Coffee Faces a 'Perfect Price Storm' — How It Will Impact Your Wallet in 2025

Surging coffee prices driven by climate, labor, and shipping costs are finally reaching consumers / NurPhoto via Getty Images

Coffee futures have surged more than 30% in 2025, approaching record-high levels, and this price spike is now beginning to show up in consumers' wallets. According to the latest Consumer Price Index (CPI) report released this week, prices for roasted coffee increased by 2.5% year-over-year in January, while instant coffee saw a dramatic 7.1% jump.

Andrea Illy, the chairman of illy caffè, describes this situation as a "perfect price storm," which has resulted from several key factors impacting global coffee production. These include unpredictable climate conditions affecting top coffee-producing countries like Brazil and Vietnam, as well as rising global shipping and labor costs.

Brazil, one of the world’s largest coffee producers, experienced its hottest year on record in 2024, alongside devastating forest fires that severely impacted its arabica coffee harvest. As the U.S. is the second-largest importer of coffee after the European Union, with top suppliers from Brazil, Colombia, and Vietnam, this situation has led to an increase in coffee prices worldwide. As Illy stated, "There is no alternative" to these price hikes, with no clear indication of when the surge in coffee futures will stabilize.

Other coffee industry leaders are also preparing for higher prices. Sudhanshu Priyadarshi, CFO of Keurig Dr Pepper (KDP), shared during a recent earnings call that the company expects coffee inflation to continue in 2025, and they are already considering price adjustments to offset the increasing costs.

However, the impact of these price hikes has been mitigated for some major coffee retailers. Large companies like Starbucks (SBUX) typically hedge against price fluctuations by securing future coffee contracts in advance, which allows them to lock in prices before they spike. Starbucks CFO Rachel Ruggeri mentioned that, due to their hedging strategy, the company saw minimal year-over-year coffee price impact in the first quarter of 2025.

Instant coffee has experienced a particularly sharp price increase, with the CPI report revealing a significant 7.1% jump. Experts suggest this is partly due to the traditionally lower price point of instant coffee, making it easier for companies to raise prices without shocking consumers. Additionally, instant coffee is typically made from robusta beans, a lower-cost option compared to arabica beans, which are used in high-end coffee shops. The price of robusta beans has risen dramatically by 60% in the past year due to climate-related droughts in Vietnam, a major robusta-producing region.

The rising costs of shipping and labor have also played a significant role in increasing instant coffee prices. Heather Perry, CEO of Klatch Coffee, pointed out that instant coffee has extremely thin margins, making it more vulnerable to hikes in logistical costs.

As coffee prices continue to rise in 2025, it is clear that both coffee producers and consumers will face the consequences of this "perfect price storm." With no immediate relief in sight, many expect these price hikes to persist throughout the year.