Coffee prices are at a fresh all-time high amid a global supply crunch, putting pressure on consumer prices and leading to volatility in stocks ranging from Starbucks (SBUX) to Dutch Bros (BROS).
The average price for a pound of ground roast coffee has hit a record $7.25, according to the U.S. Bureau of Labor Statistics. Coffee prices have surged in recent months as a drought has devastated crops in Brazil, the world’s top producer of coffee beans.
The current situation is forcing coffee wholesalers, distributors, and retailers to raise prices for consumers who were already paying high prices for their daily caffeine jolt. The record prices are negatively impacting the entire supply chain for coffee, with cash-strapped companies struggling to finance the transportation of beans from where they’re produced.
Impacted Companies
Companies impacted by the record coffee prices include everyone from retailers Starbucks and McDonald’s (MCD) to distributor Farmer Bros. Co. (FARM) and food company Kraft Heinz (KHC), which owns the Maxwell House coffee brand that’s sold in grocery stores.
Starbucks Chief Financial Officer Rachel Ruggeri said recently that the company’s products sold in supermarkets will be affected “in a more meaningful way” due to rising coffee prices. With prices at record levels, companies are reducing their inventories of coffee beans and making purchases in very small amounts.
SBUX stock has fallen 15% in the past month due in large part to skyrocketing coffee prices.
Is SBUX Stock a Buy?
The stock of Starbucks has a consensus Moderate Buy rating among 24 Wall Street analysts. That rating is based on 17 Buy, six Hold, and one Sell recommendations issued in the last three months. The average SBUX price target of $111.64 implies 15.61% upside from current levels.
Read more analyst ratings on SBUX stock
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