A more expensive cup of coffee awaits us. Production shortage

Coffee prices have risen 25% this year as bad weather has hit crops in Brazil, a major producer of Arabica coffee, and in Vietnam, where Robusta is grown. This is the latest drop in prices in agriculture caused by supply (after orange juice last year and cocoa already in 2024). It made agriculture the best performing commodity segment in 2024, growing by 27%. compared to 4 percent for wider goods.

Price premiumization strategy

US retail coffee prices fell 2%. over the past year, but now appear poised to catch up as coffee manufacturers and chains, from Nestlé to Starbucks, continue their price premiumization strategies.

Europe drinks 30 percent. coffee in the world, and the five Scandinavian countries average 9,5 kg per person, more than four times more than the United States. Asia is the second largest consumer and per capita consumption is growing rapidly. Beans make up only a fraction of the final price of coffee, but the recent increase in commodity prices is likely to go hand in hand with rising labor and energy costs and companies' pricing strategies. The average Starbucks bill increased by 4%. in the last quarter compared to 1 percent. increase in the number of transactions. The average hot latte currently costs $4,62 in the US. Last year, the Nestlé Nespresso unit recorded prices growing more than twice as fast as volumes.

Production shortage

Arabica, which is more delicate and more difficult to grow, accounts for 60%. total supply and dominates the more expensive and high-quality market coffee ground coffee, while robusta dominates the instant coffee market and is on average 30%. cheaper. The latest production shortfall threatens the International Coffee Organization's forecast for a return to a small surplus in the coffee market this year after two years of large deficits. Global production increased by 6%.

About the author

Ben Laidler – Global Markets Strategist w eToro. Capital investment manager with 25 years of experience in the financial industry, incl. at JP Morgan, UBS and Rothschild, including over 10 years as the # 1 investment strategist in the Institutional Investor Survey. Ben was the CEO of the independent research firm Tower Hudson in London and previously Global Equity Strategist, Global Head of Sector Research and Head of Americas Research at HSBC in New York. He is a graduate of LSE and Cambridge University, and a member of the Institute of Investment Management & Research (AIIMR).