Starbucks blames speculators for soaring coffee prices
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November 12, 2010 | 07:57
High coffee futures prices are unsustainable and driven by financial speculators, the chief executive of Starbucks Corp said on Friday.
"It is quite unfortunate that we are witness to record-high coffee prices, the highest level in almost 15 years, and there is zero, let me repeat, zero shortage of coffee and there is no demand problem," Howard Schultz told Reuters in an interview.
"The situation is, the financial speculators have driven the commodity market to record highs and coffee is one of them," Schultz said.
Arabica coffee futures are at a more than 13-year high, while raw sugar futures are near a 30-year high.
Schultz was in Kunming, China to sign an agreement with the government of Yunnan province to open and operate the firm's first coffee bean farm.
Starbucks had opportunities over the past few decades to open its own coffee bean farm but had turned them down, Schultz said. The farm in China's southwest is Starbucks' first foray into growing its own beans.
"It demonstrates our long-term strategic commitment to China, which undoubtedly will be the fastest growing market for us," Schultz said.
Starbucks has about 800 stores in the Greater China region, including Hong Kong and Taiwan. About 400 of those are in mainland China alone.
Schultz reiterated his view that China will eventually be the second-largest market for Starbucks, after the United States, and that he sees it having over a thousand stores in the country.
He said he was pleased with the welcome Starbucks was getting from consumers in smaller cities. It is now operating in 31 cities in the country.
"The response is like Shanghai and Beijing; it is unbelievable to us," he said.
China is traditionally a tea-drinking country, but with increased urbanisation and changing consumption trends, coffee drinking has taken off amongst the young and urbane.
Starbucks gave an upbeat 2011 view earlier this month, prompting brokerages to up its price targets on the stock.
Despite a still-stuttering economic recovery and higher drink prices, Starbucks has continued to lure customers to its stores. [ID:nSGE6A409I]
Schultz told a news conference earlier in the day that the firm's U.S. business was the strongest it has been since the financial crisis.
During 2008 and 2009, Starbucks shuttered stores and shaved costs as consumers refrained from discretionary spending. The firm introduced its instant coffee Via in September last year as a way to boost growth.
Via is sold in the United States, Britain, Canada and Japan. Schultz said there were plans to bring Via to China but did not give a time frame.