Coffee has become so expensive that drinkers in the world’s largest producer of the bean are unable to afford it.
According to industry group Abic, sales in Brazil fell 14% in November from the previous month due to rising prices. Retail coffee prices increased 40% last month, prompting a consumer reaction, according to Celirio Inacio, the group’s executive director.
Coffee consumption declines are just another sign of consumer stress in Brazil, as inflationary pressures stifle demand for a variety of staples and force shoppers to alter their shopping lists. Coffee prices in New York nearly doubled over the last year as adverse weather conditions in Brazil harmed yields and a tight shipping market hampered deliveries throughout the world.
“It’s natural to see a decline in consumption following a sharp price increase, particularly as Brazilians grapple with high inflation and stagnant income,” Inacio said in a telephone interview.
Last month, Brazil’s consumer prices increased by the most in 18 years. Coffee may continue to contribute to domestic inflation, with prices expected to increase by as much as 30% by March, according to Abic.
In Brazil, prices for arabica – the highest-grade beans – have increased nearly 140 percent this year, while those for lower-grade robusta have nearly doubled. With the industry reeling from rising production costs, some roasters in South America and elsewhere are turning to robusta.
Brazilian coffee consumers are feeling the pinch as prices continue to rise.
According to Cepea, a research arm of Sao Paulo University, the price differential between robusta and arabica increased to its highest level since 2011, last month. While global logistical challenges and delivery delays from major robusta supplier Vietnam have boosted prices, robusta has not experienced the same magnitude of increase as arabica.
Indeed, the Brazilian robusta crop’s outlook is optimistic, as it has been spared much of the adverse weather that has afflicted arabica, which is grown in various regions. The more optimistic outlook for robusta may result in an increase in the discount it trades at to arabica, Cepea said in a report this week.
However, Inacio noted that there is a limit to the amount of switching that can occur. Domestic coffee blends are typically 30% robusta and 70% arabica. While the robusta content has been increasing, he noted that if the robusta content becomes excessive, the taste profile will noticeably change.