SEOUL – The rising cost of coffee beans worldwide is finally hitting South Korea's fiercely competitive budget coffee market. Compose Coffee, a major player in the sector, announced a price hike on its popular Ice Americano this Thursday, marking the first such increase by a budget franchise since 2014 and signaling potential ripple effects across the industry.
While premium coffee chains like Starbucks have already adjusted their prices, budget-friendly options have held firm, prioritizing affordability. Compose Coffee's decision to raise its Ice Americano price by 300 won to 1,800 won ($1.24), and its decaffeinated version by the same amount to 2,800 won, breaks this trend. Other menu items remain unaffected for now.
CEO Kim Jin-sung attributed the increase to skyrocketing global coffee bean prices, along with rising labor, logistics, and ingredient costs. Arabica bean prices, favored by most coffee shops, have nearly doubled since last year, reaching over $3.60 per pound last month. This surge follows record highs seen in late 2023, surpassing even the peak of $3.38 in 1977.
The pressure on coffee producers has been mounting due to adverse weather conditions in key growing regions. Brazil, the world's leading Arabica producer, experienced a severe drought last year, impacting this year's harvest, which is projected to be 4.4% smaller despite recent improvements, according to Conab, the Brazilian food supply agency. India, a major Robusta bean supplier, also anticipates a significant drop in exports due to reduced production.
Compose Coffee's move puts pressure on other budget giants like Mega MGC Coffee and Paik's Coffee, which boast even larger franchise networks. Whether they follow suit remains to be seen, but the squeeze on profit margins is undeniable. This price adjustment comes after similar increases by premium brands like Starbucks, Paul Bassett, and Hollys in recent months, suggesting that even the most cost-conscious consumers may soon face higher prices for their daily caffeine fix. The question now is whether this marks the end of the era of ultra-cheap coffee in Korea.
[Copyright (c) Global Economic Times. All Rights Reserved.]
