Coffee hedging and warehouse management help Starbucks amid global price increase
With the current green (unroasted) coffee prices hike this month after unusually cold weather hit Brazil, following a drought that hampered this year's production, Starbucks gets unequivocal advantage over its competitors because of the company’s sourcing system. The company has an 18 months advance purchasing methods using complex hedging and warehouse management system.
"We have created a very thoughtful approach to how we source, warehouse and use hedging techniques to ensure we always have supply of premium Arabica green coffee at an attractive cost basis," Kevin Johnson, Starbucks’ CEO explained. . "I think we may be the only large buyer of green coffee that uses this approach and that will serve us well, as it gives us a significant advantage relative to our competitors, who if they don't buy this far in advance will certainly not have that cost structure that we put in place."