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Massimo Zanetti Beverage USA Inc. has seen a 36% year-on-year increase in its purchases of robusta coffee beans to date due to increased demand for cheaper coffee, a top company official said Friday.
"People have less disposable income, they're spending less on coffee and moving more toward value brands that are a lower cost," said Alfred Mansfield, manager of green-coffee procurement, speaking at Sintercafe, an annual international coffee event.
Robusta coffee beans are cheaper than arabica coffee beans, which are prized for their mild flavor and typically associated with gourmet blends.
Mansfield said his company, a unit of Italy's privately held Massimo Zanetti Beverage Group, has used the cheaper beans for high-quality blends, and hasn't encountered problems securing supplies. He said the lower price of robusta beans has helped the company keep the prices of its coffee products low, although it raised prices earlier this year when coffee futures reached 14-year highs, as did Starbucks Corp. (SBUX), Kraft Food Inc. (KFT) and J.M. Smucker Co (SJM).
Massimo Zanetti has taken other measures to cut spending, such as package downsizing, he added.
The company sells about 140,000 tons of roasted coffee a year, and 80% of the cost of production is for the price of the raw materials, which has been rising at a faster rate than the price of the finished product.
"Green-coffee price increases have really outpaced promoted coffee prices," he said.
On the sidelines of the event, Mansfield said the company usually tries to lower its prices when the coffee market cools. Futures have gone down in recent months, and both J.M. Smucker and Kraft cut prices on coffee items in August. But Mansfield said he isn't aware if the company has made a decision to follow in its competitors' footsteps with a similar move.
Like Smucker, Massimo Zanetti purchases its beans in short time frames before selling, allowing it to take advantage market movements if need be.
Massimo Zanetti doesn't foresee a shortage of supplies of arabicas or robustas for the upcoming season, he said.
Among the company's brands are Chock full o'Nuts, Hills Bros. and Chase & Sanborn.
-By Jean Guerrero, Dow Jones Newswires; 5255-5980-5180; email@example.com