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Coffee prices to jump to $6: ‘People say they won’t pay it, but they will’

Pressures at home and abroad could see your daily dose of caffeine cost even more.

Australians could soon be spending more on their daily cup of coffee as cafes battle to keep up with rising cost of living pressures. While some have found hacks to keeping their dose of caffeine low, others will have to fork out more of their hard-earned cash.

Depending on what you order at your local, coffee may have already become too expensive for you, but Australians are being warned there is a real possibility the average cup could soar to $6 by the end of the year.

ANZ Agribusiness Insights head Michael Whitehead told Yahoo Finance it’s “quite foreseeable” that prices will go up if inflationary pressures continue.

Barista pouring cup of coffee next to Australian $1 coins on top of notes
Coffee prices could jump this year if domestic and international pressures keep going. (Source: Getty)

Do you have a story to tell? Email me at stew.perrie@yahooinc.com

“When coffee jumps, it jumps in perhaps a larger increment than something off a supermarket shelf,” he said. “If it is getting to the point where people need to charge more to cover their costs, labour and wages and those things, then it probably will be a noticeable jump.

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“Lots of people say, ‘I'm not paying $6 for coffee’, but then they will.”

Coffee could soon be a ‘luxury good’

At the moment, you can expect to pay around $4 to $4.50 for a regular cappuccino, latte or flat white, however that can go up by 50 cents or more if you want to add in syrup or an alternative to dairy milk. When it comes to a simple iced latte, prices have already exceeded $6.

But due to domestic factors like inflation, and international factors like shipping costs or climate change, cafes could jack up the price to ensure they are able to keep the lights on.

Yasmin, who runs the Sisterhood Cafe in Hobart, explained to Yahoo Finance it’s only a matter of time before she will have to increase her prices.

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“Absolutely, look, milk’s going up, it’s gone up lots in the last 12 months, our coffee prices have gone up,” she said. “It’s a lot of money and it makes it more of a luxury good as opposed to everyday good.

“That probably isn’t too far off what cafes will charge to survive.”

‘Pretty crazy’: Coffee ‘undervalued’ Down Under

One expert says we should be lucky that prices have stayed relatively reasonable compared to the rest of the world.

Melbourne Coffee Academy director Charles Skadiang told Yahoo Finance: “Cafes are not getting a great margin, just because of rent, wages etc. The average profit margin for a lot of cafes is under 5 per cent, which is pretty crazy. So to make it more sustainable, coffee prices should pop up.”

He believes coffee is massively undervalued in Australia considering the quality of the product we have. Skadiang pointed to the cost of beer increasing with indexation, noting there’s far more skill involved in producing a high-quality coffee than pouring a pint.

“The thought of paying $7 for a cup of coffee is outrageous for a lot of people, but the amount of work that goes into it, you've got a skilled barista and to train someone up to make a great coffee, it takes a lot of time,” he told Yahoo Finance.

One thing stopping coffee prices going up

Skadiang said the one major thing that could stop cafe owners from raising their coffee prices is competition, because there are the likes of 7/11 who are selling machine-made coffee for around $2.

He also predicts that if coffee from a cafe becomes too expensive for customers, there could be a huge uptick in the number of people buying fancy coffee machines and making their daily cup at home.

“A really good quality coffee at home with top quality beans can be less than $1 a cup, so I think that's where people are gonna go and that's where it's heading a little bit,” he predicted. “It's a pretty quick return on investment.”

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