It is a very interesting time for the coffee industry. You may have seen news stories recently sensationalizing the price of a cup of coffee. Soaring prices across multiple facets of the supply chain have driven raw coffee prices to an unprecedented high. The days of your morning coffee being a cheap caffeine hit are indeed numbered. But while prices are set to increase, we feel the need to put into perspective the sweeping changes that have occurred in the global supply chain over the past couple of decades and highlight the improvements in both coffee quality and equity to the producers.
Over the last decade, with the emergence of social media and ever-increasing globalization, coffee consumers have begun to place value on traceability and the knowledge of where the products they consume come from. This, in turn, has prompted the coffee supply chain – once mired in obscurity – to shine a spotlight on individual producers and the work they put into their crop year on year. The ‘single origin’ coffee was born. Of course, increased traceability comes with a cost; traditionally coffee producers are at the mercy of the global coffee market (the C-Price) which fluctuates wildly according to the laws of supply and demand. Specialty coffee (which most cafes deal with nowadays) sits apart from the market in a number of ways. Higher quality coffee demands a higher price and coffee producers require incentive to produce it. As global awareness and an overall demand for higher quality coffee rises, so too does the cost of production. This change has been coming for a long time however, so why the sudden increase in the price of your morning coffee? Below we have illustrated several compounding factors that have affected global supply in addition to the increase in demand for quality coffee:
Increased Freight Costs:
The vast majority of coffee consumed in Australia is imported from overseas. Due to the global pandemic the cost of importing goods into Australia has skyrocketed. The cost of shipping containers and the import/export fees has more than tripled since early 2020 and is projected to keep rising.
Decreased Supply = Increased Demand:
The price of raw coffee has increased, surprisingly not due to the pandemic directly, but due to extreme drought and unseasonal frosts that have devasted the 2021 crop of the world’s largest coffee producer, Brazil. With a drastic reduction in volume and huge swathes of the crop un-sellable, demand for Brazil alternatives has drastically increased. To add to this, Colombia (the second largest producer of arabica coffee) has experienced a period of civil unrest, leading to massive delays and inflated cost of production. These factors alone have created a ‘perfect storm’ driving coffee prices through the roof, independent of the pandemic.
Delays in shipping of up to 60 days has led to a scramble within Australia for raw coffee. This in turn has driven internal pricing upwards for Spot (already landed) coffee. As Australia is such a large coffee consuming nation, the demand is high and, as a result, roasters and cafes are having to pay higher prices in order to secure stock for the year ahead.
Other Cost of Goods:
While the price of raw coffee is a factor, there are also numerous other things that affect the price of your morning cup of coffee. The price of milk and alternative milks are constantly on the rise, the phasing out of plastic-lined takeaway cups has driven up costs for packaging, the cost of labour is also increasing year on year.
To summarise; we tend to think of coffee as a product that is somehow immune to the forces of inflation and global affairs. Decades of advertising campaigns that compare everything to ‘the price of a cup of coffee’ have further deepened this belief that coffee is, and always will be, a cheap commodity – this couldn’t be further from the truth. As a coffee-loving nation, we need to accept the impending reality and continue to support our local cafes, roasters and coffee producers during this unprecedented time. The cost of a cup of coffee is likely to rise by around 50c in most settings; ask yourself next time you see your friendly neighbourhood barista, is this really such an outrageous ask to keep them employed and fairly paid?