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Coffee Prices Drop, But Your Morning Cup of Joe Isn't Getting Cheaper

Coffee shops keep prices level because they can.

Dan R. Krauss/Getty Images

Oil isn't the only major American import that has seen its price plummet. The coffee market is down too, with prices dropping 33 percent over the past year. The going rate of $1.11 per pound of arabica beans is the lowest in almost two years, reports CNN Money. But before you plan on seeing a discount for your a.m. caffeine jolt, don't get too excited.

Market analyst Peter Saleh tells CNN "you'll never really see [coffeeshops] cut menu prices," noting they cite labor costs built in to the price of your morning latte. But in the past, major brands such as Starbucks have pointed to rising coffee prices as an excuse to charge more. For the Seattle-based chain, the falling prices coincide with the Seattle-based chain's best-ever quarter. Its year-over-year net revenues grew 12 percent over the first three months of fiscal year 2016, to a record $5.4 billion.

So, why doesn't Starbucks pass discounts on to customers when the market dips? Analysts tell CNN Money coffee makes up only 20 percent of the company's overall costs. In addition to increasing wages, Starbucks is offering employees free college tuition, and it's trying to provide jobs for more millennials. Something has to pay for these initiatives.

It seems no matter what Starbucks charges for its beverages, people will keep visiting their local shop. One in 6 Americans received a Starbucks card over the holiday season, according to an earnings report, and the company's loyalty program now has more than 11 million active members in the United States.

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