Price trouble brewing for coffee drinkers

A double shot of despair for coffee lovers: the wholesale price of both coffee and sugar is soaring.

Last Updated: 06 Nov 2012

Thanks to the potent blend of crop failure and strong demand, international wholesale coffee prices hit a seven-month high last week, at $1.28 per pound. Meanwhile falling supplies sent the price of Colombian coffee to almost $2.20 a pound, its highest price for 12 years. And to leave an even more bitter taste in the mouths of coffee-drinkers, the price of sugar has also shot up, rising 52% since December.
At MT we’re big coffee fans, and have long winced at having to fork out £2.50 for a pint of lightly-caffeinated froth at the local high-street coffee shop. But it seems that our fellow caffeine users are set to face even higher prices for what used to be one of the few guilt-free treats we have left in these credit-crunched times. Andrea Illy, chief exec of the world-renowned Italian coffee brand, says in today's FT that prices could be about to ‘explode’.
Much of this is down to crop shortages. Just take the sought-after Colombian beans: heavy rains have led to shortages that the head of the International Coffee Organisation, Néstor Osorio, has described as ‘absolute’. Maxwell House owner Kraft has raised its retail prices by 18% as a result.

Of course, the impact of the shortages would have been weaker if, as many had expected, the recession had caused coffee consumption to fall. But it seems the downturn has hit the coffee market in much the same way as other sectors: consumers still want the product, but are simply becoming a lot more sensible about how they buy it. Suddenly the need to ‘experience’ a skinny, double-shot, cinnamon-infused, pepper-sprayed Guatemalan blend doesn’t seem so necessary, when digging the flask out the cupboard and filling it with some Nescafe will do the same job much more cheaply.

To make matters worse for the more sweet-toothed coffee drinkers, sugar prices are experiencing a similar rise: white sugar has risen above $450 a tonne, 52% up from mid-December. This is largely down to crop failures in India, the world’s largest consumer of sugar, where output is set to drop 40% in 08/09, to 15m tonnes. Which bodes badly, given the country consumes a tooth-mangling 23m tonnes of the sweet stuff every year.

So it looks like trouble’s brewing for coffee lovers. As members of that breed ourselves, we’d like to promote the pleasures of the office cafetiere. Fire it up, pour out a round of the black stuff for your colleagues and raise your cups – to the humble bean. Just go easy on the sugar.

In today's bulletin:

Centrica goes nuclear with bargain BE stake
Even civil servants face the axe, says CIPD
HSBC banks record investment banking revenues
Price trouble brewing for coffee drinkers
MT Expert's Ten Top Tips: Blogging for business

Find this article useful?

Get more great articles like this in your inbox every lunchtime

The questions to ask when everything is unknown

Systemic intelligence is an indispensable skill for business leaders.

How to stop your culture going back to normal after COVID

In this video, Capita's Melanie Christopher and Greene King non-exec board director Lynne Weedall discuss...

This isn't just a health crisis, it's an equality crisis

Inspiring Women in Business winners: In the “new normal”, we must make sure that female...

How to build an anti-racist business

You don't need a long history of championing equality to make a difference.

What are Simon Roberts’ big 3 challenges at Sainsbury’s?

The grocer's new CEO has taken the reins at a critical time.

Should CEOs get political?

The protests that have erupted over George Floyd’s murder have prompted a corporate chorus of...