UAE coffee prices: Global shortage could drive cost up by 20%

Your morning cup of coffee could increase in price by as much as 20 per cent in the next six months, according to experts.

The rising price is due to a combination of factors, including a global shortage of the Arabica bean, shipping restrictions caused by Covid-19 and an increase in the cost of containers from South America and Central Asia.

Extreme weather in Brazil, the world’s largest producer of Arabica, is another key factor in the supply crisis after frosts wreaked havoc and wiped out a third of the crop.

A senior figure from one of the UAE’s leading coffee producers said the average cost of the Arabica bean had almost doubled over the past year from $1 a pound (0.45 kilograms) to $1.80, an increase that is going to hit consumers in the pocket.

“It is inevitable we are going to see an increase from 10 per cent to 20 per cent for the end consumer in the next six months,” said Alan Hardman, sales and marketing director for Dubai company Coffee Planet, which roasts the equivalent of 25 million cups of coffee each month.

“I also think that increase will stick around for the next couple of years at least. There are also concerns the price could go up as high as $4 per pound next year, which will unfortunately be passed on to the consumer.”

The Arabica bean is estimated to be used in 60 per cent of the coffee produced worldwide and is synonymous with speciality coffee — something the UAE market is renowned for.

The global shortage has resulted in some global producers toying with the idea of turning to the alternative Robusta bean, which is significantly cheaper and commonly used in instant coffee, it is also associated with a bitter flavour.

However, Mr Hardman believes the market in the UAE will endure the price increase because of the popularity of coffee made here using the Arabica bean.

“There are a lot of roasteries in Dubai alone that have invested a lot of money into using the Arabica bean to create speciality coffees,” he said.

“That is a scene that is only going to increase and there are huge numbers of speciality coffee shops here as well. There are just rows and rows of coffee shops that are bound to the Arabica style coffee.”

He said the region’s love of coffee is illustrated by the fact his company has taken a record number of orders this month, despite the impact of the pandemic and the recent surge in cost.

“People are not going to stop drinking coffee as it has become a such a normal part of daily life across the globe and especially so in this region,” said Mr Hardman.

The coffee price increase comes as the industry grapples with the effects of the pandemic.

“We saw about 40 per cent of the places we supplied to close down and they have not reopened,” said Matt Toogood, owner of Dubai’s Raw Coffee Company, which supplies coffee to more than 350 companies in the UAE.

“There are a huge amount of places that have just disappeared.”

One of the trends during the pandemic was people investing in home equipment to make their own brew, due to restrictions on travel, which has made them savvier about coffee.

This means coffee shops will have to up their game, especially if prices are going to increase, said Mr Toogood.

“There is a temptation for companies to reduce the standard of their coffee but keep charging premium prices, which is what I am worried will happen in a lot of cases,” he said.

“However, many consumers have spent time working out what makes good coffee and have gone back to the chain stores and are now expecting a better quality. For a long time, companies have tried to hide bad coffee by using loads of sugar to compensate.”

He said the budget end of the market is going to be especially hit by price increases as smaller companies will not be able to absorb the price increases.

“The bottom end of the market is going to be 100 per cent affected because they have no way of avoiding it,” said Mr Toogood.

“Your cup of chai from the guy on the back of his bicycle is going to double because his cost has doubled.”

There is one upside to the expected ramping up of coffee prices, according to Mr Toogood.

“The coffee producers are thankfully going to be making more money,” he said.

“The biggest problem we have had in the coffee industry over the last 10 years is the farmers themselves have not been paid enough.

“In most cases, they have been surviving on the poverty line.”

Sixty per cent of all coffee comes from smallholder coffee farmers with less than five hectares of land, which amounts to about 12.5 million people.

Non-profit group Enveritas, which works to promote sustainable coffee growing, estimates that at least 5.5 million of those people live below the international poverty line of $3.20 a day.

But the increase in price may not matter to coffee-lovers in the region, as long as they have their morning cup every day.

The owner of another Dubai-based coffee franchise believes a large amount of customers know exactly what they want from their favourite beverage and are willing to pay for it.

“A lot of our customers appreciate good coffee and are prepared to pay a little bit more for it,” said Kaniz Samir-Mostaffa, co-founder of Blk Cab Coffee, which charges up to Dh35 per cup from its brew bar.

“The coffee connoisseurs have always been happy to pay that little more for the extra quality.”