The price of coffee on the world market has increased by more than 2024 percent since the beginning of 54, according to data from the Trading Economics website. The new economy analyzes how the domestic market will react in the coming period
In the period of one year, the prices of ground coffee in Serbia rose significantly less than on the world market, but due to the persistent increase in the price of raw coffee caused by unfavorable climatic conditions, geopolitical upheavals and consumer trends, the question is how the domestic market will react in the coming period. Nestle, one of the largest coffee producers operating in Serbia, has announced new price increases, as well as a reduction in packaging.
The demand for coffee has been increasing for months, and the market is unable to meet the needs of consumers. Industry group World Coffee Research predicts that in less than two decades, demand will exceed supply for almost half of current global production.
At the same time, prices are also rising. Since the beginning of the year, the price of coffee on the stock exchange has risen by an average of 54,66 percent. At the same time, Arabica prices have increased by 50% since the beginning of the year, and Robusta by around 65%.
However, according to the media, since the end of 2023, domestic distributors have noticed an increase in the purchase price of Arabica by more than 70 percent, and Robusta by almost 230 percent.
Causes of coffee price increase
Almost 40 percent of the world's robusta, a strong-flavored coffee, is produced in Vietnam, which has been hit by droughts this year. They seriously affected the supply of drinking water, the harvest, and even the production of coffee. According to some estimates, coffee production in Vietnam during 2024 will be the lowest in the last 13 years.
As a result, futures contracts for the purchase of robusta from July reached a price of almost 5.000 dollars per ton.
Other countries with significant coffee production were also hit by weather conditions that affected global supply.
Brazil is facing one of the worst droughts in decades, so from 2023 production has fallen significantly, by some estimates by up to 20 percent.
All this raises expectations of further growth in the price of coffee, which attracts investment funds to invest in coffee, which then further raises prices, bringing speculators large profits.
In addition to bad weather, the current movement of coffee prices is also affected by the conflict in the Middle East. Namely, at the beginning of the year, it was announced that ships transporting coffee would not pass through the Suez Canal, due to Hutt attacks in that area.
The rerouting of ships around Africa lengthens the usual routes by about four weeks, and with increased transport costs, prices also increase.
Nestle is reducing packaging and raising prices
One of the world's largest coffee producers, popular in the Serbian market as well - Nestle, in addition to raising prices, also started reducing packaging.
David Rennie, Head of Coffee Brands at Nestle, said they are "not immune" to the price of coffee in the market.
"We have already raised prices and we will continue to do so," he said.
Prices have increased in both Serbia and the EU.
According to the latest data of the Republic Institute of Statistics, for August of this year, the average price of a kilogram of coffee in Serbia was 1.864 dinars.
Exactly one year earlier, in August 2023, it was 1.712 dinars, and in August 2022 it was 1.504 dinars.
This means that in the last year, the price of coffee in Serbia increased by 8,8 percent, far less than on the world market.
Also, in addition to the price increase, in Serbia there have been cases of a decrease in the quality of coffee in the past. Namely, small producers added peas, soy or chicory to the coffee, which is why the Rulebook on the quality of raw coffee was introduced in 2022, according to which it is forbidden to write "coffee" on the packaging if it contains such additives.
European consumers share a similar fate, as coffee continues to rise in price both in the EU and in the countries of the region. In Montenegro, the price of coffee rose by 20 percent this summer, and in Croatia, according to October data, it jumped by 10 percent. According to Eurostat data, in October the year-on-year increase in coffee prices was the highest in Estonia - 13,3 percent, Denmark 12,5 percent and Italy 11,8 percent.
Source: New Economy
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