A looming change to high street coffee giant Pret a Manger’s popular loyalty scheme was met with a mixture of devastation and fury from some subscribers last month.
Having been entitled to order up to five free Pret coffees per day and 20 per cent off food for £30 a month, subscribers will be offered just five half-price coffees a day for a £10 monthly fee from September.
While some might still consider the new offer generous, soaring coffee bean prices since the start of the year could well force Pret and its competitors into hiking prices over the counter.
Changing: From September, users of Pret a Manger’s coffee subscription deal will no longer be entitled to order up to five free coffees per day for £30 per month
The prices of robusta and arabica beans, which collectively responsible for about 99 per cent of global coffee production, have boomed.
London robusta futures peaked at $4,846.70 per tonne in July, up by an eye-watering 81.7 per cent from as low as $2,652.60 12 months ago, according to online trading platform CMC Markets.
Over the same period, futures on the lower-caffeine arabica beans jumped by 42 per cent to $2.32 per pound, although it was as high as $2.57 last month.
That compares to an all-time high of $3.02 – or an inflation-adjusted $31.73 – in March 1977, when global production failed to meet demand after a particularly poor Brazilian harvest.
Coffee sellers, including pubs, cafes, and supermarkets, have subsequently had to hike prices to protect their profit margins.
The prices will not have gone unnoticed by consumers in the UK, where the British Coffee Association estimates that around 98 million cups of coffee are drunk daily.
So why have coffee bean prices soared and is there any chance they will fall in the near future?
Why have coffee prices increased so much recently?
After surging in 2021 before retreating the following year, coffee prices have steadily grown since November 2023 as climate change has impacted output in some major coffee-producing nations.
Brazil, the world’s largest coffee producer and exporter, has seen drier weather and above-average temperatures in regions such as Minas Gerais.
As a result, exporters group Cecafe warned this season’s robusta crop levels could be 10 per cent below forecasts, while arabica output may be 5 per cent smaller.
Meanwhile, extreme heat and the country’s worst drought for almost a decade have damaged robusta yields across Vietnam’s Central Highlands region, home to most of the country’s coffee plantations.
Vietnam’s Ministry of Agriculture and Rural Development now expects total coffee crop output between October 2023 and September 2024 will fall by around a fifth year-on-year.
More expensive mug: Coffee prices have steadily grown since November 2023 as climate change has impacted output in some major coffee-producing nations
And for the following year, coffee trader Volcafe believes Vietnam may only deliver 24 million bags of robusta coffee, the lowest in 13 years, due to ‘irreversible damage’ to the nation’s coffee blossoms.
Coffee production is vulnerable to dramatic weather changes, particularly very hot and rainy conditions which allow pests and diseases to spread more easily.
It is most bountiful if temperatures are neither too warm nor too cool, and conditions are neither too wet nor too dry, which has led some scientists to nickname coffee a ‘Goldilocks plant’.
Farmers could shift farming away from tropical environments towards more northern areas, but this raises its own economic and ecological concerns.
From the end of 2024, new European Union regulations banning imports of coffee cultivated on recently deforested lands will come into force.
Roasters operating across the bloc will need to provide geolocation data showing the precise origins of the coffee beans they source or risk fines totalling up to 4 per cent of their EU turnover.
These proposed laws have been heavily criticised by Giuseppe Lavazza, chairman of the namesake Italian coffee products manufacturer.
He told the Telegraph the move would make coffee more expensive across Europe, because too many farmers in developing countries will be unable to comply with the extra bureaucracy and be driven out of business.
‘Many farmers don’t know the boundaries of the farm; they have no chance of putting the geo satellite coordinates in the system,’ Lavazza said, adding that some ‘are just picking coffee, fantastic coffee, the best in the world, from wild forests.’
The EU has claimed that the value of coffee obtained from wild forests is minimal and that free coordinate mapping technology is easy to obtain.
Carlos Mera, head of agricultural commodities markets at Rabobank, says this has resulted in ‘a lot of uncertainty’, and driven many traders to ‘advance buying and imports ahead of the deadline’.
‘This is why we see elevated prices in the coming months, but weakening closer to or after implementation,’ he adds, although he thinks crop issues in Brazil and Vietnam are the main reason prices are so high.
Another factor behind current coffee prices is the substantial reduction in vessels travelling through the Suez Canal due to threats of attacks by the Houthis, a militant group controlling much of Yemen.
Some of the world’s largest shipping groups, including Maersk, Hapag-Lloyd, CMA CGM, and the Mediterranean Shipping Company, are instead diverting cargo to go around the Cape of Good Hope in southern Africa.
Such trips add at least ten extra days to voyages for ships transporting robusta coffee from Vietnam or Indonesia to Europe, which in turn is causing costs to spike.
Forecast rise: The World Bank predicted in April that average robusta coffee prices will increase by a quarter to $3.50 per kilo this year
Average global container rates have skyrocketed over the past year, from $1,537 per 40-foot container to $5,806, according to the Drewry World Container Index.
Transporting goods from Shanghai to Rotterdam has become especially expensive, with freight rates for this route soaring by 539 per cent to $8,260.
Unless the Houthi attacks stop soon, cafe owners may have to pass even more of the extra costs they incur onto consumers.
How much higher will coffee prices rise?
The World Bank predicted in April that average robusta coffee prices will increase by a quarter to $3.50 per kilo this year before sliding back to $2.80 in 2025.
However, the report forecasts arabica prices dropping to $4.40 in 2024, followed by $4.35 the next year, helped by production in Brazil, Colombia, and Ethiopia, boosting total supply by nearly 7 million bags in the current season.
Similarly, Rabobank thinks arabica prices, while remaining at over $2 a pound, will start falling towards December and into 2025.
One factor Rabobank’s Carlos Mera believes is not significantly affecting prices is demand, which he points out rose by less than 1 per cent in the last year instead of the usual 2 to 2.5 per cent.
He says: ‘Demand weakness and a recovery in production is to be expected as a consequence of the current high price cycle.’
Coffee prices have soared over the last year
The popularity of Coffee is expected to continue to rise in the coming years drinking as a result of demographic change, with a rapidly expanding middle class across the likes of China, India, and some African nations.
The US Department of Agriculture estimates global coffee output will go up by 7 million bags to 176.2 million in 2024/25, while consumption will total 170.6 million.
Over the long term, though, coffee growers will be forced to respond to the threat of climate change.
If not, Pret’s future coffee subscription deals could be even less generous.
Coffee prices have soared over the last year
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