Coffee prices hit multi-decade highs as supply-chain probs drip down to consumers
That’s that me espresso… Coffee’s getting es-pensive. Arabica-bean futures hit a 27-year high this week, while futures for the lower-cost robusta (think: instant coffee) reached their highest price since the ’70s. Bean prices are jumping as the industry deals with a double shot of supply-chain probs. An extreme drought in Brazil (the top arabica producer) has devastated crops. Its bean haul this season is expected to be 26% smaller than last year’s. In Vietnam (the leading robusta grower) a lack of rainfall shrank shipments; this quarter the region could reap half of its typical supply.
Perk down: Budget-strained shoppers are skipping pricey beans. Sales of at-home coffee dipped more than 1% this year after surging in 2020 (remember dalgona coffee?).
French-pressed… Coffee sellers have been trying to figure out which strategy will boost their sales: passing down costs by raising prices, or keeping prices steady even as it squeezes margins. Nestle, the world’s biggest coffee maker, has raised java prices twice since 2022 and said more hikes are on the way. Meanwhile, Starbucks and coffee-pod maker Keurig Dr Pepper tried cutting prices and using promos to boost sales, but said that strategy failed. Now they plan to raise prices and nix promos. Downmarket, Folgers owner JM Smucker just reported its sales surged last quarter as shoppers opted for its more affordable joe.
Know your customer… Some shoppers are trading down to budget brands to get their caffeine fix. But when it comes to treating themselves to primo beans and fancy lattes, discounts don’t seem to affect coffee-buying cadences. When an item has “treat yourself” status, customers may buy it less often, but be willing to stomach higher prices when they do.