Consumers should expect to get a cheaper cup of coffee starting next year, one of the world’s leading roasters said.
(Bloomberg) — Consumers should expect to get a cheaper cup of coffee starting next year, one of the world’s leading roasters said.
The cost of wholesale arabica beans has plunged in recent months after reaching the highest level in over a decade last year, but consumers are still facing elevated prices to get their fix. That’s because companies are working through stocks of beans bought in 2022, as well as adapting to higher packaging and energy costs.
Next year, the lag between the decline in market prices and what consumer ultimately pay should start to dissipate, according to Italian coffee manufacturer Luigi Lavazza SpA.
“We bought a lot of coffee in 2022 and we still have this coffee in our stocks,” Giuseppe Lavazza, the company’s chairman, said in an interview. “We have to sell the coffee at the price we bought in 2022. In 2024, we’ll have space to provide more discounts and have flexibility to pricing.”
Coffee roasters are operating in a difficult environment with higher interest rates and a cost-of-living crisis threatening to cut consumption. Passing on lower costs could help rescue faltering demand. Lavazza said he thinks a “recession is not unlikely,” and there are alrealdy signs of UK consumers cutting back on spending in response to price increases.
“Currently the situation is still highly sensitive. The geopolitical context is extremely serious, markets are still volatile, balances are uncertain,” he said.
A recovery in Brazil’s coffee production has weighed on wholesale futures prices of arabica beans. That, combined with a weakening dollar, has helped ease the inflationary pressure on roasters. At the same time, they are dealing with record-high robusta prices as strong demand for the cheaper beans tightens supply. Lavazza expects robusta prices will start to ease later this year.
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