Drinking a coffee. Photo: Unsplash
Would you pay $7 for a standard coffee?
New Zealand's coffee sector is under pressure as volatile bean prices collide with a weaker New Zealand dollar, increased freight costs and higher costs of doing business.
One roaster says if coffee prices had kept up with the increase in cafe costs, a flat white would now be selling for $7, not the more like $5 that most cafes price them at.
Stats NZ data shows the cost of an average takeaway coffee has risen from $2.89 in June of 2006 to $3.72 in June of 2016 and $4.79 in June this year.
In Wellington this week, a trim flat white with an extra shot cost $6.30 at Swimsuit.
A medium flat white from French83 in Federal St, Auckland, cost $6, a regular trim flat white from Bleached in New Plymouth $4.40 and an Americano from Moore Wilson in Wellington $4.80.
An oat milk flat white at the Long Beach coffee cart in Northland cost $7.
Internationally, coffee bean prices have made news because they have been increasing rapidly amid forecasts of frost in Brazil that could damage the country's coffee crops.
Richard Corney, founder of Flight Coffee and Wellington's The Hangar cafe, said on top of that there was disruption in the market because crops of robusta beans, which are usually turned into things like instant coffee and pods, had been lower.
That had pushed the price up so that instead of being about half the price of arabica beans, as normal, it was now more expensive for the first time in decades.
"The big multinationals that use robusta to turn into instant coffee, for example, have not been able to get the supply of robusta, it's chewed into lower-quality stocks of arabica and essentially what it's done is strip the market of supply.
"The cost of goods for coffee at this moment in time and contracting forward for me in my organisation is the highest it's been, ever. It's very difficult."
He said the cost of coffee from Brazil, which was the majority of supply, was double what it was two or three years ago.
"There's a major issue with global supply of coffee at the moment. I don't think we're going to see any rationalisation until the Brazil crop materialises which might be November, December."
Alice Burton, head of operations at importer John Burton Ltd, said the weak New Zealand dollar was having an effect.
"We try to do what we can to ease that pricing increase but it's undeniable that prices have gone up dramatically in the last two or three years."
She said prices were up 53.9 percent over the past year.
Coffee beans are traded in US dollars and the New Zealand dollar has fallen from US63c at the end of last year to between US58c to US60c over recent weeks, which made importing more expensive. Freight costs were also up, she said.
Burton said price increases probably needed to be passed on to consumers more than they were.
"In future, consumers will need to start paying a bit more, but what that means it's hard to say. It's up to the business model of the roaster... if they are willing to change blends, what their other costs are."
Corney agreed. "This impacts everyone from Starbucks to Nestle, especially the longer it goes on, it's inevitable that consumers are going to see an increase in their coffee price, whether it's on the shelf or in the cup."
He said the complicating factor was that cafes were under significant pressure at the moment due to the economic downturn, and were loathe to put their prices up.
"It's worse than Covid, if you ask me... we're going to see a lot of cafes close or sell up because it makes no sense... if I put coffee prices up to cafes, what hospitality and cafes need now is cost relief, not increase."
He said the cost of a cup of coffee had changed very little in real terms, but cafes had experienced big increases in their own costs, such as rent, wages and ingredient costs.
"$7 should be what we charge without fear of losing business but people aren't going to pay $7."
He said he expected a "reckoning" for the sector soon.
From the end of this year, coffee supplies could also be constrained by new European Union deforestation regulations, he said, if companies could not prove they were not linked to deforestation.
"There's a lot of anxiousness around the supply of some coffees from 2025. Some countries might not be able to meet those regulations ... what's happening is a lot of these stocks, the volumes that are traditionally in European warehouses have just been bought so there's a major issue with global supply of coffee at the moment."
