A “Wild Ride” for Coffee as Tariffs and Supply Issues Push Prices Higher

Introduction

The cost of your favorite morning brew is about to rise as coffee prices climb higher due to a perfect storm of falling supply, rising demand, and stubborn inflation.

While this may sound like bad news for coffee drinkers, the situation is more complicated than just a price hike for your daily flat white.

It’s a battle for the survival of the coffee industry itself.

The Brewing Crisis: Rising Costs Across the Coffee Industry

The coffee industry is facing challenges that extend beyond just cafes and coffee shops.

Coffee, once a simple commodity, is now experiencing rising prices at every level, from production to the final cup served at your local café.

In fact, the cost of coffee beans has increased significantly, and this has begun to affect everything from your daily espresso to supermarket coffee prices.

• 27,000 cafes in Australia, employing over 139,000 people, represent a market worth $14 billion, according to an IBISWorld report from January 2025.
• International brand Lavazza reported a staggering $1.3 billion increase in costs in 2024, mainly due to disasters affecting coffee bean crops worldwide.
• Rising costs in rent, energy, and wages have further strained profit margins, and experts predict that barista-brewed coffee prices may rise to as much as $12 per cup, which is far above the current $5.50 average.

As demand for high-quality coffee surges globally and climate change continues to wreak havoc on coffee-growing regions, these challenges are set to impact cafes and consumers alike.

The reality is that coffee prices are now on a “wild ride” with no signs of slowing down.

The Impact on Local Cafes

For Rachel-May Follan, owner of Whyld Coffee on the Gold Coast, the past year has been a “wild ride” of rising costs and unpredictable supply issues.

As a small-scale roaster, Rachel-May has seen firsthand how the global coffee supply chain has been disrupted.

“Last year, I paid about $4 per kilogram for organic green coffee beans. Now, the price has skyrocketed to $14 per kilogram,” Follan shared, highlighting the dramatic shift in coffee costs.

She noted that this price surge was largely triggered by panic buying after the Trump tariffs were announced, which created a sense of urgency in the coffee industry.

Follan likens the panic to the toilet paper shortage during COVID-19, a phenomenon that many coffee roasters, particularly in the U.S. and Australia, have faced as they try to secure coffee supplies before prices climb even higher.

The Supply Chain: From Bean to Cup

Follan emphasized the amount of work that goes into producing coffee beans and the hands that are involved in the process. “Thousands of hands have gone into back-breaking work for it.

These are hand-picked cherries from a tree that are then pulped, dried in the sun for 30 days, and rotated by hand,” she said.

Despite the labor-intensive process, coffee itself only accounts for about 13% of the cost of a cup of coffee.

For cafes, this means slim margins.

While the cost of beans is increasing, cafes are struggling to maintain their profit margins.

On average, cafes make a gross $1 profit per cup sold before factoring in the costs of rent, wages, packaging, and milk.

As a result, many cafes are considering small price increases—around 50 cents—just to stay afloat.

The Home Brewing Surge: Supermarket Coffee Prices Skyrocket

It’s not just cafes that are feeling the heat. Coffee lovers who prefer to brew their coffee at home are also seeing prices surge.

An analysis of supermarket coffee prices reveals sharp increases, with both Coles and Woolworths in Australia reporting record-high coffee prices over the last six months.

Retail price hikes are largely attributed to the escalating costs of green coffee beans, as well as supply chain disruptions.

Supermarkets are working with suppliers to ensure a range of products remains available, but the reality is that consumers are paying more for coffee both in-store and online.

As one Woolworths spokesperson put it, the price hikes are a direct result of supplier and manufacturer increases.

The Rising Cost of Doing Business: How Cafes Are Coping

Business costs across the coffee industry are booming.

Essential Coffee, one of the country’s largest specialty roasters, reports that their business’s labour costs have risen by 9%, rent has gone up by 29%, and insurance costs have increased by 6% over the past two years.

But it’s not just operational costs that have caused concern. Todd Hiscock, CEO of Essential Coffee, explained that the wholesale cost of coffee has risen by 119% since November 2023.

The Chinese have very much converted from tea to coffee, Hiscock said.

They’re buying up unprecedented levels of coffee supplies, often taking an entire Brazilian stock load in ways that have never been seen before.

In addition to increased global demand, climate-driven weather events, such as frosts, storms, and bushfires, have disrupted coffee production.

You’re seeing crops just get wiped out, Hiscock said.

On top of that, there’s also the removal of crops due to more urbanization.

The Price of Alternative Milks: A Growing Concern for Cafes

As more consumers turn to plant-based milks—such as almond, oat, and soy milk—cafes are facing even more pressure to raise prices.

These alternatives can cost 20 to 100% more than regular cow’s milk, making it difficult for cafes to keep costs manageable.

For a barista-quality plant-based milk, we’re paying as much as $4 per litre, sometimes even more, Hiscock noted.

The higher costs of alternative milks are contributing to the overall price increase, further impacting both cafes and consumers.

Predictions: The $12 Coffee

Industry leaders, including Hiscock, are predicting that the price of coffee in Australia will need to increase to between $8 and $12 per cup. This is in line with prices in North America, where consumers are already paying higher rates for their daily coffee.

We need to come to the party and pay in a competitive global market, Hiscock said.

If we don’t, we risk losing the supply of coffee to larger, more lucrative markets.

Despite the challenges, Hiscock acknowledges that price increases may lead to backlash from consumers.

It’s hard because people are very sensitive to their beloved coffee, and when you move the price up, you find not just a lot of negative reactions but some very terse expletives, he added with a laugh.

A Café Is More Than Just a Cup of Coffee

While many experts predict that flat white prices may hit $10 per cup in the near future, Follan believes that prices around $6 to $7 are more realistic.

We’re not saying that it needs to reach crazy numbers, she explained.

But I do think that $6 to $7 is a fair price.

Follan also emphasized that cafes are about much more than just the coffee.

You could be going in because you like the playlist or you like the ambience.

It’s an experience as well, she said, stressing the importance of the overall experience that cafes provide to their customers.

In this way, the price of coffee is not just about the product itself but about the entire environment and service that comes with it.

The Way Forward: Navigating the Coffee Crisis

As the coffee industry grapples with rising costs, supply chain disruptions, and global market pressures, one thing is certain: the price of coffee is set to increase, and it may be necessary for both cafes and consumers to adjust to the new normal.

The question is not whether prices will rise but how high they will go and how consumers will respond.

With challenges ahead, industry leaders must find innovative solutions to balance the rising cost of coffee while maintaining quality and customer satisfaction.

For now, coffee lovers may have to accept that their morning cup of coffee will cost more, but the ultimate goal will always be to keep the experience of enjoying coffee rich, rewarding, and sustainable for both businesses and consumers alike.

As the coffee market adapts to these challenges, it’s clear that the future of coffee in Australia—and globally—will involve higher prices, innovative solutions, and a renewed appreciation for the effort and craftsmanship that goes into every cup. ☕