PAY UP: Why your coffee is more expensive

Fox Business

16,654 views • 9 months ago 5 min read

Video Summary

Roasted coffee prices have surged by 22% in the past year, making it the largest price increase among items tracked by the government. This escalation is attributed to adverse weather conditions like droughts, frosts, and heatwaves that have significantly impacted coffee production in tropical regions, which are crucial for supply. The United States, unable to grow its own coffee, relies heavily on these areas, particularly Brazil, the nation's leading coffee supplier.

Further exacerbating the situation, a 50% tariff on coffee from Brazil has driven up costs for coffee shops and roasters. One New York establishment, for instance, faced an additional $68,000 for shipping containers compared to the summer. To mitigate this financial strain, many businesses are implementing surcharges, such as a 1.5% charge on all transactions, rather than item-specific price hikes to lessen the burden on individual customers.

Customers are noticing the increased prices, with some expressing reluctance to purchase coffee outside their homes. The cost of a double espresso at a Manhattan coffee shop is noted at $4.75, and the price of green coffee has risen from $2.77 to $3.81 per pound due to tariffs. The owner of one shop plans to remove the surcharge as soon as the tariffs are lifted, acknowledging that many customers continue to pay the higher prices.

Short Highlights

Roasted coffee prices have increased by 22% in the last year, outstripping other tracked items.
Adverse weather conditions, including droughts, frosts, and heatwaves, have severely impacted coffee production in tropical regions.
A 50% tariff on coffee from Brazil, the largest supplier, has significantly driven up costs for businesses.
One New York coffee shop is facing an additional $68,000 for shipping containers, leading to a 1.5% surcharge on transactions.
The price of green coffee has risen from $2.77 to $3.81 per pound due to these tariffs.

Key Details

Roasted Coffee Price Surge [00:00]

Coffee prices have risen by a significant 22% from the previous year.
This price increase is the largest among all items monitored by the government.

This section highlights the substantial increase in coffee prices, making it the most notable price hike among tracked goods.

Coffee prices up a whopping 22% from last year. Uh that's more than any other item tracked by the government.

Factors Contributing to Price Increases [00:30]

Roasted coffee prices are up 22% in the past year.
Several weather events, including droughts, frosts, and heat waves, are impacting coffee-producing crops.
This adverse weather has significantly affected production levels.
The United States cannot grow its own coffee and depends on tropical regions for supply.
Brazil is identified as a primary country for coffee growth.

This part of the discussion explains that volatile weather patterns are the primary cause of reduced coffee production, necessitating reliance on international sources.

Bad weather, you've got droughts, frosts, heat waves, um all impacting the coffee producing crop, and um that weather has hit production in a big way.

Tariffs and Supply Chain Costs [01:08]

There is currently a 50% tariff on coffee imported from Brazil.
Brazil is the nation's biggest coffee supplier and a major supplier for many coffee businesses.
One New York coffee shop and roaster experienced an increase of $68,000 for shipping containers compared to the summer.
This additional cost has forced the business to pass some of it on to customers.

This segment details how tariffs, particularly on coffee from Brazil, have drastically increased logistical expenses for businesses, leading to the need for price adjustments.

And right now there's a 50% tariff on coffee from Brazil. That's the nation's biggest coffee supplier and it's Joe Coffey's biggest supplier.

Business Response to Increased Costs [01:30]

A 1.5% surcharge has been added to all transactions rather than increasing prices for individual items.
The goal of this surcharge is to reduce the burden on any single customer.

The strategy of implementing a small, across-the-board surcharge is explained as a way to distribute the increased costs more evenly among customers.

We decided to add a 1 and a.5% search charge to all transactions rather than implementing an itembbased price increase because this reduces the burden on any individual customer.

Customer Reactions to Price Hikes [01:45]

Some coffee drinkers have expressed that they are buying less coffee out due to the higher prices.
One individual prefers buying coffee at home, though has purchased it at restaurants previously.
Another person notes that prices have gone from around $4 a few years ago to approximately $9 now.
Convenience is also a factor, with the effort and cost of driving or delivery being mentioned.
A sentiment that people will "always pay up for caffeine" is also noted.

This section captures the impact of rising coffee prices on consumer behavior and perceptions, with some customers finding it too expensive and inconvenient, while others acknowledge the persistent demand for caffeine.

We used to call Starbucks four bucks, but that was a few years ago. Now, it's like nine bucks.

Impact on Raw Material Costs [02:17]

The raw material, green coffee, is subject to tariffs.
Before the tariffs, green coffee cost $2.77 per pound.
Currently, it costs $3.81 per pound, indicating a significant increase.
The CEO of one store stated that the surcharge will be removed once the tariffs are no longer in effect.
Despite this, customers are still paying the higher prices.

This final part of the transcript focuses on the direct cost of the raw ingredient, green coffee, and how tariffs have inflated its price, leading to continued higher prices for consumers until the tariffs are lifted.