In the past, a €1 espresso was a staple in Italian cafés, a modest indulgence for many workers starting their day. But that familiar scene is changing. Today, an espresso costs about €1.20 in Italy, signaling a shift that’s affecting coffee lovers nationwide.
This increase in coffee prices is not isolated to Italy. European statistics reveal that coffee prices have surged across the continent. The factors behind this trend are multifaceted, reflecting a blend of global economic pressures and specific regional challenges.
Global Economic Pressures
The surge in coffee prices is part of a broader inflationary trend. Post-pandemic economic policies and the ongoing conflict in Ukraine have driven up costs across various sectors. This includes everything from energy to everyday services, straining household budgets.
Supply Chain Disruptions
The coffee industry has also been hit by a series of logistical issues. Yemen’s Houthi rebels have intensified their attacks in the Red Sea, targeting cargo ships. This has forced many shipping routes to be rerouted around the Cape of Good Hope, resulting in longer delivery times and higher costs. Maersk, a leading maritime transport company, anticipates continued disruptions through the third quarter of the year, which has contributed to rising prices for coffee, particularly from Vietnam, a major Robusta producer.
“The Houthis have showcased their innovative capabilities by employing not only conventional drones but also underwater drones,” said Oran van Dort, a commodity analyst at Rabobank. “Their increasing ability to inflict actual damage is significant.”
EU Regulations and Environmental Policies
European policymakers are also contributing to higher coffee prices. A new EU regulation aimed at combating deforestation will take effect at the end of the year. This regulation requires coffee producers to prove their products do not contribute to deforestation. The certification process is costly and complex, adding another layer of expense for coffee businesses.
Currency Fluctuations and Climate Change
The strength of the U.S. dollar against the euro has made coffee more expensive for European buyers, adding another dimension to the price increase. Additionally, climate change is affecting coffee production globally. Droughts and extreme weather in key coffee-producing regions like Brazil and Vietnam have reduced output, driving up prices.
“Coffee, like other crops, faces growing challenges due to climate change,” noted Christopher B. Barrett, an economist and agriculture professor at Cornell University. “The optimal growing conditions for coffee are shrinking due to persistent heat and other climate impacts.”
Impact on Coffee Shops
For coffee shops, price adjustments are a delicate balancing act. Kiliane Huyghebaert, owner of Jackie, a specialty café in Brussels, is cautious about passing on costs to customers. “We’re not going to raise prices arbitrarily,” said Huyghebaert. “We need to ensure our customers remain loyal.”
In addition to rising coffee prices, labor costs are also increasing. The cost of living has led to higher wages, and training baristas remains a time-consuming and costly process. Furthermore, the price of fresh milk has doubled, compounding the financial pressures on coffee shops.
As coffee prices climb, both consumers and businesses face new challenges in managing the costs associated with their daily cup of coffee.