Words by Phillip Di Bella
In the past 12 months green bean prices have risen by 30-40%.
This begs the question – will coffee, an everyday expenditure for most consumers, become a luxury?
There are a variety of factors behind the rising price of coffee, but the most important one is the price of raw green coffee beans.
“Brazil is experiencing a shortfall in production,” explains Raihaan Esat, General Manager of International Coffee Traders. The world’s largest coffee producer – and the second largest importer of coffee products to Australia – has suffered extreme weather events that have destroyed roughly 20 percent of their coffee plants.
“Unfortunately, these weather events have caused damage that will also affect next year’s harvest, so the market is speculating that there’s going to be a shortage next year as well, which causes prices to go up further.”
To add to this, global shipping constraints have escalated over the past few months, with the ongoing pandemic causing disruption to supply chains around the world. We’ve seen shipping costs double and triple in some cases within the past year.
Cafe owners have had a rough couple of years with the pandemic, and the last thing they want is for the cost of coffee to go up. But many cafe owners buy coffee from roasters, who are having to pay more for green beans, so they can’t keep their prices where they are.
“I’m expecting that we’ll see the price of coffee for cafes go up by about $2 to $3 per kilogram, on average,” says Raihaan. “That cafe owner now needs to make a decision – do they increase the price of each cup by 10 cents, or do they try to find savings somewhere else so they don’t have to put their prices up?”
But finding those savings can be difficult, because it’s not just the shortage of beans from Brazil and rising freight costs that are adding to cafe owners’ expenses. Other trends such as the sheer amount of milk options on offer mean cafes have to carry a wider variety of stock to satisfy customer demand, which also impacts workflow.
“Coffees can’t be bulk-prepared like they used to be. At the same time, nobody wants to wait more than five minutes for a cup of coffee, so you have to keep the speed up, even though we’re dealing with an infinitely more complex product. And the only way to do that is usually to put another barista on.”
How do rising prices affect coffee culture?
While the price of green beans will plateau eventually, we should expect them to remain high for the foreseeable future.
“We’re going to see little increases in the price of a cup of coffee over the next year or two,” says Raihaan.
And rather than giving up their cup of joe altogether, Raihaan expects that the everyday coffee drinker will simply become more choosy about where they buy it. Just as craft beers have become mainstream, we can expect specialty coffees to become more popular as consumers take more of an interest in their coffee’s origin, and the nuances and subtleties of its flavours.
“Right now, I think convenience drives coffee buying behaviour, if we’re talking about your everyday coffee drinker,” Raihaan says.
“If someone drinks a coffee in the morning and another one after lunch, most of the time their choice is based on convenience – they’ll go for whatever’s close by and reliable.
“But if we gradually raise the price by $2, or even $3, then eventually we hit a tipping point where people choose quality and value over convenience, because people can justify any purchase as long as they see the value in it. At that point, the question people ask themselves won’t be, ‘Should I drink coffee or not?’ It will be, ‘Where do I go to ensure I get the most value for my $6 or $7?’ ”
For cafe owners, this means the challenge is going to be delivering value for the $6 or $7 you charge.
“You can’t just bump your price and not give the customer any extra perceived value for it. I’m not talking about giving things away for free – I’m talking about providing great service, remembering customers’ names, and giving them good human interactions.
“If there’s something special about your coffee, let your customers know. If you put your prices up slightly because you buy coffee from a more ethical supply chain, for instance, then you should educate your customers about the benefits of that in your face-to-face interactions, instead of being worried that your customers will complain because they’re just there for cheap coffee.”
While you cannot control the cost of green beans, you can control your other costs, such as rent, wages and buying power. By joining The Coffee Commune you can pool your resources with other business owners to save time and money.
Check out www.coffeecommune.com.au to learn more.