Surging Costs Threaten Australia's Coffee Industry

The rising costs of wages, energy and raw materials are pushing Australian café owners to the brink, with many struggling to maintain profitability. With up to 70% of the price of a coffee now consumed by operating costs, industry leaders warn of closures and skyrocketing coffee prices, potentially reaching $8 per cup by mid-year.

Australia's $14.2 billion coffee sector has been under immense pressure over the past three years due to inflation, higher global coffee prices and falling disposable incomes. Industry insiders estimate one in 10 cafes closed within the past year, with more closures likely in 2025 as financial strains intensify.

Currently, wages constitute nearly half the cost of a coffee, energy accounts for 10%, and another 25% goes toward materials like beans and milk. Compounding the situation, coffee beans—globally traded and influenced by economic factors—have reached their highest price in 70 years, while the Australian dollar's weakness increases import costs, leaving little room for profitability.

Beyond coffee alone, café owners are feeling additional strain from maintaining food services, which are critical for revenue. Many operators have had to adopt cost-saving measures, like cutting staffing hours or taking on more shifts themselves. Those with poor financial planning and high overheads are most at risk, as combination pressures from packaging, rising rents and energy costs add to the economic burden.

Looking ahead, the broader picture remains bleak, with experts suggesting that soaring bean prices driven by weather instability in Brazil and delayed harvests in Vietnam could keep input costs rising. For consumers, a $10 cup of coffee may soon become the new norm. The sustainability of small cafes may depend on innovation, improved cost management, or significant economic recovery in disposable incomes.

Source: News, The Australian, ABC