Rising Coffee Prices: Reasons Why We Have to Pay More for Our Enjoyment
For many, a cup of coffee is essential for a good start to the day, and it often doesn’t stop at just one. Espresso, latte macchiato, and cappuccino are also high on the list of favorite drinks. However, the fact that coffee is becoming more expensive leaves a bitter taste for many consumers. Have you also wondered why you’re paying more and more for Robusta and Arabica coffee beans? The reasons for this significant and ongoing price increase are varied.
Expensive Robusta and Arabica Coffee Beans: The Current Situation
You may have noticed that the price of your coffee has increased compared to what you paid a few years or even just a few months ago. It's not simply a matter of strategy or greed on the part of roasters and retailers. Instead, these cost increases are the result of soaring prices for green coffee. For the two most important varieties, Arabica and Robusta, prices on the global market have almost exploded since 2022. In 2024, stock market prices are nearly 60% higher than in the previous year.
This situation can't be attributed to just one cause. There are several reasons why coffee beans have become more expensive, including:
- climate change and lower yields
- higher production costs
- longer transport routes
- increased demand
- changes in the global market
Climate Change: Tough Conditions in Producing Countries
Heat is good, but extreme heat is not. Coffee beans, both Robusta and Arabica, prefer relatively stable temperatures, sufficient moisture with moderate rainfall, and balanced sunlight. However, the reality in many producing countries is quite different.
Extreme weather conditions are no longer rare for coffee producers. Brazil, the world’s largest coffee exporter, has experienced several winters with frost and prolonged drought. Vietnam’s delayed rainy season and subsequent drought are expected to result in a low harvest yield for 2024. In India, for example, heavy rainfall has impacted the harvest severely, reducing coffee yields.
Production Costs: Rising Expenses Across the Board
The fact that you’re paying more for your coffee is the result of rising costs across the entire production and supply chain. The main cost drivers include:
- Producers: Higher energy and labor costs Prices are rising in almost all areas: coffee farmers face higher energy costs, and wages for workers have increased, costs which are (at least partially) passed on to their customers.
- Transport: Container shortages and detours Transport is also heavily influenced by energy costs, as massive container ships require large amounts of increasingly expensive fuel. Added to this are container shortages and longer waiting times at ports. Additionally, the Red Sea route has become risky due to attacks by the Houthi militia, forcing a detour around South Africa, which not only takes more time but also costs more.
- Roasters: Higher energy and packaging costs Roasters also face additional costs. While the energy required to roast Robusta and Arabica beans has remained constant, gas prices have risen. Moreover, airtight and light-protective packaging required for long-term storage has become more expensive due to increased demand and supply shortages.
Demand: Why Coffee is Becoming More Popular
Even before water and beer, coffee is the number one favorite drink in Switzerland and Germany. This has been the case for decades, but the Covid-19 pandemic has further boosted coffee demand. On average, nearly four cups of coffee are consumed per person daily. No one wants to give up this hot, invigorating drink voluntarily. Even rising costs have (so far) not led to a decrease in coffee consumption.
The demand is increasing not only in countries already known as coffee-drinking nations but also in other countries such as India, Brazil, and Mexico, where coffee consumption has become more popular, making it an even more sought-after product.
Another factor that should not be underestimated is the EU’s deforestation regulation, which will come into force at the end of 2024. Producers must prove that the production of coffee beans (or other products) has not caused deforestation or other forest damage if they wish to export to the European Union. Due to this strict requirement, traders worldwide fear a further shortage and have stockpiled heavily. The result: supply is shrinking. In the Swiss government’s view, this regulation is not yet feasible, although it was discussed on August 14, 2024.
Outlook: Prices Will Remain High
A short- and medium-term recovery in the prices of Robusta and Arabica coffee beans is not expected. Instead, experts do not foresee a quick recovery but rather a further increase in costs. This unfavorable trend is further fueled by rising prices in the stock markets. To prevent coffee from becoming an unaffordable luxury item and to ensure it remains the affordable number one drink in the long term, there is an urgent need for solutions across all cost-driving areas.