The Rise of Coffee as a Luxury Experience

People need to recognize that coffee is fundamentally an agricultural product.

📈 According to the New York Times, citing Pachamama Coffee co-founder Thaleon Tremaine, the rising cost of coffee is no longer tied to “exclusivity.” Instead, factors like prolonged droughts, floods, and the broader impact of climate change have significantly reduced supply, driving prices higher — a trend also observed with other products like cocoa, olive oil, and orange juice. Meanwhile, coffee demand continues to rise, with little evidence that coffee enthusiasts are reducing their consumption. This month, prices in one market reached their highest level in nearly 50 years. Tremaine notes that this volatility poses a serious threat to the sustainability of coffee businesses, as many struggle with soaring transportation and storage costs, as well as the livelihoods of farmers.

Here’s what’s happening.

🌾 ☕️ Coffee cultivation requires very specific conditions, including a foggy, humid tropical climate and nutrient-rich, disease-free soil. Apart from a small amount grown in Hawaii, the United States produces almost no coffee domestically, relying heavily on imports as the world’s largest coffee importer. This limited supply chain makes coffee prices highly susceptible to the increasingly frequent impacts of extreme weather.

🌾 ☕️ The U.S. Department of Agriculture reports that approximately 57% of global coffee production last year came from Arabica beans, with Brazil as the leading exporter. However, a severe drought there this summer has drastically impacted the harvest, which typically occurs between May and September, potentially affecting next year’s yield (recovery from drought can take up to two years). Meanwhile, in Vietnam, extreme weather, including a severe drought followed by heavy rains, has significantly disrupted key reserves of robusta, the second-most-popular coffee variety, often used in instant coffee blends.

🌾 ☕️ Kevin Rainey, a professor and industry analyst, explains that coffee prices, like those of other high-value crops affected by climate change, are on a steady upward trend. Rising global temperatures and practices such as deforestation are reducing coffee plant productivity, further straining the industry. Over time, the regions suitable for coffee cultivation will continue to diminish.

🌾 ☕️ Concerns over the harvest are evident in a striking moment for the typically volatile coffee market. Since early November, wholesale coffee prices have surged by over 30%. By mid-December, Arabica bean futures — the cost buyers pay to transport beans from producer countries to ports in the U.S. and Europe — exceeded $3.30 per pound, shattering a 47-year record.

🌾 ☕️Despite declining production, global demand for coffee continues to climb, driven in part by increasing consumption in China. According to a June report from the U.S. Department of Agriculture, coffee consumption in China has grown by over 60% in the past five years.

🌾 ☕️ Other factors have also contributed to rising coffee prices. In 2021, supply chain disruptions combined with political instability in South America slowed exports, driving prices higher. Even as inflation eases, companies are still planning to raise prices, including major companies that are better equipped to handle disruptions. Nestlé, the world’s largest coffee producer, recently announced plans to increase coffee prices next year while reducing package sizes. Similarly, J.M. Smucker, maker of brands like Folgers and Dunkin’ Donuts at-home coffee, implemented a price hike in October.

🎯 As a matter of fact, many are concerned about migration and inflation, yet few recognize that climate change is increasingly driving both. By electing leaders who deny climate science, we risk exacerbating these effects, leading to even greater challenges. Today, it’s coffee; tomorrow, it will be other essential products. It’s something worth considering.