ROADNIGHT MUSING – JUNE 2025
‘THE UNFILTERED TRUTH – BREWING COST CRISIS’
Let’s talk coffee. Not the kind brewed quietly in your kitchen, but the kind that fuels café culture, barista banter, and the everyday Aussie ritual. The cost of your morning cup has crept higher—painfully so. What was once a $4 flat white in pre-COVID days has edged closer to $6 or $7, and forecasts warn of $10+ cups on the horizon.
A snapshot of average prices in major Australian cities (May 2025):
This demonstrates an increase of 37.5% in less than 5 years, which is significantly higher than the annual inflation rate and CPI over the same period. So, what’s driving the sharp increase in coffee specifically, when it’s a daily staple of Australians?
GLOBAL FACTORS:
Growing global demand – On the supply side, approximately 99% of all coffee consumed in Australia is sourced internationally from what is known as the “Coffee Belt’- a narrow climatic zone along the Equator characterised by rich volcanic soil, mild temperatures, regular rainfall, altitude and shaded sun. Yet global demand is growing with coffee culture spreading into China and parts of South-East Asia. The demand for high quality beans has never been higher.
Climatic factors – The largest coffee producer in the world Brazil, has suffered both frost and drought causing supply disruptions for the 2025 crop. Similarly, India and Vietnam, producers of close to half of the world’s robusta coffee have also faced challenging conditions.
Supply chain factors - Trade disruptions such as tariffs, export bans, and geopolitical tensions can raise supply chain costs and then drive-up bean prices. There have also been multiple instances of international shipping issues and container shortages since Covid leading to delays in getting beans from the farm to the roasters.
Cost of growing - Labour shortages and rising wages in key producing countries are driving up production costs. As these nations develop, there is a rural-to-urban migration trend coupled with an ageing farming population and declining interest in agriculture reduces the available workforce. This in turn increases prices, which are ultimately passed on to the consumer.
Coffee trading in US dollars - As can be seen on the below graph, global raw coffee bean prices have increased from $120USD/Lbs in 2015 to $354 in May 2025, being a 195% increase in a 10 year period. When the Australian dollar weakens, it costs local roasters more to buy green beans. Further, trading in coffee futures can add to price volatility making harder for businesses to predict costs.
Source: tradingeconomics.com
LOCAL FACTORS:
Rising wages - Domestically, cafés in Australia face rising operational costs, including higher wages, rent, and utilities, compounded by labour shortages across the hospitality sector. From 2015 to 2025, the minimum wage has increased from $17.79/hr to $24.95/hr representing a 40% increase in 10 years. Whilst workers require wage adjustments to keep up with inflation and living costs, the hospitality sector relies heavily on labour, and this creates a significant increase to their operational costs. Again, ultimately being passed onto consumers.
Limited import substitution – elevating Australia’s coffee output has been difficult due to the specific growing conditions required, and the need to develop new non-tropical varieties. There are hopes Australian grown coffee consumption could increase to 3 to 4 per cent in the next 10 years.
Changing preferences - Consumer preferences have shifted in recent years, with Australians increasingly choosing ethically sourced beans and non-dairy milk alternatives. These choices add to the cost per cup, compounding the broader rise in coffee prices.
THE FUTURE OF COFFEE?
If you’ve noticed your daily coffee getting more expensive, you’re not imagining things — and prices are expected to keep climbing through the end of 2025. A mix of global and local challenges is to blame: weather events, shipping delays, higher import costs, and staffing shortages are all pushing café prices up. In some regional areas, a cup is already nudging $10.
The road ahead continues to look bumpy, with prices likely to stay volatile.
The answer: costly coffee is here to stay so true coffee connoisseurs will have pay!
Sources:
https://www.torrens.edu.au/stories/blog/hospitality/why-are-coffee-prices-rising-in-australia
https://www.tripodcoffee.com.au/blogs/news/why-are-coffee-prices-rising