Price of coffee beans nearly doubles on rising quality of life in coffee growing countries, rising consumption in Eastern Europe and capital market intervention
Over the past year, coffee drinkers in Israelhave been paying 10%-15% more for a cup of coffee or an average of NIS 12-14 ($3-3.5).
Coffee chains say that compared with the rise in bean prices around the word, the increase in Israel was relatively small, mainly due to the social protest that entailed cautious pricing.
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Coffee chain executives met over the past weekend in Eilat for Israel’s first coffee convention, held by the Israeli Coffee Association.
„In the past year and a half, there were quite a few price hikes and coffee is up by nearly 100% but eventually, consumers barely felt the rises,” said head of marketing and business development at Cup O’ Joe, Ofer Gvirtzman.
For example, a small cappuccino at Ilan’s coffee chain has recently gone up by 15%. Aroma Israel, Cup O Joe, Arcaffé, Café Café, Café Greg, Cafeneto and Landwer all raised coffee prices by some 10%.
The industry’s marketing managers are careful not to become victims of the social protest. „We can easily become a target if we indiscriminately hike prices,” says Ilan’s marketing director, Michal Shtag.
Gvirtzman says that sales reports at Cup O’ Joe are not showing declines in demand; however, customers are seeking more special deals which is why the menu now includes a special breakfast deal for NIS 35 ($9.5).
Aroma Israel marketing director, Amir Itzkovich, says: „Competition between the chains ensures that prices cannot be hiked by a large margin, the customers know exactly what their getting. There are less than 2,000 cafes throughout Israel – we can’t raise prices without being aware of what’s going on in the industry.”
Shay Baniel, head of AFH (Away From Home) division at Strauss, which operates the company’s coffee on the go activities such as coffee carts, puts his finger on some of the effects of the social protest.
„Profit margins of the away-from-home sector, including cafes – are relatively very low. When I operate a 24-hour coffee cart in trains or hospitals, I have high operating costs that I can’t roll onto costumers – I can’t charge NIS 17 ($4.5) for an espresso.”
Israeli Coffee Association Chairman Michael Reiner notes that there are numerous reasons for the global rise of coffee prices: the effects of the climate change on coffee crops; rising standards of life in coffee growing countries such as Brazil and India, including increasing consumption in these countries; increasing demand in Eastern European countries; the huge comeback of away-from-home consumption which led to a quantum leap in the number of cafes; the transition of the coffee industry from a government controlled industry to a corporate controlled industry; increase of competition in the markets including rising demand for organic and fair trade coffee; rising transport costs and the entrance of financial investors which trade in coffee futures and drive coffee prices up on the markets.
Orna Yefet, Calcalist
