“Bitter” coffee awaits us after Easter, as increases of as much as 20% are expected following the rally in international prices seen in the product over the last 3-4 months, the result of a combination of factors.
Today, coffee companies in Greece are purchasing green coffee, which is used for the production of Greek coffee, for 6.5 to 7 euros/kg, compared to 5.5 euros/kg four months ago, which is about 27% more expensive.
“Although a large part of the increases are absorbed by the companies, if the rise in prices continues at the international level, price increases are inevitable”, the president of the Hellenic Coffee Association and head of the company “Giagoglou Coffees”, Tassos, pointed out speaking to “K” Yagoglu. The price increases will be visible both on the supermarket shelf and, of course, in the restaurant. The inflationary crisis that followed the pandemic crisis resulted in a change in consumption habits. Thus, although before COVID-19 60% of coffee consumption in Greece was done outside the home and 40% inside the home, now, and despite the fact that there is no restrictive measure due to COVID-19, 70% of the consumption is done inside home and 30% outside. As for whether the overall consumption of coffee has decreased, Mr. Yagoglu characteristically stated: “There is an axiom in our market: every 10% increase in price causes a drop in consumption volume by at least 1%.”
A decisive role in the increase in coffee prices, which threatens to turn a daily pleasure into a luxury, has been played by the prolonged drought in Vietnam, the main producer of Robusta coffee, which is mainly used in Greece and in Europe in general. As a result of the above, the price of Robusta coffee repeatedly set records on the international stock markets. Yesterday July futures on the London exchange were up to $4,265/ton, a price increased by 60.88% compared to a year ago. According to data from the International Coffee Organization, which compiles a composite price index (ICO Indicator Price) based on the price evolution of all the main varieties of coffee, the index was formed on average from the beginning of April until April 23 to 214.65 cents/lb. A year ago the corresponding index averaged 178.57 cents/pound. The index for Robusta coffee in particular stands at 189.76 cents/lb this year compared to 115.70 cents/lb in April 2023.
Although the availability of Arabica coffee, a variety that makes up 75% of world production and is produced mainly in Brazil, there are no problems, the reduction in the supply of Robusta is dragging prices up in this category as well, with the increase in the last quarter to be of the order of 20%. Indicative of the interaction that exists in commodities, which are traded on the stock exchange, is that this year Brazil is expected to have a very good harvest, which does not normally justify, according to Mr. Yagoglu, increases in the price of Arabica coffee contracts .
To the drought affecting Vietnam came to be added the disruption of maritime freight transport in the Red Sea. Since the Robusta coffee imported into Greece mainly comes from Vietnam or India and Indonesia, ships are forced to go around Africa to avoid Houthi attacks, which also significantly raises the cost of imports coffee.
Although the industry believes that the removal or even reduction of the excise tax imposed on coffee in 2017 – as a memorandum measure – could absorb shocks from price appreciation, the government’s economic staff has consistently rejected this possibility, arguing that it would not there is fiscal space. The board of directors of the Hellenic Coffee Association received the same response from the Minister of National Economy and Finance, Kostis Hatzidakis. This tax increases the price of coffee by 40%-50%, while the burden on the industry amounts to 140 million euros.
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