For coffee lovers, getting their caffeine fix is becoming more expensive – and there’s little relief in sight.
It’s one reason Starbucks, attempting a turnaround after a disappointing 2024, on Monday announced job cuts and a further streamlining of operations. And it’s not just coffee chains – with all the costs of labour and order customization – that have seen prices soar. Government data in January showed that the retail price of ground coffee hit a record high of $7 a pound, up from $4 in January 2020.
Behind these surging prices is a complicated mix of drivers. Disastrous growing seasons in the world’s two biggest coffee producers, Brazil and Vietnam, have meant fewer beans on the market. But demand is growing, too: Coffee consumption in China, where the tea-drinking culture has reigned for millennia, has surged 150 percent in the last 10 years, according to the U.S. Department of Agriculture, with its coffee drinkers moving from lower-quality soluble coffee to higher-quality green coffee. As if there wasn’t enough already, geopolitical turmoil and new deforestation regulations are contributing to the squeeze.
And now, the escalating trade wars in the opening weeks of the Trump administration are poised to make it even worse. On Tuesday, President Donald Trump warned that his threats of 25 percent tariffs on Canada and Mexico – paused last month – are “going forward” next week. A levy on Mexico, whose top coffee export market is the United States, would probably ratchet prices even higher.
All this has caused a reaction from producers. Sixty percent of the world’s coffee comes from more than 12 million farmers, many in poverty, growing on plots of smaller than 12 acres, according to an effort from Cornell University and World Coffee Research. And with fewer beans on the market, farmers are either hoarding them or charging a higher price to make up for losses, noted a recent report from CEPEA, the University of São Paulo Center for Advanced Studies in Applied Economics that tracks and analyzes domestic coffee trade.
The dilemma for coffee drinkers is that it’s a strong daily habit – so they’re more likely to grumble about the price and swallow the cost than quit sipping, said Jim Watson, a beverage market analyst at the research firm Rabobank.
Watson, who drinks two cups a day, said consumers should be worried. But even if they are, “they generally keep buying,” he added.
“There’s no wiggle room,” Watson said. “The industry is already under pressure.”
The climate crisis
Arabica beans, beloved for having more flavour than acidity, are the most popular coffee beans on Earth. And the world’s largest producer of arabica is Brazil, which has a climate perfectly situated for their cultivation.
The second most popular are robusta beans, packed with even more caffeine, which are often used for pre-ground and instant coffee. Vietnam grows more robusta than any other country.
So it was catastrophic when rare twin weather events ruined the 2024 coffee growing seasons – a drought followed by August frost in Brazil and a drought followed by October flooding in Vietnam – reducing the number of beans on the market.
Vietnam’s December export was down 39.5 percent compared with the same month last year and marked the lowest December export number since 2014, according to a January report from the International Coffee Organization. Brazil’s December coffee exports were down 7.4 percent year-on-year, the report noted.
Meanwhile, wholesale arabica coffee prices have shot up, from under $2 per pound on Jan. 1, 2024 – a price benchmark it had stabilized around for years – to a record high of $4.30 per pound on Feb. 13, prompting one coffee blog to declare: “It’s a new era for coffee.”
“A lot of people have a false sense of stability,” said Maxwell Dashwood, a coffee market analyst and author who owns two cafes in England.
A new European Union law that bans the sale of any coffee touched by someone involved in deforestation or grown on deforested land is one attempt to address the climate crisis. But it also means that fewer beans are going to make it to market – especially for Brazil, which under the Jair Bolsonaro administration allowed the destruction of swaths of the Amazon.
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Just before the ban was set to take effect in late 2024, E.U. policymakers pushed implementation to December 2025. But hoarding had already begun, causing analysts to warn that the law could disrupt supply chains and create new compliance costs, adding more stress to the global coffee trade – including to the United States, said Carlos Mera, a coffee analyst at Rabobank.
“You only need one bean that is not compliant, and the whole shipment and silos in which that bean was stored is noncompliant,” he said.
Global political risk
On top of the climate disasters, war has pushed up prices, analysts say.
The war between Israel and Hamas has tied up the Red Sea, which carries 30 percent of the world’s container traffic, including coffee from Vietnam. Iran-backed Houthi rebels for months fired missiles on trading vessels that made their way through the Red Sea and Suez Canal.
The Suez slowdowns mean there are between 4 million and 5 million bags of coffee that are ready but haven’t arrived in Europe, according to a December report by the International Coffee Organization.
By the end of March 2024, the volume of traffic through the Suez Canal and Bab el-Mandeb Strait had dropped by half, according to a World Bank report. Cargo and tankers had to travel up to 53 percent farther to avoid Houthi attacks.
And time is money: Shipping prices have shot up, driving up the price of coffee imported from Vietnam, said Vinh Thai, a supply chain and logistics professor at RMIT University in Melbourne, Australia.
The price of a north-south container shipping route to Australia is up 20 percent, and east-west routes from Asia to Europe or America are up at much as 16 percent in the last two years, Thai said.
Looming tariffs
For decades, U.S. policymakers supported low tariffs, which made it possible for Americans to enjoy inexpensive goods from across the globe. Trump’s embrace of protectionism is a stark departure from this tradition. And while his administration argues that other nations, not Americans, would ultimately foot the bill under his strategy, the consensus among economists and many business leaders is that it doesn’t work that way.
Among his first actions in January was to threaten levies on another major coffee exporter, Colombia, which were averted only at the last minute. Just a week later, Trump announced tariffs on China, along with Canada and Mexico, ultimately pausing the levy on the last two until early March.
Coffee exporters like Osito Coffee warn that American consumers would ultimately bear the cost if the tariffs on Mexico go into effect. Assuming the cost of beans and transportation is $5.50 a pound, the green coffee seller recently wrote on social media, a 25 percent tariff would bring the average cost to $6.88 per pound. Osito said it would then sell that pound for between $8.60 and $8.75.
The cost of beans accounts for about 30 percent of a bag of coffee in the supermarket, Mera explained. So if tariffs kick in and companies decide to pass along the cost, the United States has few options except to absorb the hike – it generally lacks the climate to grow coffee and almost entirely depends on imports for its java fix.
Making more with less
Even after absorbing price hikes, Americans are still likely to pay more for coffee throughout this year as companies pass on costs to consumers, say coffee analysts. But coffee lovers are trying to ease the pain, whether through a cheaper cafe order or home preparations that stretch their bag of beans.
One thread on the forum Coffee Roasters Club provided crowdsourced ways to save, like one coffee drinker’s tip to buy green coffee beans and roast them at home: “It’s a bit of an up-front investment, but over time it saves money, and you get fresh beans.”
Another user suggested getting a daily kick through cold brew or French press, both of which tend to use fewer beans than espresso.
The global drivers of rising coffee prices mean that coffee drinkers around the world are feeling the same inflation as Americans. Thai, the professor in Australia, compares prices at coffee shops around Melbourne. A native of Vietnam who drinks “countless” cups a day, Thai said he has noticed that coffee prices throughout Australia have been on the rise the past couple of years.
It became quickly apparent to Zara Wright just how much coffee drinkers were looking for a better, cheaper way to get their daily dose. Wright, a 24-year-old Australian, was shocked by the reception she received on her TikTok video a few weeks ago. She figured everyone knew her no-brainer coffee hack.
The social media manager posted a video showing how she walked down to her coffee shop with a jar of iced oat milk and ordered a double shot of espresso that she simply poured into the jar, thus making an iced oat milk latte. Her concoction cost just 4 Australian dollars – a third of the full order at the counter.
The video on her 7,400-follower account has garnered nearly 170,000 views.
Wright, who has three cups a day, told The Washington Post the idea was born of her already having poured her oat milk over ice only to realize she was out of beans at home. So she figured she’d head down the street for her jolt. Wright said she never makes her money-saving pour at the store, instead doing it outside the shop or in her car.
Watson, the coffee consumer analyst, said viral hacks and adaptations are just early signs that people will keep drinking their coffee. Sippers will see the full force of price increases in three to six months, he expects.
Andrea Illy, chairman of Italian roaster and global retailer Illycaffè, shares that general assessment, saying recently that retail coffee prices could rise another 25 percent. Meanwhile, a recent Bank of America analyst wrote that the parent companies of Folger’s and Keurig will “raise prices to offset higher coffee costs despite already high retail prices and consumers showing signs of price fatigue.”
Coffee shops have been able to depend on caffeine addicts, but they should be concerned about consumers getting used to cost-saving tricks like Wright’s, Watson warned.
As coffee drinkers adjust how to get their caffeine fix, they establish new habits, he said. “And that’s dangerous, because those habits are sticky.”