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Why your morning cup of coffee may start costing you more
Coffee prices surge, with further indications of what climate change will do to commodity prices
03 February, 2025

As students, one thing many of us cannot live without is our daily caffeine fix, especially before an early start. While London coffee prices already feel extortionate for student budgets, they could only get worse this year due to supply chain issues.

Arabica coffee beans, produced mainly in Brazil and Colombia, are currently trading at a 47-year high after rising 94% in the last year to 3.76 US dollars a pound as of the 31st of January.

Robusta coffee, the other popular coffee bean grown in Africa and India, has also seen price volatility into the new year, with an over 70% increase in price compared to this time last year, at around $5,700 per metric ton.

Price hikes come after the world’s largest coffee producers, Brazil and Vietnam, experienced adverse weather conditions, reducing the supply of coffee beans. Brazil saw its worst drought in history, while Vietnam experienced heavy storms and rainfall.

Climate change is expected to cause more issues for the supply of commodities in the upcoming year. The price of cocoa also suffers a similar year-on-year effect with an increase of 140% after changing weather patterns in Western Africa altered the supply. Therefore, as adverse weather conditions worsen, costs may continue to rise across many industries for businesses and may be passed on to customers.

The supply change for coffee will increase costs for businesses, and depending on their profit margins, the cost could be passed on to customers. This comes after a difficult five-year period, as Covid saw branded cafe sales decline almost 40%. Retailers and coffee shops may increase their prices in an attempt to protect their profitability.

In April 2024, it was reported that coffee prices at branded chains increased by around 9%. This time last year, the average price of a Latte at a major chain was £2.91 compared to an average of £2.34 in 2019. In 2024, Starbucks notably raised its price drastically from £2.60 in 2019 to £4.50 compared to Greg’s, who, across the five years, only increased its price by 10p to £2.00 in 2024. However, this measure does not consider city price premiums, which inflate prices across cities such as London due to higher rents.

Data from Financial Times from January 31st, 2025.

The price elasticity of coffee across major UK chains is uncertain since price rises have been consistent over the last five years while profits have remained stable. Yet, there could be impacts as the cost of living continues to hit, with students strongly feeling the pinch.

On the whole, as students who are major purchases of coffee from major chains, a potential increase in the already extortionate prices could see many of us reduce our luxury purchasing habits.

But how may businesses look to cling on to their customers, and specifically the student market?

In September 2024, we saw the end of Pret a Manger’s popular subscription, which upset many London workers and students based on the low cost and high availability of Pret Coffee.  The subscription originated in the fallout from Covid with the hope of increasing sales, which it was successful at. However, in the long run, this move may have cost them customers, and with the new rise in coffee prices, Pret may see a decline in their profitability.

Additionally, in light of wars across the Middle East, various consumer boycotts affected Starbucks, negatively impacting its sales and, consequently, its share price. In October 2024, net sales and income fell consistently with previous quarters. As a result, Starbucks attempted to manage this with major price rises, which could pose a strategic challenge if it considers raising prices again.

One popular competitor in the student consumer market is Caffe Nero, with its attractive 15% student discount. Initiatives like this, which encourage customer loyalty, are something that major retailers could adopt to combat potential sales declines as prices rise. Encouraging higher sales could be essential to retaining profitability as climate change continues to cause supply issues.

Grace Holloway
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