Coffee prices are set to rise even higher, according to Giuseppe Lavazza, chairman of Lavazza Group, due to a combination of economic pressures and supply chain challenges.

"The costs of green coffee at source have doubled," Lavazza stated, attributing the spike to several key factors. Significant climate impacts have led to a decline in robusta production from Vietnam and Brazil, the world’s largest coffee exporters.

Additionally, geopolitical crises, particularly the war in Ukraine, have driven up energy prices and disrupted shipping routes, notably through the Suez Canal.

For UK consumers, this has meant the price of a 1kg bag of beans rising by 15% in a year, and Lavazza said this could increase by 20% to 25% over the coming year.

In the US meanwhile, market speculation and the strong dollar, which increases the cost of coffee paid for in the currency, have further complicated the situation. "Every cent of variation means an additional $10 million in raw material costs for us," Lavazza noted during an event held on the sidelines of the Wimbledon tennis tournament on Tuesday, 9 July.

These economic strains have led to a 3% contraction in the coffee market as consumers face reduced purchasing power.

"Coffee prices are not going to go down, [they’re] going to stay very high,” Lavazza said in comments reported by the Financial Times. “The coffee supply chain is dramatically under pressure.”

"We have faced very, very strong headwinds. I don't see any reason why coffee prices will go down," Lavazza predicted.

Despite the challenging environment, Lavazza Group achieved its budget targets in 2023 and slightly increased its market share, both in volume and value terms.

This was the result of the company's "affordable pricing strategy" to protect consumers, even as it absorbed part of the cost increase in its margins.

The group's turnover reached €3.1 billion in 2023, with increases reported in all markets and solid growth in both the home and away from home channels. However, the company's EBITDA fell from €309 million in 2022 to €263 million, with the EBITDA margin declining from 11.4% to 8.6%.

"The Group's strategy was to limit consumer price increases in an inflationary environment, protecting volumes and using its margins to absorb part of the cost increase," Lavazza said.

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