Coffee lovers may notice that their preferred beans are no longer available, but they will be back soon, albeit at a 25% price increase.
Retailers are negotiating with roasters such as Lavazza, Illy, Nestlé, and JDE Peet’s to pass on the growing price of arabica beans.
Due to four consecutive bad harvest seasons brought on by unfavorable weather, Arabica coffee prices have almost doubled in the last year.
Coffee To Get 25% More Expensive
Price increases are being resisted by retailers, which is postponing sales and creating short-term shortages on store shelves.
For instance, the Dutch retailer Albert Heijn temporarily ran out of items like Senseo and Douwe Egberts but restocked them on March 20 at a higher cost.
In order to keep coffee reasonably priced, Albert Heijn stated that it would cover a portion of the price increase.
Ninety percent of its global price negotiations are finished, and JDE Peet’s warned of declining profits as a result of rising coffee costs.
After a 70% increase in price last year, mostly as a result of Brazil’s extreme droughts, Arabica bean prices increased by more than 20% this year.
Since raw beans usually make up 40% of wholesale coffee costs, a 28% increase in retail prices could result from fully passing on last year’s increase to customers.
Reg Watson, an analyst at ING, projects price increases of 15–25%, with some markets experiencing the entire increase at once.
The dollar-based pricing of raw beans is causing even more drastic price increases in nations with weaker currencies, such as Brazil.
Three Coracoes, a major roaster in Brazil, increased prices three times: in December by 10%, in January by 11%, and in March by 14.3%.
Retail Prices Increased by 40% Last Year
Retail prices increased by 40% last year due to a 170% local currency increase in coffee prices, and more price increases are anticipated soon.
According to Brazil’s coffee association (ABIC), consumers are responding by limiting their coffee consumption and cutting back on waste.
Despite a 4.6% increase in prices, coffee sales volumes in North America and Europe decreased 3.8% last year.
A greater decline in sales volume is anticipated in 2024 as a result of steeper price increases.
J.M. Smucker, a U.S. roaster that sells Folgers, Dunkin, and Café Bustelo, anticipates lower sales volumes and plans additional price increases.
Supermarket Private Label Coffees Are Becoming More and More Popular
As consumers look for less expensive options, supermarket private label coffees are becoming more and more popular, which is hurting sales of premium roasters.
The market share of private label coffee increased from 20.51% in 2021 to 23.12% in 2024 in the United States.
Roasters have to decide whether to increase prices or absorb costs, both of which reduce profit margins.
The financial strain is even being felt by Starbucks, where beans only account for a small percentage of a cup’s price.
Roasters and traders are having trouble offloading high costs to supermarkets because they are purchasing very little stock.
Coffee depots in the United States are half full, according to a storage executive, which reflects lower demand and purchasing.
