While coffee producers end the season inefficiently due to climate effects, coffee prices are trending upwards. While coffee chains are increasing their products in response to increasing costs, global coffee chain Starbucks is relying on its stocks.
The company has become vulnerable
While the company’s taking fewer precautions against market fluctuations causes concerns, it is noteworthy that the coffee chain, which had a fixed-price coffee contract worth $ 1 billion in 2019, will only make a contract worth $ 200 million in 2024. Stating that the company is much less protected than in the past, analysts argue that the next 12 months are critical.
New CEO, new strategies
On the other hand, Starbucks’ new CEO, Brian Niccol, aims to revive falling cafe sales and also wants to strengthen the image of the community coffee house. .
The company purchases coffee with two different contract types: fixed price and “price to be determined”. Contracts for which prices will be determined are subsequently clarified according to price fluctuations in the New York futures market. Starbucks also insures its risks using derivative instruments in such contracts. According to the company’s annual report, the total value of price-to-be-determined contracts amounted to $929 million at the end of the fiscal year. This is well below the levels in 2021 and 2022. AlsoThe total value of unroasted and roasted coffees in the company’s inventory is at its lowest level since 2021, at $920 million.
Source: www.dunya.com
