Cost Pass-Through and Sticky Prices in the Ground Coffee Industry
U.S Department of Agriculture Online Journal, 2007
Posted: 5 Jun 2013
Date Written: July 4, 2006
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 that 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. We do not find robust evidence that coffee prices respond more to increases than to decreases in costs.
Keywords: cost pass-through, retail prices, manufacturer price, commodity costs, coffee, Demand and Price Analysis
Suggested Citation: Suggested Citation