"Your cup of coffee is already expensive. It’s about to get even worse," per Bloomberg

Global coffee drinkers hoping for relief from rising prices are in for a bitter surprise: costs are set to increase further.

Both premium arabica beans, preferred by coffee chains like Starbucks Corp., and the more affordable robusta variety have surged in price due to significant supply disruptions in countries like Vietnam and Brazil. Throughout the supply chain, sellers have been raising prices and eliminating discounts to maintain their margins, with many warning of more increases to come.

JM Smucker Co., known for brands like Folgers and Café Bustelo, raised its prices this summer. Pret A Manger discontinued its UK coffee subscription, which allowed customers up to five drinks per day. Variety Coffee Roasters in New York City recently raised its retail prices by about 5%, the first increase in five years, and other local coffee shops are expected to follow.

"When it comes to price hikes, we've always triple second-guessed ourselves before pulling the trigger," said Patrick Grzelewski, director of coffee for the eight-location Variety chain. "But it’s just not something anyone can avoid anymore."

Prices for robusta beans, commonly used for instant coffee, have reached their highest levels since the 1970s. Higher-quality arabica beans were at their priciest in over two years earlier this month. Part of this increase is due to adverse weather: droughts in Vietnam, a robusta powerhouse, are leading to a fourth consecutive year of deficits, while dry conditions in Brazil have reduced the size of its arabica crop. The price gap between the two varieties is nearing its narrowest point ever, prompting companies to seek out lower-quality arabica beans instead of the typically more cost-effective robusta to manage expenses.

"The strategy of finding cheaper, less expensive components for a blend — I never thought it was the right strategy in the first place — but now it’s a strategy that just simply doesn’t work anymore," said Michael Kapos, vice president for sales and marketing at Downeast Coffee Roasters, a family-owned retailer and wholesaler in Rhode Island. His company implemented a 5% price increase earlier this year. "There’s nothing left to do than for coffee shops to raise their prices."

It's not just weather driving up prices. Growing demand in markets like China promises to keep supplies tight. Additionally, there is a growing recognition that coffee traders and roasters have long been underpaying farmers, a trend some buyers are trying to reverse to make the industry more sustainable. Higher profits incentivize producers to continue planting coffee instead of switching to other crops, and allow them to invest in making their trees more resilient to disease and climate risks. If coffee prices don’t rise for growers, there will be little incentive to maintain long-term production.

This scenario mirrors the cocoa market, which saw prices soar to unprecedented levels this spring as production dropped after decades of underinvestment. Some financially strained commodities traders even had to exit their coffee positions amid pressure from rising cocoa futures. Additionally, European roasters will soon need to prove that the beans they import weren't grown on recently deforested land, as per the European Union Deforestation Regulation. Few countries are fully prepared to comply, meaning supplies will be constrained.

"Buyers are looking earlier than they usually would and in larger quantities because they need to get that coffee to Europe now before EUDR kicks in. That’s making everything worse," said Tomas Araujo, trading associate at StoneX.

For decades, consumers worldwide enjoyed cheap coffee at the expense of growers, from 99-cent drip coffees at US rest stops to €1 espressos in Paris. However, these deals have been gradually disappearing due to a combination of higher bean prices, rising labor costs, and supply chain disruptions that peaked during the pandemic.

Generally, once consumers adapt to higher prices, companies are reluctant to reduce them. At Dimbulah Coffee in Singapore, a flat white now costs about S$5.90 ($4.38). At Where’s Fred’s near St. Paul’s Cathedral in London, a cold brew is £3.60 after a 30 to 40 pence increase earlier this year, putting it on par pricewise with the draught beer it also sells.