HEADLINES predicting $7 cups of coffee by the end of the year – and the resultant carnage in cafe strips like Leederville or Mt Lawley – might have little more substance than the froth on a skinny cap.
While there have undoubtedly been price rises forced by global supply disruption and the rising cost of milk, cafes and distributors the Voice spoke to hadn’t seen anything suggesting they’d have to resort to that level of marking up.
The story was fuelled by reports of Brazil’s last harvest, the worst in two decades after successive drought and then frost destroyed about 20 per cent of its plants. Brazil accounts for about 40 per cent of the world’s most popular coffee been, Arabica. Columbia, the second-biggest supplier of Arabica, also had a disappointing year.
It forced the price of beans up from $27 a kilo to $31.
But Brazil’s crop has bounced back this season, and with the harvest due to start this month, it’s expected to pull in around 61.4 million bags of coffee – slightly down from its marquee year in 2020-21 when 65.2 million bags were produced but enough to stave off platinum-level brews.
One distributor, who didn’t want to be named, even claimed the $7 price predictions were a bit of a conspiracy – he hasn’t had to raise his prices, but says he’s been under pressure from others to follow their lead.
The distributor reckons when Brazil’s crops were looking grim last season, speculators pre-purchased large amounts at top price, expecting it to continue rising sharply. That failed to materialise, so he reckons they’re now trying to manipulate the market into raising its prices to soften their losses.
But fear of price rises is having an impact on coffee drinkers’ behaviour said another boutique roaster. He told the Voice there’s been a huge increase in people wanting to buy a bag of beans for a home-brew, and they’ve been peppering him with questions on what machines work the best.
Fremantle Traders Association CEO Mia Kriznic says the beans account for just 6 per cent of a cuppa, with most of the cost actually coming from the milk, rent and cost of labour.
“In terms of costs, I don’t think anyone’s actually put prices up,” Mr Kriznic said.
“My understanding now is that everyone’s getting charged a delivery fee which they weren’t before.”
Cafes don’t want to stir first
MIKE IVANOFF runs Crib Lane cafe on Hay Street, and has been hit by two recent hikes in the price he pays for coffee beans.
“Since September last year I have had two coffee increases, first being $1 per kg, which was reasonable, and in March a $4 per kg increase, which is about 20 per cent up prior to September.”
There’s also been rises in the cost of milk, cups, lids, and wage and superannuation increases. Mr Ivanoff’s had to raise his prices but he’s still absorbing most of the cost increases.
“I put all my prices up in March by about 50 cents which realistically wasn’t enough, as we’re still selling our coffee cheaper than the suburbs who have much cheaper rent.”
City cafes have been wary of being the first to increase their prices to reflect growing costs: “The problem we have in the CBD is competition and the fear of losing customers to someone who holds on and loses money or breaks even in the meantime.”
Mr Ivanoff says work-from-home is still the big factor impacting CBD businesses.
“McGowan is saying everyone should go back to the office, yet the office of State Treasury – his department – are on a 50 per cent swing shift.”
Mr Ivanoff says having to wear a mask in the workplace all day is still a big deterrent to a lot of workers deciding whether to go back in.
by STEVE GRANT, DUNCAN BAILEY and HOLLY HARDMAN