London: If your favorite coffee beans have disappeared from store shelves, don’t panic- they’ll be back. The bad news? They’ll cost up to 25 percent more.
Major coffee roasters, including Lavazza, Illy, Nestlé, and JDE Peet’s, are negotiating price hikes with retailers following a near-doubling of arabica coffee prices over the past year.
The surge is driven by four consecutive seasons of supply deficits caused by extreme weather, making it increasingly difficult to grow enough high-quality beans to meet global demand.
Stock Shortages
Retailers, resisting the price hikes, have delayed new supply agreements, leading to temporary stock shortages. Dutch supermarket giant Albert Heijn recently ran out of JDE Peet’s products, such as Douwe Egberts and Senseo, before striking a deal that brought them back at higher prices.
JDE Peet’s, one of the world’s largest coffee roasters, has already finalized 90 percent of its price negotiations globally but warned of declining profits due to skyrocketing costs.
Why Coffee Prices Are Rising
Global arabica prices have surged more than 20 percent this year after a 70 percent spike in 2023.
Brazil, the world’s leading arabica producer, has faced its worst drought in decades, severely impacting output. On average, raw coffee beans account for 40 percent of a bag’s wholesale cost.
Countries with weak currencies, such as Brazil- the world’s second-largest coffee consumer face even steeper price jumps. Brazilian coffee roasters have raised prices multiple times, with supermarket costs up 40 percent year-over-year.
Impact on Consumers and Industry
Market data shows a 3.8 percent drop in North American and European coffee sales last year, despite a relatively modest 4.6 percent price increase. With even higher prices expected in 2024, analysts predict an even sharper decline in demand.
Private-label supermarket brands have gained traction as cash-strapped consumers seek cheaper alternatives. US private-label coffee’s market share has grown by 13 percent since 2021, with brands like Tesco’s Finest benefiting from the shift.
Meanwhile, coffee traders and roasters are limiting purchases as they struggle to push costs onto retailers.
