Coffee is a daily beverage for many people and a must-have drink for breakfast. However, the expectation of decreasing coffee prices is becoming increasingly unlikely for coffee lovers. Will coffee become a luxury item in the future?
Due to severe disruptions in coffee supply from Vietnam and Brazil, the prices of premium Arabica coffee beans favored by coffee chains like Starbucks and more affordable Robusta coffee beans have significantly increased. Roasters and coffee experts indicate that due to factors such as climate change, the global coffee supply is decreasing, and prices may remain high for a longer period of time.
The International Coffee Organization (ICO), a government intergovernmental organization established with the support of the United Nations in 1963, reported last month that the ICO composite price (the main reference price of the global coffee industry) reached a 13-year high at an average of 226.83 cents, approximately $2.27 per pound.
CNN believes that coffee is becoming a luxury item that consumers cannot escape from.
Michael Hoffmann, an honorary professor at Cornell University’s College of Agriculture and Life Sciences, told CNN that recent weather conditions have impacted coffee bean production, noting that “coffee is more sensitive to temperature changes than many other crops.”
“Imagine more severe weather, continuously rising temperatures, and direct impacts on coffee plantation workers,” he said. “For consumers, coffee may only become more expensive.”
Vietnam, a major producer of Robusta coffee beans, has been hit by drought, leading to the fourth consecutive year of global shortage, while drought conditions in Brazil have caused a decrease in Arabica coffee bean production from damaged trees.
Coffee industry insiders often say that when Brazil sneezes, the rest of the world catches a cold, referring to Brazil as the largest producer of Arabica coffee, a high-quality coffee variety that accounts for over 60% of coffee production.
Earlier this month, the price of Arabica coffee beans reached the highest level in over two years. Some of the price increases are related to adverse weather conditions.
The preferred raw material for instant coffee is Robusta coffee beans, and as more people enter the Robusta coffee market, prices have reached their highest level since the 1970s.
Neil Rosser, director of coffee operations and commodity consultant at Bison Luxley Commodities, told CNN that while Arabica coffee usually dominates the coffee market, the rising costs of Robusta coffee this year are pushing up coffee prices overall.
Italian coffee maker Lavazza told CNN in a statement that the company’s price hikes this year are due to various reasons.
“Combining factors such as poor harvests, climate, the conflict in Ukraine, the Red Sea conflict, speculation, and a strong US dollar has brought a ‘perfect storm’ to the coffee industry, and coffee prices have been spiraling upwards since the outbreak of the pandemic,” the company said.
Giuseppe Lavazza, the company’s CEO, told the Financial Times in June that he expects the price of supermarket coffee in the UK to rise another 10%.
Some coffee companies that acquired coffee beans before the latest price hikes are able to avoid further increases. The world’s largest coffee chain, Starbucks, typically locks in green coffee prices 9 to 18 months in advance, allowing them to withstand price fluctuations for a period of time. Smaller coffee shops may not have the same level of flexibility.
According to Bloomberg, at a Blue Bottle Coffee shop near Central Park in New York, a 16-ounce sweet latte costs $8.25, and adding almond milk brings the price to $9.25.
Brett House, an economics professor at Columbia Business School, told Bloomberg that when it comes to price increases, “everyone has a breaking point.” With prices high as they are now, consumers may start opting for cheaper options like drip coffee instead of higher-end espresso-based drinks to bring the cost to around $3 per cup.
“I would still enjoy my coffee, but within the same store, I’d downgrade to less expensive items,” he said.
Andrew Stone, Chief Brand and Culture Officer at Bluestone Lane, told Bloomberg that if you are more sensitive to coffee prices, perhaps you might choose not to have a second cup of coffee in a day.
“Having two cups of cold brew a day might be too expensive,” he said. Bluestone Lane operates several dozen stores in Boston and Los Angeles.
Rosser told CNN that if costs continue to remain high, the inevitability of even more expensive coffee is looming.