The politics of the price of a cup of coffee
Banana Meinhoff
Ive noticed the price of a cup of coffee in chains such as Nero and Pret going inexorably upwards in the recent past. I paid £2.75 for a latte in a railway station Pret this week.
The reason why this is remains unclear but it is certainly not related to the cost of the coffee beans that are being used, as might be thought.
Earlier this year the Financial Times published a detailed piece on the state of the coffee market on 21st May. I’m not linking to it as most of the stuff the FT publishes is behind a paywall (I have a sub). However I pick up on relevant points below.
The price for coffee beans globally is ‘tumbling’ according to the FT even as more coffee from vanilla lattes to cold brews is being drunk.
The global coffee industry is worth $90bn having doubled since 2009 while global coffee output is at its highest since the 1990s. Demand has not kept pace so there is currently over supply leaving some coffee growers in financial trouble.
The problem apparently lies in the increase in supply of low grade arabica beans which has driven the price lower on the key trading benchmark the New York C. The average price for a pound of coffee beans here is around $1.20 with producers facing costs of $1.50 to produce the same. The problem arises particularly with the production of speciality coffee beans which cost more to produce but which don’t attract a premium price.
So while the coffee growers struggle to make a living increased costs of cups of coffee for the drinker doesn’t see more money reaching them. The FT notes that if an average cup of coffee costs £2.50 the cost of the coffee itself is 4% of that with rent, labour and tax being far the biggest elements of the cost.
If the coffee chains were paying their baristas a living wage or beyond that might be lived with. As it is the cost of a cup of coffee appears to have little relation to the actual cost of coffee
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