The Bitter Truth About Why Your Coffee Isn't Tasting as Good Lately

By Rich Smith, The Motley Fool

Posted 5:30AM 06/19/12

Oscar Wilde once said, "A cynic is someone who knows the price of everything and the value of nothing."

If he was right, the supermarket aisles of America are probably crowded with coffee-drinking "cynics" right now.

Reuters is reporting that many of America's major brands have been quietly tweaking their coffee blends. While most coffee companies consider their blends trade secrets, and are loath to disclose exactly what goes into them, both circumstantial and direct evidence suggests they're now substituting lower-grade Robusta beans for some of their pricier Arabica, and degrading the quality of our coffee.

Here's What's Brewing

Research out of agricultural bank Rabobank confirms that demand for Arabica beans among coffee buyers "has fallen 27% year-to-date, while Robusta [demand] is 25% higher." This seems to confirm a widespread alteration of the bean mix.

At least one coffee roaster has admitted it. In November, Massimo Zanetti USA, which roasts for both Chock full o'Nuts and Hills Bros., publicly confirmed upping its Robusta usage by 25% this year.

Why the switcheroo? Prepare to not be shocked. The answer is: price.

Last year, a shortage of Arabica caused prices of the premium bean to spike as high as $3 a pound -- $2 more than what a pound of Robusta would cost. This compares to a five-year historical trend of Arabica costing closer to 70 cents more than Robusta. In recent weeks, the trend has reversed, with Arabica prices falling to just a 62-cent premium over Robusta.

What's It Mean to You?

If you're a coffee purist, then this all probably sounds like dirty pool.But really, all the coffee companies are doing is trying to match demand for their product with a price people are willing to pay. And already, mainstream coffee brands such as Kraft's (KFT) Maxwell House and J.M. Smucker's (SJM) Folgers have responded to falling coffee prices by lowering the prices they charge consumers.

More premium coffee purveyors such as Starbucks (SBUX), in contrast, have been slow to follow suit.

When you get right down to it, if there's more Robusta in our coffee but people still find it drinkable, and the coffee's getting a bit cheaper in consequence, where's the harm?

Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks. Motley Fool newsletter services have recommended writing covered calls on Starbucks.

Wednesday, June 20, 2012