Soaring coffee bean prices, will coffee prices rise? Neighborhood cafes are “closed doors”

“If the price is not raised even by a few hundred won, the door will be closed.”

A (male in his 50s) who runs a small cafe in Seongdong-gu, Seoul. Mr. A, who has been running a cafe for three years, said that the price of coffee beans has risen sharply recently, so if the product price is not raised, it will have to be closed.

According to Mr. A, the price of beans, which used to be 20,000 won per kg, rose to 23,000-24,000 won a couple of months ago. Since about 40 cups of coffee are produced per 1 kg of coffee beans, it is explained that the price per cup of coffee should be raised by at least 300-400 won considering the price increase (3,000-4,000 won).

However, Mr. A was concerned, saying, “If you raise the price, customers will fall.” Still, he explained, “If we don’t raise the price, we can’t keep the store.” Mr. A had been thinking about whether to raise the price before the increase in the price of coffee beans due to the increase in labor costs for part-time students following the minimum wage increase, followed by the increase in milk prices.

He explained, “There is no need to worry about large franchise coffee shops.” “There are companies that own their own coffee bean fields, and since they reserve a large amount of coffee beans in advance, they are not greatly affected by the price increase of coffee beans”: . He added that the margin is also high because coffee sales are high.

The reason coffee bean prices are on the steep rise is because of disruptions in supply in Brazil and Vietnam, the world’s first and second largest producers of coffee beans. In the case of Brazil, coffee production has been reported to have plunged due to the cold and drought this year.

In Vietnam, lockdown measures to prevent the spread of COVID-19 have led to a decrease in coffee production. It is difficult to put workers into the coffee farm, and the logistics system that moves the harvested beans is also paralyzed, resulting in a sharp decline in exports compared to last year.

According to CNN on the 18th (local time), the price of coffee futures rose to the highest level since January 2012 and has risen more than 80% this year. On the 17th of this month, the Arabica bean futures price was traded at $2.326 per pound (454g) on ​​the New York Mercantile Exchange. The price has nearly doubled compared to a year ago.

However, despite the sharp rise in coffee bean prices, large franchises and food and beverage companies are of the opinion that they will not raise prices for the time being.

In the case of large coffee franchises such as Starbucks, Ediya Coffee, and A Twosome Place, they said they have no plans to raise prices right away. In the case of Starbucks, coffee beans are supplied by direct contracts with local farmers in more than 30 countries, including Brazil and Vietnam.

An official from Ediya Coffee said, “There is a stock of coffee beans that we have so far,” and “there are no plans to raise it for the time being.”

However, even large franchises remain open to the possibility of price hikes. A Starbucks Korea official said, “As coffee beans are producing poor crops worldwide, the pressure to increase prices is greater than ever before.”

A Twosome Place also announced that it would not raise coffee prices. A Twosome Place official said, “Coffee is a popular favorite food, and we will not raise the price in consideration of consumer sentiment in the COVID-19 situation.”

However, A Twosome Place increased the price of some cake items by an average of 4% in August. It is interpreted as an attempt to offset the increase in cost by increasing the price of other products instead of coffee, which has high consumer price resistance. An official from A Twosome Place explained that the price increase for cake items was “a minimal measure that was inevitably decided in consideration of the accumulated cost pressure and improvement in the profit and loss of franchisees.”

Dongsuh Foods, which produces Maxim Mocha Gold coffee mix, called ‘national coffee’, also said that it is not considering price hikes as an option right away. A Dongseo Food official said, “We bought coffee beans as a gift and have stock.”

However, an official from a coffee company said, “The coffee crop will be difficult not only this year but also next year as the abnormal climate continues. He also predicted that if the increase in coffee bean prices continues for a long time, large franchise companies may also raise prices.


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