Want to keep your local cafe in business? Start paying them $7 a coffee

Yesterday, I paid $7 for a cup of coffee. There wasn’t anything special about it, either, it was just an ordinary long black.

That I ordered this coffee in London, where I’m now living, is worth noting. Here, the going price for a coffee generally sits around £3-£4, which converts to about $6.50 in Australia.

Credit: Artwork: Marija Ercegovac

In most European cities, a coffee will set you back roughly €4. Again, that’s the equivalent of about $6.50 and, it has to be said, tastes much better than what’s on offer in Britain. In the US, it’s even steeper, with a latte now costing an average of $US5.50 – about $8.50 in Australia.

Given I’ve spent the better part of the past decade never paying more than $4.50 for the stuff in Australia, you might think I’d find these price hikes maddening. But actually, I don’t have a problem with it. Because here’s the thing: we should all be paying a lot more for our coffees in Australia.

I admit I am slightly biased on this topic because I worked in cafes and as a barista through university, and saw the amount of work that goes into perfectly roasting beans and brewing the best cups of coffee. But that doesn’t change the cold, hard economic breakdown of the situation.

In December, the global commodity price of arabica coffee (the most popular and widely available variety of coffee beans) broke all-time highs, hitting nearly $US3.50 a pound (about $5.50 for roughly 450 grams). Its rise has continued into the new year, with the price exceeding $US4 a pound.

The reasons for these skyrocketing prices is namely climate change. Brazil and Vietnam, which produce about half of the world’s coffee, have been hit with adverse weather conditions (an extended drought in Brazil; heavy rainfalls in Vietnam) that have greatly affected supply and mean prices will probably continue to rise.

Another issue in the rising cost of serving up a cuppa is the Aussie dollar. With coffee traded in US dollars, a weaker local dollar means that buying beans costs businesses more than it did a couple of years ago. And all of this is before the coffee is shipped to Australia, roasted by an expert team, packed, delivered to cafes and transferred to a cup.

Understandably, the continued rise in bean prices has worried roasters and cafe owners alike. One friend who works in wholesale speciality coffee told me recently that her company has put up the price of their roasted beans by $2 a kilo because they simply can no longer continue to absorb the rising cost.

Last year, speciality roasters Pablo and Rusty broke the issue down into costs, noting wages were one of the biggest factors in coffee prices, followed by rent, milk, the coffee itself, then GST, operating expenses and equipment. And as bean prices have climbed dramatically, so too have commercial rents, utility prices and the price of milk.

Australians have been paying much more for everyday essentials for some time now. But for some reason, when that’s extended to a cup of coffee, we freak out.

As my friend explained, their $2 price hike on beans would translate to less than 20¢ a cup per customer, and would more than cover the cost of increased wholesale prices. But cafes are reluctant to push prices and risk losing customers in the process.

Assuming you buy one coffee a day, over the space of a week, a 20¢ price rise would set customers back an extra $1.40 a week. That’s chump change compared with other price rises, but would make a huge positive impact all the way through the supply chain.

Yet there’s something in our psychology that bristles when you see a coffee priced at $6, $6.50 or even $7. Suddenly, something most of us consider to be an everyday essential becomes a luxury when it hits a certain price. And this is precisely what cafe owners and workers are worried about. What’s more, making coffee at home is a growing coffee category, and has been since COVID-19 lockdowns, meaning some cafes are feeling a small retreat in demand.

Australians love the cafe experience; it’s an ingrained part of our culture. That our comparatively cheap coffee prices don’t match up with how they have changed around the world isn’t a sign that we’re somehow lucky the cost of living hasn’t touched this one item, it’s a sign that small businesses are struggling and too scared to say so.

If you want to keep the lights on at your local cafe, and enjoy our world-class coffee, it’s time to suck it up and pay more, even if that is as little as 20¢ or as much as $2 extra.

Rachel Clun is a former economics correspondent for The Age and The Sydney Morning Herald.

The Opinion newsletter is a weekly wrap of views that will challenge, champion and inform your own. Sign up here.