The £5 coffee that tells a story of global economic turmoil
At 9am in west London’s Kew Bridge area, tourists, runners and dog walkers queue at the Dear Coco vintage Italian coffee cart. The cart serves high-grade arabica bean coffee brewed in an expensive La Marzocco machine, with prices reflecting the quality: £4.50 for an iced latte, £4.10 for a 10 oz latte, and £3.90 for a 6 oz flat white. While such a price tag would have once seemed strikingly high, the £4 threshold has been well breached across much of the UK, including chains that do not use the highest-grade beans. In central London, a large coffee served with an alternative milk like soy or almond now approaches £5. Earlier this month in the US, Starbucks Chief Executive Officer Brian Niccol faced criticism for describing a “$9 [£6.68] experience” at one of his outlets as a “really affordable premium experience.”
Supply Chain Squeeze on Small Operators
The man working the Dear Coco cart in Kew considers himself relatively lucky; carts pay street trading fees rather than soaring rents and business rates. Still, he is squeezed. “We feel super strongly about keeping the price of a flat white under £4 for as long as possible,” Anthony Duckworth tells me, as rowing boats glide past. “But it’s becoming increasingly difficult, because every part of the supply chain has become more expensive. We think there’s a really important psychological threshold around that four pound mark.” Coffee is not merely a morning ritual repeated worldwide; it serves as an insight into the modern global economy. The latte illuminates everything from commodity inflation to trade chaos, from geopolitical strife and climate change to Generation Z cultural tastes. It reveals rampant new demand from the Chinese middle class and the long-hanging economic effects of the Vietnam War—all present in every frothy cuppa.
Industry Hiccups and Historical Roots
The modern coffee journey began in Turin, northern Italy, at a train station in 1895. Steam-powered coffee machines were developed to cater to time-poor travelers, often on the Milan express—one theory for the name “espresso.” This marked the start of mass consumption of what had originally been a luxury drink. Near the Turin ring road, at a glass and steel structure, I speak to Giuseppe Lavazza, whose great-grandfather launched the Lavazza coffee brand 131 years ago. “The secret of surviving is having a company ready to modify,” he tells me while holding what he hopes is his next great innovation: a cookie of coffee, called a tabli, that he expects will serve the growing at-home coffee market without the need for environmentally questionable metal pods. Giuseppe Lavazza notes that despite high prices, demand for coffee has remained resilient. In recent years his industry has encountered serious hiccups affecting both of the world’s most important coffee beans. At one end of the market, arabica beans—known for their sweetness and aroma—are hand-picked at cool altitudes in Brazil, Ethiopia, and Kenya; this careful process is even more intricate than the harvesting of grapes for the finest champagne. At the other end, robusta beans—known for their high caffeine levels—are mass harvested by machines. Vietnam has cornered the robusta market since emerging from its war in the 1970s.
The Climate Squeeze on Bean Prices
Two years ago, a convergence of climatic events pushed the price of both beans to multi-decade highs. In early 2024, Vietnam suffered its worst drought in decades, with rainfall collapsing by 30%. Then, late last year, a typhoon during harvest hit production as well. In Brazil, farmers are still struggling to recover from a severe frost in 2021 that damaged the arabica crop. As a result, arabica prices peaked last year above $4 (£2.97) per pound of green beans, up from about $1.20 historically. The price has now settled at $3.08. Robusta beans increased even more, reaching $2.59 (£1.92) per pound before settling.
Context
Similar price pressures have been observed in other commodity-dependent consumer goods. For example, cocoa prices surged to record highs in 2024 due to drought in West Africa, driving up the cost of chocolate bars and confectionery. Likewise, olive oil prices tripled in parts of southern Europe after consecutive years of heatwaves and poor harvests, squeezing producers and consumers alike.