Coffee Prices Soaring... Lavazza Says "They Will Rise Even More Next Year"

Coffee Prices Rise Due to Climate Change, Logistics Risks, and EU Regulations
Already Up 15%... "Will Rise Another 10%"

As coffee bean prices hit an all-time high, Italian coffee company Lavazza has warned that coffee prices could rise further due to climate change, Red Sea logistics risks, and new European Union (EU) regulations.

On the 9th (local time), the London Robusta coffee bean futures price, a global coffee benchmark, closed at $4,627 per ton, up 6.91% from the previous day. It has surged 81% over the past year. Giuseppe Lavazza, chairman of the Lavazza Group, said, "Coffee prices will not go down and will remain very high," adding, "The coffee supply chain is under tremendous pressure."

Robusta beans are widely used in low-cost coffee and instant coffee. If bean prices continue to rise, an increase in grocery prices is inevitable. This year, coffee prices in UK supermarkets have risen by about 15%. Chairman Lavazza forecasted that prices could increase by nearly 10% more by next year.

In Southeast Asian countries, the largest producers of Robusta beans, droughts and poor harvests have sharply reduced yields. Chairman Lavazza stated, "Climate change has affected production in Vietnam and Indonesia, the world's most important Robusta producers, significantly reducing supply," and added, "Coffee producers like Lavazza have no choice but to raise prices and reduce profit margins as raw material costs soar."

Transportation costs have also increased. Since October last year, ships have avoided the Red Sea due to attacks by the Houthi rebels and have taken routes around the African continent instead. Coffee companies sourcing beans from Asia and East Africa inevitably face higher costs. Chairman Lavazza revealed that production costs have increased by more than 800 million euros (approximately 1.1993 trillion KRW) over the past two years due to rising bean prices, transportation costs, and a strong dollar.

Speculative forces have also played a role. Chairman Lavazza pointed out, "Speculation is one of the major factors," noting that as supply decreased and prices rose, hedge funds and speculators flooded the market, driving prices even higher.

Lavazza also stated that the burden has increased with the enforcement of the EU Deforestation Regulation. Under this law, companies must prove that their supply chains do not contribute to deforestation. Products failing to meet the requirements will be banned from sale across the EU and subject to fines. Chairman Lavazza said only 20% of coffee farmers can comply with this regulation, leading many companies to purchase coffee earlier than usual. He added, "Coffee industry companies are facing very strong headwinds."