‘Attempts to increase coffee prices likely to meet consumer resistance’

South Africa may have dodged the bump and grind of a feared Brazilian coffee bean shortage‚ and kept prices stable.

That’s the good news.

While FNB Business’ Dawie Maree says South Africans can expect the price to increase “at realistic levels”‚ there are some negative factors to be wary of: the cost of feed used by dairy farmers being affected by the drought‚ Pravin Gordhan’s sugar tax and Starbucks.

That the latter‚ said Maree‚ “is anticipated to charge slightly higher prices is also creating uncertainty amongst some local coffee retailers who are already considering to review the prices they charge for a cup of coffee”.

This effect of the retailer’s entry into the market would be compounded‚ he said‚ “if dairy farmers…start running into production shortages”‚ leading to an increase in the price of milk and “coffee retailers paying even more for input costs”.

The tax on sugar-sweetened beverages‚ announced by Gordhan in his National Budget Speech last month‚ too “will add further strain to local coffee businesses leaving them with no choice but to increase the price of coffee in the long term”.

 However‚ Maree predicted‚ “any attempts by the local coffee industry to increase prices in the short term will likely be met by resistance from consumers who are already struggling to make ends meet in this tough economic environment”.

 “As a result‚ the coffee industry will have no choice but to absorb costs in the short term and gradually factor in increases‚ in order to remain relevant to consumers‚” he said.

SA is not particularly affected by the Brazilian coffee bean crop as it imports most of it coffee beans from east African countries.