Things are about to get “very scary” for New Zealand’s coffee and café industry, one roaster and café owner is warning.
Richard Corney, managing director of Flight Coffee, which also operates Wellington café The Hangar, had already warned that New Zealand retail coffee prices are unsustainably low.
He now says the sector is in “uncharted territory” as coffee commodity prices hit levels not seen since the late 1970s.
He pointed to the New York City price, which has been lifting year on year over the past five years. He said it now looked to have broken its December record.
A weaker New Zealand dollar did not help, either, he said.
“With both the Arabica and Robusta markets trading at extended unprecedented historic levels, all coffee, both fresh, instant, high quality and low, is going to get much more expensive. The impact these market dynamics are having on coffee roasters, not just in New Zealand but the world over, mean significant price increases for consumers are inevitable.”
He said the average green coffee price, excluding all other input costs, had lifted from $3.76 a kilogram in 2020 to $10.18 a kilogram in 2024 and was at $13.97 so far in January.
“It becomes painfully obvious the margin challenges facing coffee roasters over the past three years. As coffee contracts booked throughout the 2024 period materialize, and dependent on when these were booked, when they end up in our favourite blends with other costs considered, coffee roasters are facing between a 25 percent to 35 percent reduction in margin, possibly more depending on the period you’re comparing this against.”
He said roasters would have to pass on the cost to cafés, and it would be up to cafés how much of that they could absorb.
“If roasters pass on a cost of $5 or $6 per kilo, this represents an increase of $0.10 to $0.12 per cup cost. By cafés putting up prices by $0.50 a cup, they’ll be able to reasonably pass on price increases and offset other unaccounted for cost increases. In reality, when considering the cost increases experienced by hospitality over the last 10 or 15 years, based on the experience at our own café, The Hangar, a cup of coffee should be no less than $8 per cup.”
Marisa Bidois, chief executive of the Restaurant Association, said the rising cost of coffee was yet another pressure point for hospitality businesses already facing rising costs.
“For many cafés, coffee is a cornerstone of their offering, and price hikes on beans add to the squeeze on already tight margins. While some operators may have no choice but to pass costs on to customers, many will absorb as much as they can to remain competitive, putting further strain on profitability.
“Global supply chain disruptions, climate conditions affecting production, and currency fluctuations are all driving up costs, and unfortunately, this isn’t an isolated challenge-businesses across the sector are contending with increased supplier costs across the board.
“To remain sustainable, café will need to review their pricing accordingly, ensuring they can continue to provide quality coffee while covering their costs. We encourage consumers to continue supporting their local cafés, understanding that behind every cup of coffee is a small business working hard to balance affordability with sustainability.”
Brad Olsen, chief executive at Infometrics, said the Bank Commodity Price Index showed Arabia coffee prices were 63 percent higher in December 2024 than a year earlier, at US$7.57/kg, and were more than double the US$3.46/kg seen on global markets back at the end of 2019.
Infometrics analysis of Stats NZ trade data suggests that annual average coffee import prices have lifted 61 percent between November 2019 and November 2024.
“Coffee prices have been forced higher by the same factors that have seen olive oil and cocoa and chocolate prices rise – lower supply but higher demand. Demand for coffee continues to increase, but supply has been hit by more droughts and flooding in key coffee-producing regions in the last few years,” he said.
“Lower supply, and more volatile supply, is keeping prices elevated and jumpy. There was a smaller harvest in some areas in 2024, that have limited supply and are pushing up prices, with a drought in Brazil, and severe weather in Vietnam also hitting.”
