Takeaway coffee prices rising at fastest pace in more than 10 years

Saturday, 27 August 2022

The components of a cup of coffee are becoming more expensive.

People getting a coffee fix are generally paying at least $5.50 for a regular double-shot flat white, an informal nationwide survey shows – but you can still get one for $2 if you know where to look.

Stuff reporters around the country went to their local cafes to compare the price of a coffee, after Stats NZ revealed that the price of a takeaway coffee lifted 5.3% in the year to July.

That was the fastest rate of increase since 2009, except for when GST increased to 15%.

In July last year, the annual rate of increase was 2.7%. The average weighted price recorded by Stats NZ for a takeaway coffee was $4.35 in July.

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But the cheapest coffee found by Stuff reporters was $2 at Pak’n Save Moorhouse Ave, in Christchurch.

The next cheapest was more than twice the price – $4.80 for a medium flat white at Foundation Cafe, also in Christchurch, and Red Cafe, in Nelson.

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The most expensive among our reporters’ coffee orders was a $6 flat white from the Streetwise coffee cart in Palmerston North.

Around the country, the cost of a different type of milk would add another 50c to $1.

Infometrics chief forecaster Gareth Kiernan said milk prices had risen rapidly, which would have an effect on cafe prices. The retail price of two litres of milk was up 5% year-on-year in July and had been up more than 10% in June.

He said wage growth would also have an effect. Average hourly earnings for the accommodation and food service industry are up 12% year-on-year.

“This growth reflects the lack of workers within the industry with the borders being shut, therefore losing access to backpackers and people on working holidays,” he said.

“Additionally, as the broader labour market has got extremely tight, worker shortages have been exacerbated for this industry, along with retail trade and agriculture, because their average wages are so much lower than the rest of the economy, so workers have a relatively easy path towards higher-paying roles in other industries.”

Richard Corney, founder of coffee roaster and supplier Flight Coffee, said the price of cafe coffee had been too low for too long.

If prices had moved with supplier costs and other pressures on businesses, people would already pay more than $7 for a typical cup, he said.

The cost of coffee beans was up, he said, at the same time that the New Zealand dollar was weaker against the US dollar. “It’s been a volatile market for the better part of 18 months.”

At the moment, the biggest coffee producer, Brazil, was facing problems because of early rain, he said. “It’s a month earlier than would typically be expected and flowering is happening at the same time as they are trying to harvest.”

He said growers had to decide whether to harvest and potentially damage the flowers, reducing the fruit of future seasons, or have a lighter crop this year. That was compounded by other weather patterns affecting supply in other parts of the world, he said.

“For the third year running, global supply is very, very tight.”

The cost of shipping to New Zealand had also increased dramatically, he said. It used to be possible to ship a container from Brazil to New Zealand for US$1800 but now suppliers were being quoted US$14,000 or more.

He said the sector was in a holding pattern because, while its costs were twice what they were 18 months ago roasting companies could not put their prices up 100%.

Corney said when he opened his first cafe in 2006 a flat white was $3.50 and, in some places, prices had barely moved from that, despite significant inflation and minimum wage increases.

“There’s a mindset across the general population that a cup of coffee is immune from inflation and that is something that needs to be dispelled because it’s absolutely not the case.”

And as for that $2 coffee? Foodstuffs spokesperson said all of its stores were operated by local owners which meant they could adjust their prices to suit their local communities.

“Prices vary across stores that offer coffee and the $2 deal is not typical but offered in some of our stores,” she said.

She said Pak’n Save Moorhouse covered any shortfall between the cost to produce the coffee and the $2 price.

“They’ve been offering these $2 coffees since the start of Covid, and it has been a huge hit amongst the community.”