Coffee prices are climbing rapidly, with some London cafes now charging £6.50 for a flat white. This surge mirrors the recent shock of £10 pints in the capital, as inflationary pressures grip the hospitality industry.
Drivers Behind Rising Coffee Costs
Experts attribute the price hikes to a combination of factors: higher energy bills inflated by the war in the Middle East, government policies raising taxes and wages, and volatile weather in coffee-growing regions. A 'super El Niño' is forecast for late 2024, bringing extreme rainfall and drought. In Brazil, heavy rain in June caused rainfall levels nearly 2,000% above the historical norm, waterlogging fields and delaying harvests by 52%. In Vietnam, the largest robusta producer, farmers face early drought, with fertiliser and fuel prices up 30% year-on-year and labour costs up 33%.
Lavazza Warns of 'Exceptional Volatility'
Giuseppe Lavazza, chair of Italian coffee company Lavazza, said: 'Volatility is the new constant. This has been a year of high turbulence and pressure... The coffee market now shows fundamental changes compared with the past.' Arabica bean prices have risen 230% since 2021, and robusta by 325% over the same period. Lavazza has passed costs to consumers: a flat white at its Regent Street cafe increased from £4 to £4.40 takeaway, and from £5.50 to £6.50 to drink in.
High Street Prices and Consumer Tolerance
Other chains are also raising prices. A flat white in central London Starbucks costs £5.20 takeaway, while Costa charges £4.70. Susannah Streeter, chief investment strategist at Wealth Club, noted: 'Arabica coffee prices have been highly volatile over the past two years... Many companies are building a buffer into their pricing to protect already tight margins.' She added: 'For now, many customers appear willing to absorb higher prices. But there are limits.'
Profit Margins and Industry Outlook
David Abrahamovitch, founder of artisan chain Grind, keeps his flat white at £4.10 but says it yields only 18p profit. For that price, £1.60 goes to staff costs, 55p for cups, 96p for operating costs, 68p on VAT, and 13p on other expenses. The price of green coffee beans has more than doubled since 2024. Paul Rooke, executive director of the British Coffee Association, said: 'We've seen significant volatility in global coffee markets... That looks set to remain for the foreseeable future.' Despite challenges, demand for coffee remains strong, supported by innovation in the ready-to-drink market.
