Why does my latte cost so much?
It’s not your imagination — coffee prices have gone up. Here’s why.
Gone are the days of scrounging loose change for your daily caffeine fix: Coffee costs more. People now spend about $6 on average for a beverage at cafes and bakeries, according to the cashier checkout system Toast. Grocery store bean prices have soared, climbing 22 percent in the last three years.
So why does your cup of joe cost so much?
The percolating effects of changing weather patterns, international turmoil and elevated energy costs all have served to increase the cost of producing milk and beans, the key components of most coffee beverages. Add inflation and a labor shortage, and many shops have done what they see as the logical thing: raise prices.
“Every cup of coffee is a small miracle,” said Lauren Crabbe, owner of Andytown, a coffee shop in San Francisco that raised prices last year. “Just everything that goes into it.”
Here’s a breakdown of the global effort poured into your daily fuel.
The coffee
Coffee crops — commonly grown in Brazil, Vietnam and Colombia, among other countries — are at the mercy of changing weather. Extreme weather in Brazil in 2021 reduced the expected harvest, sending wholesale coffee prices to their highest level in years.
Many small farmers are also struggling to make a profit as they deal with rising material costs and labor shortages. “Somebody can pick coffee all day long and make $5 for a day,” said Mayra Orellana-Powell, founder of Catracha Coffee. The company helps small-coffee producers in Santa Elena, Honduras, access the specialty coffee market, which has grown in popularity in the United States since the early 2000s and generally pays farmers better than commodity prices.
Overall, the commodity price for arabica coffee has jumped more than 40 percent since before the pandemic, climbing even further last year and dropping slightly this year.
By the time beans are roasted and sold to cafes, they often cost $10 or more per pound, depending on the blend, Crabbe said. And even if commodity prices go down, customers are unlikely to see their bills drop.
“Retailers, once they increase the price, tend not to lower it because they know their margins are going to be squeezed,” said Judy Ganes, president of J Ganes Consulting, which works with food and agricultural industries.
Orellana-Powell likes to remind people that their morning mug is the end result of a long and arduous process. “People don’t treat [coffee] as a luxury item,” said Lowell Powell, her husband and co-founder. “And they should.”
The milk
Another likely ingredient in your coffee is milk.
Cow’s milk is the traditional complement. The retail price of dairy milk is $4.36 a gallon, up $1 from four years ago, according to the U.S. Agriculture Department.
The rising price can be traced, in part, to increasing feed prices, making the 10 ounces or so of milk in your latte more expensive over time.
But dairy milk is not the only type of milk coffee drinkers might choose. Increasingly, customers are asking for oat, almond or soy milk. Plant-based milk often costs about twice as much as dairy milk, depending on the specific type and store, according to commodities price data firm Mintec.
Coffee shops often charge a premium for plant-based milk to make up the difference, though shops are increasingly getting rid of the upcharge as the milk become more popular. Caribou Coffee, one of the largest chains in the United States, now lets customers who join its Perks program choose any milk for no extra cost if they order on the app.
The barista
While coffee and milk prices are up, their effects pale in comparison to one of the biggest expenses for cafes — labor, said Ganes.
Restaurant and shop workers have pushed for higher wages, part of a larger trend that led to a summer of strikes in America. Many shops have raised wages and increased perks to keep workers on board and attract new workers.
Jonathan Townsend, director of barista-training company the Institute of Coffee, said baristas deserve more money during what he called a “cost of living crisis” driven largely by higher inflation.
“It’s an arduous job to be serving customers all day, and there should be more money for that role as well as to encourage a more diverse workforce,” Townsend said.
Since 2021, Starbucks workers at hundreds of stores across the country have voted to unionize. The coffee giant said its average hourly wage is now around $17.50. The company announced another raise to take effect Jan. 1, but said some of the new benefits would not be available to unionized stores.
In San Francisco, Crabbe says wages and benefits for her employees make up nearly 40 percent of the cost of each latte.
The business expenses
Along with paying and training workers, coffee shop owners must keep the lights on — literally. That coffee shop you visit every morning has to pay rent, taxes and its electric bill. And as you probably know by now — those prices are going up.
The first time Crabbe raised prices, it was to cover the cost of employee health insurance. More recently, it was because inflation and supply chain crunches had made nearly every element of her business more expensive, from coffee beans and milk, to cups and lids.
Crabbe said she tries to keep up with rising costs without alienating daily customers.
“That’s the tightrope we’re all walking in the coffee industry,” she said. “We need to keep it affordable so it stays a daily habit.”
In Dallas, Adam Lowes, co-owner of LDU Coffee To Go, said he is “astonished” to see what some shops are charging for coffee right now. Lowes charges a base latte price of $4 to encourage customer loyalty, relying on volume to generate profits.
Still, Lowes said that rising costs are squeezing bottom lines. “Every single product that I order has gone up,” he said.
The extras
Some days, plain coffee is just not enough. Perhaps you need a pump of vanilla? A heavy shake of chocolate sprinkles? Some whipped cream? Your order may vary, but that extra dose of flavor is not free.
Flavored lattes are the most requested item for Grant MacHamer, who sets up cafes for corporate workers across the country. MacHamer, senior manager of the coffee program at the Good Eating Company, began working in coffee 15 years ago. Then, pour-overs and single-origin beans were just becoming popular with consumers. Now it’s all about the high-end syrups, such as vanilla sugar made from real vanilla beans.
“People want those flavored lattes,” he said. “I think they would destroy us if we took it off the menu.”
At Starbucks, you’ll pay at least 80 cents to add a flavor to your grande-size latte. The seasonal favorite, Pumpkin Spice Latte, is heavily anticipated every autumn. Since it was introduced 20 years ago, Americans have purchased more than 600 million servings.
Despite rising prices, more Americans drink coffee daily than any other beverage, according to the National Coffee Association. And that’s good news for your local coffee shop as holiday drink season begins.