Key facts
- Coffee prices are rising significantly due to factors including the war in the Middle East, extreme weather, and increased operational costs.
- A flat white in some London cafes now costs £6.50, with takeaway prices also increasing.
- Arabica bean prices have risen 230% and robusta bean prices 325% since 2021.
- Volatile weather, including a predicted 'super El Niño', is disrupting harvests in key growing regions like Brazil and Vietnam.
- Increased energy, labor, and tax costs are contributing to higher prices for consumers.
- Despite price hikes, demand for coffee remains strong, though consumers may eventually resist further increases.
Coffee prices are experiencing significant inflationary pressures, with some flat whites in London now costing £6.50, mirroring the shock of £10 pints. Experts attribute the surge to a confluence of factors including higher energy bills, exacerbated by the war in the Middle East, and government policies that have increased taxes and wages.
Volatile weather conditions are also playing a critical role. A 'super El Niño' phenomenon, which brings extreme rainfall and drought, is forecast, while Brazil has already experienced unprecedented rainfall in June, damaging bean quality and delaying harvests. In Vietnam, a major producer of robusta beans, farmers are battling early drought, compounded by a 30% year-on-year increase in fertilizer and fuel costs, and a 33% rise in labor expenses.
Lavazza, an Italian coffee company, has warned of 'exceptional volatility' in the sector, noting that arabica bean prices have climbed 230% and robusta prices 325% since 2021. The company has passed these costs onto consumers, with a takeaway flat white at its London cafe rising from £4 to £4.40, and a sit-in version increasing from £5.50 to £6.50. Other chains like Starbucks and Costa also show elevated prices.
Susannah Streeter, Chief Investment Strategist at Wealth Club, indicated that this trend is likely to persist due to volatile arabica prices and elevated operating costs, forcing companies to build price buffers. Despite these increases, Lavazza reported strong sales, suggesting consumers are currently willing to absorb higher costs. However, Streeter cautioned that there are limits to consumer tolerance, potentially impacting casual trade.
David Abrahamovitch, founder of the artisan chain Grind, highlighted the tight margins by keeping his flat white at £4.10, yielding only an 18p profit after accounting for staff, operating costs, and VAT. He noted that the price of green coffee beans has more than doubled since 2024. Paul Rooke of the British Coffee Association confirmed significant and ongoing volatility in global coffee markets, further impacted by domestic factors like rising energy and labor costs. Despite these challenges, demand for coffee remains robust, bolstered by sector innovation.