On Tuesday, the price of arabica surpassed $3.44 per pound, reflecting an increase of over 80% since the start of the year. Robusta beans, which are cheaper and more bitter, have also risen sharply, hitting fresh highs this autumn.
The price surge follows challenging weather conditions in the world’s leading coffee producers, Brazil and Vietnam. Brazil, the largest producer of arabica beans, has suffered its worst drought in 70 years, followed by unusually heavy rains that threaten this season’s flowering crop. Vietnam, the top supplier of robusta, has also experienced weather extremes that are expected to limit future yields.
These supply concerns emerge at a time of steady global demand for coffee. Consumption in countries like China has more than doubled over the past decade, while roasters and traders report that inventories of beans are critically low.
For several years, major coffee brands including JDE Peet’s (the owner of Douwe Egberts) and Nestlé managed to absorb higher raw material costs, protecting consumers from price increases to maintain their market positions. However, industry insiders say that this strategy is reaching its limit. With soaring bean prices putting intense pressure on profit margins, brands are now preparing to pass costs along to customers in the first quarter of 2025.
Italian coffee giant Lavazza, which until recently tried to shield shoppers from rising costs, confirmed that it was ultimately forced to adjust its prices. David Rennie, Nestlé’s head of coffee brands, has also admitted that the firm will need to raise prices and possibly adjust package sizes, describing the situation as “tough times” for the entire industry.
Commodity analysts expect the upward trend in coffee prices to persist for some time, with the impact of extreme weather on supply—and consistently strong consumer demand—making it likely that coffee lovers will feel the pinch in their wallets well into next year.
Jamie Young
Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the 'covid era' and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine's coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk
