• Financial Times, Thursday, March 6, 2008 12:15 PM

Both Kraft (Maxwell House) and Procter & Gamble (Folgers) have twice increased the price at which they sell coffee to retailers in the U.S. in the past month, highlighting the pressure food companies are under to pass on cost increases. Kraft has also lifted prices in Europe.

Kraft this week became the latest company to increase prices, lifting them by 4% as wholesale prices for unroasted robusta and arabica coffee beans hit their highest levels in more than a decade. The price of robusta coffee futures contracts traded in London have soared this year, with the May contract rising by some 40% as global demand for coffee runs ahead of supply.

Food companies blame high wholesale coffee prices on increased hedge fund activity in the commodity markets. But analysts say that food companies did not hedge their coffee purchases adequately, and need to pass on price rises quickly to avoid losses. Retailers decide how much of the increase to pass on to consumers.

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