​Coffee Prices Set to Rise for Another Year, Lavazza Warns

UK consumers will likely face rising coffee prices until at least mid-next year, as the coffee industry grapples with significant challenges, according to Lavazza. The Italian coffee company's vice chairman, Giuseppe Lavazza, revealed that the anticipated price drop he predicted last year has not materialised, citing several contributing factors.

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Lavazza pointed to poor harvests in key coffee-producing regions such as Brazil and Vietnam, geopolitical conflicts, and ongoing supply chain disruptions as primary reasons for the soaring prices. On Monday, coffee prices hit an unprecedented high of $4,300 (£3,356) per tonne. Lavazza remarked, "We have never seen such a spike in price as the trend right now."

The impact of these challenges extends beyond production. Shipping costs have surged, with blockages in the Suez Canal contributing to shipping expenses quadrupling the average. This escalation in costs has directly affected UK consumers, with the price of a 1kg bag of coffee beans rising by 15% over the past year. Lavazza warned that prices could increase by a further 20% to 25% in the coming year.

At Lavazza's flagship cafe near Regent Street in central London, the price of a flat white has risen to £3.50 for takeaway and £5.50 for in-house consumption, reflecting the increased costs. Lavazza stated, "We have faced very, very strong headwinds. I don’t see any reason why coffee prices will go down."

Despite these rising costs, the trend of UK consumers brewing fresh coffee at home remains robust. This shift began during the pandemic when cafes were closed and has continued unabated. Lavazza noted, "People love it so much. And we think there’s an environmental element too, of people wanting to move away from using pods."

The UK retail coffee market, valued at £1.3 billion, has grown by 3.9% year on year, driven by price inflation of 3.8%, according to Nielsen figures. Lavazza reported a 2.9% increase in sales volumes in 2023 compared to the previous year, translating to an additional 32 million cups of Lavazza coffee consumed over the past two years.