Christopher Adams

Christopher Adams is the Markets and Banking reporter for the New Zealand Herald

Pricey coffee? We'll just have to suck it up

High commodity prices will affect the daily latte. Photo / Alan Gibson
High commodity prices will affect the daily latte. Photo / Alan Gibson

New Zealand cafes and coffee roasters will have to "pick up their game" if they're to cope with the challenges posed by surging international commodity prices, says an industry player.

Coffee has seen a sustained rally on New York's Intercontinental Exchange, which sets the global price for arabica beans, since last year.

A pound (.454kg) was trading at US$2.63 ($3.46) this week, a 54 per cent increase on its July level.

At the same time, dairy prices have also risen sharply, meaning that the other crucial ingredient of flat whites and lattes - milk - isn't getting any cheaper.

Alistair Sedcole, general manager of Auckland-based coffee roaster Allpress Espresso, said cafes had already put prices up and it was possible they would increase further.

He said consumers would become more picky about where they bought their coffee as rates went up.

Some consumers would be prepared to pay up to $5 for a cup - provided it was the best quality.

"If you're paying $4 and you're getting a bad cup of coffee, you're going to regret that," said Sedcole.

"If you're paying $5 and getting a great cup of coffee, you're going to love it.

"I actually think this change in terms of the market will just force a high level of quality. Consumers will demand great coffee."

Justin Purser of Trade Aid Importers, one of New Zealand's main importers of Fairtrade-certified coffee, said the global prices would take some time to flow through to New Zealand importers, roasters, cafes and consumers.

"Coffee drinkers need to expect to pay higher prices for the foreseeable future as the price increases we're seeing simply cannot be absorbed up the chain," he said.

Purser said there was not enough coffee being grown at the moment to satisfy global demand.

"I've just returned from visiting farmers in Sumatra and Latin America, where street prices have doubled since last year and still coffee traders are scrambling to buy whatever coffee's around - even rubbish coffee is earning high prices right now," he said.

Unpredictable weather had hit key growing regions, and production had fallen as the average age of farmers and their trees increased.

Sedcole said increased coffee consumption in emerging economies like China was also having an impact on supply, and many consumers were changing their preference from instant coffee - often made from lower quality robusta beans - to freshly roasted, arabica coffee.

Allpress had already put up its wholesale prices for roasted beans in its London operation, and was considering doing the same here.

He said Allpress would focus on increasing its operational efficiency, without compromising quality, to deal with the high coffee prices that looked set to continue.

"There isn't anything we're seeing at the moment that indicates coffee prices are going to stabilise and come back.

"We are consistently surprised every day to see the price continuing to increase."

- NZ Herald

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