Caffè Nero Forecasts Continued Coffee Price Increases Amid Global Challenges
Caffè Nero, the family-owned coffee chain, has issued a stark warning that the price of a cup of coffee is likely to keep rising. Founder Gerry Ford cited prolonged disruption from the war in Iran and escalating staffing costs as key factors driving this trend. Despite this, the company reports steady growth and plans to open up to 30 new stores in the UK and between 50 and 70 more internationally this year.
Strategic Expansion and Financial Performance
The business, which recently acquired the 15-store Compass Coffee chain in Washington DC for conversion to its main brand, is focusing on controlled growth. Ford emphasised that Caffè Nero is outperforming larger rivals Starbucks and Costa, attributing this success to consistency and long-term planning rather than rapid expansion. "We have been more consistent in what we are trying to do. We have not had massive growth upswings. We are going at a steady pace," he said.
In the year to May 2025, sales increased by 13% to £587.6 million from £519.8 million. However, pre-tax losses widened to £41 million from £34 million, largely due to rising finance costs, which reached nearly £78 million from £69 million the previous year. This increase is linked to higher interest rates and borrowing to fund recent acquisitions, including Nottingham's 200 Degrees for about £9 million in October 2024, as well as Wales' Coffee#1 and Harris + Hoole.
Cost Pressures and Market Dynamics
Ford highlighted that the industry has absorbed significant costs in recent years, including business rates and higher employment expenses in the UK. Coffee prices have tripled between the end of 2023 and early last year, partly due to climate crises affecting crops in key regions like Brazil and Colombia. Today, Arabica coffee prices remain almost double those in 2023.
"I have been doing this 29 years and the price of coffee goes up and down. Eighteen months ago it went up and it didn't really come down," Ford noted. While prices have slightly decreased in the last three months, he does not expect this to lead to cheaper coffee for consumers, as other costs such as energy remain high, exacerbated by Middle East conflicts.
Future Outlook and Acquisitions on Hold
Caffè Nero has put further acquisitions on hold for at least a year to absorb recent purchases, which have increased debt to £481 million from £428 million. Despite this, underlying profits are up by a fifth, and new acquisitions are adding to sales and profit sources. The group now operates over 650 outlets in the UK, with Turkey and Poland as key international markets.
Ford warned that prolonged disruption could push coffee prices up again, noting that the average latte in the UK across all chains is already £3.76, a 35% increase over the past five years. "Typically prices go up but not down. I expect as the year goes on we will see," he said, underscoring the uncertain market conditions ahead.
