Maybe we pay a little more attention to the coffee news, there has been a fair bit of news covering the price of a cup of coffee going upwards of $6-$7, and in some cafes, it’s already there.
To avoid some of the alarmism (and another toilet-paper gate like we saw at the start of COVID) we want to take a moment to educate you on what's actually pushing up the cost of your daily coffee and what you can do about it.
The good news is that Tripod is not seeing as much pricing pressure as your cafe and we've out some measures in place to maintain prices for the time being.
Here are the primary forces pushing up the price of your daily cup of coffee:
1. Labour Costs
It’s hard to find a cafe without a “staff wanted sign” these days. Cafe staff have left the industry or left the country. This shortage is meaning everyone, and specifically cafes, are having to pay more for staff to run their businesses.
Dylan Bloomfield, Manager of policy and advocacy at the Victorian Chamber of Commerce and Industry, reports some cafes having to pay twice what they used to for staff.
2. Climate Change
Climate Change is causing extreme weather patterns interrupting coffee crop planting, which ultimately results in less consistent coffee supply and harder growing conditions.
Recently, Brazil has recently been hit with a major frost storm halting production. You might not know it, but Brazilian coffee makes up about 20% of the Australian coffee market.
When there is a shortage in one region, simple supply and demand economics, increase the price from that area and other areas with similar beans (e.g. India and other South American countries).
Behind the scenes in the Russia-Ukraine war is an economic bottleneck for fertilisers.
Russia is the world’s largest exporter of fertiliser so economic sanctions cause a shortage and price increase on resources global farmers have become dependant on.
While this cost isn’t baked into today’s prices it will begin affecting farmers who require fertiliser in the next 90-120 days.
Coffee farms that focus on organic and biodynamic methods of farming should should hold consistent production and pricing, bar a climate disaster in their area. These farming methods rely more on soil health and biodiversity than fertilisers (which are typically petroleum based).
4. The International Shipping Crisis
When you combine ineffective international transport and with increasing oil prices (Brent Crude Oil currently at $118 a barrel, up from $64 a year ago), you get more costs for coffee beans. This factor is driving up the cost of green beans, which flows directly onto the importers, roasters, then ultimately the cafe.
So what do these factors actually mean for the everyday Australian?
1. All coffee companies will face pressures to increase costs, but cafes will be hit the hardest because of their over exposure to labour cost pressures. They're also last in line on the distribution chain, so any of their suppliers will have already baked in the increased costs of beans.
2. All coffee will become slightly more expensive but the cheapest coffees will see the highest price increases proportionately. Extreme weather fuelled by climate change can wipe out a seasons worth of crop in large areas which can create global supply shortages (ie. Brazil's recent frost storm will reduce the supply of commodity-grade beans globally).
Should you expect a price increase from Tripod?
Not in the short term, but possible in the medium term. To keep our prices consistent, we’ve locked in our next few roasts, and because we don’t operate any cafes or employ a large workforce, we’re not facing increasing labour cost pressure.
We do expect a modest cost increase over the next quarter but it would only be a few cents a coffee compared to dollars, so if you love our coffee now might be the time to add a few extra.
Fun fact, the cost of commodity coffee is tracked and can easily be viewed here: https://markets.businessinsider.com/commodities/coffee-price.