US Coffee Producers Defend Steep Prices

FOR the past few weeks, a sign at the counter of a popular Boston gourmet coffee shop has alerted customers to a rise in coffee prices, stemming from frost damage to Brazil's crop. Though the sign is now gone, prices have remained high.

Last week, coffee futures prices dropped more than 12 percent, raising questions about the real extent of the damage to Brazil's crop. Early this week, however, prices again rose sharply after a United States Agriculture Department report confirmed significant frost damage in Brazil, the world's largest coffee-producing country. What will happen next is a matter of speculation.

``There has been intense volatility,'' says Andrea Cook, corporate affairs manager for San Francisco-based Nestle Beverage Company, maker of Hills Bros. coffee. ``Even before the frosts, it was apparent that there was a worldwide shortage of green coffee beans - there was not enough to meet demand.''

In May, the wholesale price of a 13-ounce can of Hills Bros. coffee was $1.89, Ms. Cook says. By July 14, the price had risen four times to $3.44. Last week, the company cut the price to $3.24.

Critics say, however, that US coffee producers have been too quick to raise their prices and keep them high. Last month, Richard Kessel, executive director of the New York State Consumer Protection Board, asked the Justice Department to investigate the hikes in retail prices.

The coffee producers counter that they have done nothing wrong. ``Our principle is to follow the green coffee market,'' says Judy Ellis, a spokeswoman for Cincinnati-based Procter & Gamble, which markets Folgers coffee. ``We've stuck with that principle ... and we have data to support us that when prices are up [on the market], we generally reflect that in Folgers' prices. It's not as though we only raise prices and never come down. We do and we have [come down] - even in the last couple of weeks.''

``All we can do is hope our loyal consumers will stay with us,'' Ms. Ellis adds.

Specialty coffee producers hope for the same. When prices began rising in March in reaction to the worldwide shortage, Brothers Gourmet Coffees, the largest roaster of gourmet coffee in the US, absorbed the cost itself. The company, based in Boca Raton, Fla., withheld a price increase until June 21. Despite that hike, Brothers Gourmet anticipates that consumers will continue to buy its coffee, spokesman Tony McCale says.

``People expect to pay a premium price for gourmet coffee and they're willing to do that,'' he says. ``They also understand that prices are increasing for us.''