A single cup of coffee now costs $4.90 on average, a 7.6% increase from this time last year. Even making coffee at home is more expensive these days, the coffee prices in July jumped 20.3% from the year prior.
Coffee has long been a relatively cheap staple for households in Brazil and around the world. However, as coffee farmers continue to grapple with rising prices due to the pandemic, the climate emergency and geopolitical tensions, even commercial-grade coffee destined for instant brands could see significant price increases.
As the largest coffee-producing country in the world, not only by volume but also by land area, the rising cost of fuel ****has pushed up the cost of production throughout Brazil’s coffee supply chain, impacting road transportation ****and machinery used for the harvest and crop management.
In Brazil, the world's biggest coffee exporter, farmers experienced drought, then frost, which damaged crops of arabica beans, a type of high-end coffee plant. Some farmers estimate their crops could be cut in half as a result, which would nudge the cost of coffee even higher.
The chart above details monthly exports of arabica coffee from major Central and South American production centers. Brazil (purple line) routinely leads the charge, exporting a record 39.72 million 60-kg bags during the 2018 market year.
The effects of inflation trickle down the supply stream. As prices go up, so do product and labor costs since workers are purchasing goods that now cost more money and need higher wages to make ends meet. A successful approach to cost-cutting is both multi-faceted and value-driven.
<aside> 👨🏻💼 Coffee businesses always ask themselves: where we are and aren't willing to compromise, and then get creative.
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Price rises were vital to addressing product and labor costs. Raised prices to not only be in line with the cost of goods sold, but with what businesses feel the job is actually worth to the community they serve.
Products like milk, cups, lids, sugar, etc., have increased significantly in the past year. Inflation has touched every aspect of operating a coffee business—green coffee prices are up, and current gas prices have made transportation (moving coffee to a warehouse, delivering products from a roastery to cafés) more expensive.
As general costs rise, workers need more money to stay afloat, leading some states and cities to increase the minimum wage. Some companies have raised wages to remain competitive, even when not required by law.