Over the past few weeks, we have seen an increase in news reports regarding the raw material price of coffee. Although this has been a topic in the back ground for some time, this conversation was really spearheaded into the national media sphere last week by a leader in the New Zealand industry. You can find a well detailed blog post from him on their website, really getting into the technicalities of it.
But what does this mean in simple terms?
Coffee is traded on The New York C (the term for the market coffee is traded on). Because it is a traded commodity, it doesn’t have a fixed price like other products you may find, but instead has always fluctuated a little up and a little down each month, but with a slightly increasing average line.
This market is impacted by many aspects, such as weather events, geopolitics and regulation changes, supply shortages, market speculation etc. Even COVID-19 caused changes, particularly in the logistics of moving coffee.
Because coffee is traded, the price of raw material is also impacted by the NZD:USD exchange.
All of these factors, including the weakening NZ dollar, has massive impacted supply of raw material, increasing the cost and restraint on the supply line.
So what is a realistic example of this impact? We have evaulated our cost of coffee across six of the main origins we utilise. In the time from 1st February 2025 (our last price update), to 1st March 2025, the average cost of our main blend has increased by 21%. We use this as a benchmark due to it’s make up and volume roasted. This is a massive increase in just a short period of time.
What is scary, is it is not expected that the market will get any better, any time soon.
The biggest squeeze now, is on coffee roasters. For a long time, roasters have been restrained in the middle of the supply, with rising costs on one side and a demand for lower pricing in wholesale coffee on the other. In many cases, roasters have limited their price increases, both on retail and wholesale coffee, generally in an attempt to not upset their client base.
Over the next few months, we will see an increase in coffee roasters realising this is no longer a sustainable business model, and pricing for both home coffee users and wholesale establishments increasing to try to balance the rising cost of raw material. This increase, is likely to cause an increased price on your cafe experience as well, with cafe owners already having tightened their belts as much as possible during these challenging economic times. The truth is, this acute reduction to a business’ profit, any business, is unsustainable and solutions such as price increases, needs to be considered.
It is an interesting time ahead for the coffee industry in New Zealand.