LONDON/NEW YORK – If you’ve noticed your favorite coffee beans missing from store shelves, rest assured they will be back soon. However, the downside is that prices may surge by up to 25%. Major coffee roasters such as Lavazza, Illy, Nestlé, and JDE Peet’s (maker of Douwe Egberts) are  currently negotiating with retailers to pass on increased costs due to a sharp rise in arabica coffee prices over the past year, according to industry

Price Negotiations and Market Impact: A spokesperson for Albert Heijn stated that JDE’s purchasing costs have risen significantly. While part of the increase will be absorbed to keep products affordable, prices will inevitably rise. JDE Peet’s, which has already warned of a decline in profits due to soaring coffee costs, noted that price disputes in Germany and the Netherlands have temporarily led to some of its products disappearing from shelves. However, the company confirmed that it has successfully concluded 90% of its price negotiations worldwide. Arabica coffee, commonly used in roast and ground blends, has already seen a 20% price hike this year, following a 70% surge last year. Brazil, the world's leading producer of arabica, has been severely impacted by one of its worst droughts on record.

Raw coffee beans typically make up about 40% of the wholesale cost of a bag of roasted coffee. If last year's price hikes were fully passed on to consumers, it would result in a 28% increase in retail prices, according to Reg Watson, Director of Equity Research at Dutch Bank ING. He estimates that consumer prices will likely rise between 15% and 25%, with some regions experiencing the hike all at once.

Rising Costs and Consumer Behavior: Countries with weakened currencies against the US dollar, including Brazil, are facing even steeper price increases. Documents reviewed by Reuters indicate that major Brazilian coffee roaster 3 Coracoes raised prices by 14.3% on March 1, following previous hikes of 11% in January and 10% in December. The Brazilian Coffee Roasters Association (ABIC) reported that raw bean prices in Brazil soared by 170% last year, leading to a 40% jump in retail coffee prices. More increases are expected soon.

As a result, many consumers are changing their habits. Instead of brewing large quantities and discarding leftovers, families are becoming more mindful of waste, said ABIC President Pavel Cardoso. Market data from Nielsen shows that coffee sales volumes in North America and Europe declined by 3.8% last year as prices rose by 4.6%. With even steeper price hikes expected this year, sales are likely to drop further. J.M. Smucker, maker of Folgers and seller of Dunkin’ and Café Bustelo coffee brands, has already raised prices multiple times and anticipates a further decline in sales volumes in the upcoming fiscal year, its CFO Tucker Marshall said in a recent call.

Shift Toward Cheaper Alternatives: With rising costs, cash-strapped consumers are increasingly turning to lower-priced supermarket brands, also known as "private label" products. Data from Chicago-based market research firm Circana reveals that the market share of private label coffee in the US has grown from 20.51% in 2021 to 23.12% in 2024.

Coffee roasters now face a dilemma: absorb part of the cost increases and maintain customer loyalty or raise prices to protect profit margins. Either choice impacts overall profitability, even for major coffeehouse chains like Starbucks, where raw coffee accounts for less than 2% of the cost of a cup of coffee. Meanwhile, coffee traders and roasters are minimizing their purchases due to difficulties in transferring higher costs to retailers. A storage industry executive noted that US coffee depots currently hold only half their usual inventory, indicating a cautious approach in an uncertain market.