A Brewed Awakening Of Coffee In 2025
Droughts, Demand, and Increased Costs
Just like my recent blog on cocoa beans being at their all-time high, one of the biggest reasons for high coffee prices was the recent drought in the highest-producing countries. The supply in Brazil is short due to recent hot and dry conditions and lack of rainfall. The lowest rainfall in decades was recorded in the country’s coffee region, Minas Gerais, which reduced the supply of coffee beans this year. Similarly, other major producers like Colombia and Vietnam are facing similar challenges, leading to overall lower global output.
Another challenge coffee producers face is rising costs. Alongside labour costs from the fair-trade coffee movement, producers also face fertilizer prices and transportation expenses that have been climbing steadily. As inputs get more expensive, it can lead to coffee farmers struggling to keep up, and a reduction in production. All of which could lead to higher prices for the end consumer.
Lastly, the demand for coffee is not decreasing – nor is it just a thing in America. Emerging markets like China and India are increasing their demand for coffee; in 2023 China increased its coffee imports by 26% from the previous year. The usual coffee-consuming countries, such as those in Europe and North America, continue their steady rise in coffee consumption. The global coffee consumption had a notable growth in 2023, growing 5% year-over-year. The largest contribution to this is the spreading of coffee culture that has reached countries like China, which saw a 20% compound annual growth rate from 2019-2023. This growing global demand is adding even more strain on the already tight supply of coffee and forcing some coffee producers to raise their prices just to keep up with the market trends.
A Look Forward at the Market
The recent drought has significantly impacted the supply of coffee beans, leading to a surge in global coffee prices – an issue that cannot be quickly resolved. Although there is some rainfall forecasted in Brazil’s growing season, it won’t be quick enough to restore supply or lower prices. Market analysts predict that coffee prices are likely to remain high in the short to medium term. This is due to the combination of supply issues, demand pressures, and economic factors that coffee producers are currently struggling with.
Implications to Consumers
As the cost of coffee beans continues to rise, coffee shops and retailers are likely to pass these costs on to consumers. This could mean an even higher price for a cup of coffee at local cafes or for packaged coffee products in stores. It is more likely the local cafes will be impacted by these price changes than the large chains such as Tim Horton’s and McDonald’s due to economies of scale. The biggest shift that may be seen is the shift from locally produced, more expensive coffee beverages, to cheaper alternatives that consumers can buy from their preferred chain. A regular medium coffee from Tim Horton’s currently costs around $2.49, whereas a fancier medium-sized coffee such as a latte or espresso from a local cafe in Saskatoon averages around $4.00-6.50 (based on a few menus from local cafes in Saskatoon), meaning those who prefer a fancier coffee from a local cafe may opt to a more “basic” coffee from Tim Horton’s instead. Consumers may also turn to alternative brands that are cheaper to purchase or turn to home brewing as buying from coffee shops becomes more expensive.
So, while you may not see the price increase directly yet, it may be coming. Although supporting small businesses is important, if you are on a tight budget, you may find yourself at your local Tim Horton’s for a classic Double Double. So, while you may not see the price increase tomorrow, it is coming. For those hooked on a morning cup, you may find yourself trying to go cold turkey, swapping it out with an alternative like tea or mate, or you will have to shell out extra for that essential hit of caffeine.
