Higher prices brewing for coffee

Record global demand and falling stocks have driven up the price of raw coffee beans around the world. And now these higher prices are filtering their way through the supply chain with latte lovers feeling the brunt when they queue up for their daily caffeine fix. There is an excellent article about this in today’s Financial Times which explains how changes in raw bean prices work through the wholesale market through to retail level. The key is the extent to which suppliers are able to pass on higher costs to their consumers.

It was interesting to read that many producers of instant coffee granules have not hedged their coffee purchases - i.e. they chose not to buy beans at prices prevailing in the futures market. This puts them under more pressure to pass on higher costs to supermarkets. In fact our chart shows that instant coffee prices are not yet rising to the same extent as retail prices for filter fine coffee.

Higher milk prices and rising wage costs are two extra factors making the leisurely cappuccino a more expensive habit in coffee stores across the UK.

Read the FT article here