Why are coffee prices rising in australia in 2025

The average price of coffee in Australia

In 2025, Australians are witnessing a significant increase in coffee prices. The La Marzocco Australia's Future of Coffee Report reports that the average price of a cup of coffee has risen by 37.5% from pre-pandemic levels, moving from $4.00 to approximately $5.50. A flat white now costs between $6.00 and $7.00 in major cities, while an iced long black ranges from $6.50 to $8.00.

Here's a breakdown of average prices in major Australian cities:

Factors impacting coffee prices

Coffee prices in Australia are influenced by global supply chain disruptions, climate change affecting coffee-growing regions, and rising labour and transport costs. Sustainability concerns, such as ethical sourcing and eco-friendly farming practices, also impact pricing as more consumers demand transparency. Additionally, the growing popularity of milk alternatives like oat, almond, and soy has reshaped cafe offerings, increasing operational costs due to the higher price of these products. As cafes aim to meet environmental expectations and dietary trends, the shift towards sustainable practices and alternative milks contributes to the overall rise in coffee prices across the Australian market.

Extreme weather conditions

Coffee prices in Australia have been steadily increasing, driven by a convergence of global and domestic factors. Extreme weather events in major coffee-producing countries such as Brazil and Vietnam have led to reduced crop yields and diminished bean quality. These supply disruptions have caused international coffee bean prices to reach record highs, with arabica prices peaking at levels not seen since 1977.

Australian dollar depreciation

Compounding the issue, the Australian dollar has depreciated against the US dollar, the currency in which coffee is traded, making imports more expensive for Australian roasters. Additionally, global supply chain challenges, including increased freight costs and port congestion, have further inflated the cost of importing coffee beans.

Rising operational costs

The rising operational costs for cafes such as higher wages, rent, and utilities have added pressure to increase coffee prices. Despite these challenges, Australia's strong coffee culture means that demand remains robust, suggesting that consumers may continue to absorb higher prices in the near term.

Global coffee supply and demand

The global demand for coffee continues to grow, driven by increasing consumption in emerging markets. This surge in demand puts pressure on supply chains, especially when production is affected by adverse conditions. For instance, Brazil's coffee production in 2024 was estimated at 54.79 million 60kg bags, reflecting a slight decrease due to prolonged droughts and extreme temperatures.

Climate change stands out as a key contributor to instability in coffee-growing regions. Rising temperatures, erratic rainfall patterns, and the increased frequency of droughts and pests have dramatically affected the viability of traditional coffee-producing areas, particularly in countries such as Brazil, Ethiopia, and Vietnam. Arabica coffee, which is more sensitive to environmental changes than Robusta, is especially at risk, leading to declining yields and shifts in suitable growing zones to higher altitudes or new regions.

Economic factors influencing coffee prices

International trade dynamics and tariffs significantly impact global coffee prices. As coffee is largely produced in developing nations and consumed in developed countries, disruptions in trade flows such as tariffs or export restrictions can increase supply chain costs. Tariffs imposed during geopolitical conflicts or economic sanctions may hinder the free flow of goods, inflating the cost of imported coffee beans. Additionally, logistical issues stemming from international shipping delays have further elevated prices.

Simultaneously, the coffee industry is experiencing rising labour costs and critical labour shortages, especially in producing countries like Brazil, Colombia, and Vietnam. Factors such as rural-to-urban migration, aging farming populations, and reduced interest in agricultural work have resulted in fewer available workers to harvest and process coffee beans. This shortage drives wages up, increasing production costs which are ultimately passed on to consumers.

The hospitality industry faces rising wages and labour shortages, which increases the operational expenses for cafes and, consequently, the price of coffee for consumers.

The future of coffee prices in Australia

By the end of 2025, coffee prices in Australia are expected to continue rising, driven by a combination of global and domestic pressures. The average cost of a flat white has already increased in many cafes, with further price hikes predicted due to increased import costs and supply chain disruptions.

In regional Australia, some coffee prices have reached close to $10 per cup. This surge is linked to labour shortages, transportation costs, and the rising cost of milk alternatives such as oat and almond milk, which are increasingly popular due to dietary trends and sustainability concerns. Consumers are more willing to pay a premium for ethically sourced and environmentally responsible coffee, influencing how cafes set prices.

Prices are expected to remain high over the next few years, with continued pressure from climate-related risks and inflation. Cafes need to innovate by offering smaller serving sizes, dynamic pricing, or more sustainable in-house roasting options. As consumer awareness of ethical sourcing and climate impact grows, the market may shift further towards specialty, high-quality coffee, with cost reflecting its environmental and social value.