Starbucks returns in a big way

You might remember that last year Starbucks stopped buying coffee.

With arabica prices spiralling upwards and threatening to break through the proverbial roof, the coffee giant pulled out of the market all together and left everybody else to squabble over the bean reserves that were going for $2.25 per pound.

With Starbucks’ gigantic buying power this didn’t hurt them. Due to the way that they operate, they secure large swathes of coffee in advance. So by closing their chequebook for a couple of months they sheltered themselves from paying these increased prices.

It would be legitimate to question this from a moral standpoint: Is it okay for Starbucks, one of the largest purchasers in existence, to stop buying coffee when it’s trading at its highest level for two years and thus denying farmers a bumper payday?

Of course it isn’t a simple black and white issue however. Business never is. Starbucks could afford to pull out; others couldn’t.

Starbucks knew that the main factor behind the increased costs wouldn’t last forever as harvests would improve and inclement weather patterns would eventually peter out.

And now they have, with Kevin Johnson, Starbucks’ chief operating officer, praising his buying team’s ‘patience’ over the past couple of months.

The result of which has seen their “costs for fiscal 2015 [be] below average market prices.”

Speaking to investors whilst they announced some seriously impressive profits, it was also released that the company had already accrued 94% of the coffee they need this financial year thanks to a late January surge.

“Due to the recent drop in coffee prices, we have been locking in supply for [fiscal] 2016,” Johnson said.

Locking in they have been. This time twelve months ago it is believed that had only acquired 40% of the coffee they needed for the fiscal year.

“We actually did a really good job buying below the market,” said Scott Maw, the company’s chief financial officer.

“We wait, and we were patient. And when [prices] came into our target range, we filled up our needs for the year.”

But despite this rush to buy their coffee reserves and the apparent backslapping all round, Maw expressed some caution recently, playing down that the potential economic benefits of their policy might not be as high as some analysts are predicting.