The Italian coffee roaster has warned UK retailers of imminent price rises and 'tough times' as raw materials costs soar
The increase in the price of raw materials is set to have ‘a knock-on effect of the cost of coffee for retailers | Photo credit: Lavazza
Italian coffee roaster Lavazza is negotiating with UK retailers about how to manage rising costs as almost a third of businesses in the UK anticipate increasing the price of their goods or services.
In an Associated Press interview, Lavazza’s UK General Manager Pietro Mazzà said the company was in talks with retailers after the price of a 1kg bag of beans increased by £2 in the past 14-16 months to approximately £12 as the price of green beans and components for equipment has risen.
“We have seen an 80% average increase in the cost of green beans in a year. We are all facing tough times. The situation is troubling and will be for some time, so we need to keep the conversation [with retailers] as free and open as possible,” Mazza said.
The war in Ukraine has exacerbated rising raw materials and energy costs and caused further supply chain disruption for coffee businesses already weakened by the pandemic.
A Lavazza spokesperson said that the increase in the price of raw materials is set to have ‘a knock-on effect of the cost of coffee for retailers, and subsequently for consumers’.
Lavazza said that instant coffee still made up more than 60% of the UK market, but wholebean sales had increased 30% over the last three years. Mazza added that this demonstrated growing premiumisation in the UK market, with consumers continuing to seek higher-quality at-home coffee following Covid lockdowns.
The news highlights the growing cost pressures coffee shops are operating under. Recent UKHospitality research found that just 37% of hospitality businesses in the UK are currently turning a profit.
Moreover, Office for National Statistics (ONS) data indicates that 30% of UK businesses expect to increase the price of goods or services in July, with rising energy costs reported as the main factor.
70% of UK food businesses, including coffee shops and restaurants, and 60% of UK retailers and wholesalers, increased prices in April and May 2022.
The rising costs are likely to force UK coffee shops to further increase prices. In February 2022 UK food-to-go and coffee chain Pret A Manger cited inflation as a driving force behind the company increasing the cost of its monthly coffee subscription.
Bakery chain Greggs has increased prices twice in 2022, whilst other chains, including Costa Coffee, have also raised prices in the UK.
Price increases are being seen globally. In February 2022, several major coffee chains in China, including Starbucks, Luckin Coffee and Tim Hortons, raised prices in response to increasing operational costs and inflation.
In the US, Starbucks has also cited inflation as the reason for implementing three price rises in six months in its largest market globally.