpacing the 10% gains of single-cup coffee. However, sales volumes for ground coffee shrank less than single-cup coffee-likely because its unit price was lower.
Whole coffee beans and instant coffee, by contrast, saw sales volume increase 6.8% and 5.8%, respectively, from a year ago, even though both groups have also seen prices rise about 20%. Instant coffee has the lowest unit price among the four major formats.
Coffee shops are playing a different game since they are better able to absorb price shocks.
Chains like Starbucks and Dutch Bros aren't simply selling beverages. They attract customers through customized flavors, convenience, loyalty programs and, in Starbucks' case, a place to spend time. The coffee itself is only part of what consumers are paying for.
Starbucks' U.S. comparable sales rose 7.9% in the latest quarter, mostly driven by transaction growth rather than higher prices. Likewise, Dutch Bros posted 8.3% same-shop growth for company-operated stores. Its CFO said in June that the chain has substantial pricing power, but has chosen to absorb much of the coffee-cost spike rather than passing it on to customers.
Coffee beans will likely stay expensive even though prices have come down from recent peaks, as a strengthening El Niño climate phenomenon threatens crops across several major producing regions.
Brazil had been expected to harvest a record crop in 2026, but the nation's coffee industry association has warned that extreme heat and irregular rainfall could cut the 2026 crop by 15% to 20% from its potential. Colombia's coffee federation expects its 2026 output to fall about 8% from last year.
If the divergence in coffee demand persists, Smucker looks well positioned as its packaged coffee brands have demonstrated strong pricing power. Still, Smucker CEO Mark Smucker said the company remains cautious about future sales due to volatile commodity prices and the generally weak consumer environment, despite rising coffee volume in the latest quarter.
Starbucks and Dutch Bros, meanwhile, can protect traffic by monetizing the broader beverage experience. Their drinks carry much higher selling prices than the raw coffee input itself, giving them more room to offset bean costs and keep prices stable.
Keurig faces a tougher situation. If consumers increasingly view pods as expensive relative to ground or instant coffee-and private brands offer an easy substitute-the K-Cup system may discover that even a deeply ingrained coffee habit has a price limit.
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