The Ups And Maybe Downs Of Coffee Prices

By Douglas Hart
President, Hart & Associates Management Consultants Ltd.

Whether buying coffee at a grocery store or ordering a cappuccino at Starbucks, Canadians have felt the sharp taste of rising coffee prices over the last several years. While Canada’s overall food prices rose by 3.5%, coffee prices increased by 20.3% in 2025. Beef by comparison was up 13.5% in 2025. Coffee prices have shot up by 73.5% in the last five years. It seems that prices continually go up. However, there are signs on the horizon that some relief for coffee prices is coming later this year.

Why Coffee Prices Matter So Much To Canadians

Canadians’ love of coffee helps explain why price increases are so noticeable. On average, Canadians drink 2.8 cups of coffee per day, consuming approximately 663 million pounds annually. That demand translated into $6.2 billion in coffee sales in 2024. According to Statistics Canada, $4.8 billion of those sales occurred at restaurants, with the remaining $1.4 billion coming from grocery stores. It is reported that 71% of Canadians drink coffee on a daily basis.

While most coffee sales by dollar value occur at coffee shops and restaurants, the majority of coffee by volume is consumed at home. About 73% of coffee is brewed at home, with the remaining 27% consumed outside the home. Fast-food restaurant chains dominate the out-of-home market. Perhaps no surprise, Tim Hortons alone accounts for more than 70% of hot brewed coffee sales in Canada, followed by Starbucks and McDonald’s. Both Tim Hortons and Starbucks also sell significant volumes of coffee through major grocery chains.

To understand why coffee prices have risen so sharply, it helps to understand where coffee is grown. Coffee beans come from red cherries grown on coffee plants in tropical regions between the Tropics of Cancer and Capricorn. Coffee requires stable temperatures between 15°C and 30°C, consistent rainfall, rich soil, and frost-free conditions. Arabica beans—generally milder and more aromatic—grow at higher elevations, while the hardier Robusta beans grow at lower altitudes. Brazil, Vietnam, Colombia, Indonesia, and Ethiopia collectively account from roughly 74% of global coffee production, with Brazil alone supplying about 30% of the world’s coffee.

Why Coffee Prices Have Gone Up So Much

Over the last five years, several factors have caused the price of coffee to skyrocket.

Climate change has caused supply shortages.

Floods, droughts, rising temperatures, and increasingly erratic weather patterns have reduced coffee supplies worldwide. In 2025, Brazil’s Arabica production fell by 18.4% due to poor flowering, frost, and an unusually dry summer. To offset these losses, Brazil has shifted some production toward Robusta beans, which are more tolerant of extreme conditions. Arabica accounts for 75% of the world’s production, mostly grown in Brazil and Colombia. Robusta account for the remaining 25%, mostly grown in Vietnam and Indonesia.

Vietnam has faced similar challenges. Rising temperatures and drought caused coffee production there to decline by 15% in 2025. The Vietnam Coffee and Cocoa Association has warned that exports could fall by an additional 15% over the next two years if climate pressures persist. If global supply is constrained, prices will likely continue to rise.

U.S. Tariffs and Their Spillover Effects

In July 2025, the Trump administration imposed tariffs on coffee and other agricultural products imported into the United States, including a 50% tariff on Brazilian coffee and even higher rates for Vietnamese coffee. The merits of this move was highly questionable, given that the U.S. produces only about 1% of the coffee it consumes. The argument that tariffs were needed to protect US domestic producers simply does not hold water—or coffee.

These tariffs pushed roasted coffee prices in the U.S. up by 21% by September 2025. Although the tariffs were lifted in November, the higher prices largely remained due to ongoing supply shortages. Because Canada imports much of its roasted coffee from the U.S., higher American prices quickly translated into higher costs for Canadian consumers.

Adding to the cost of coffee, Canada imposed a 25% retaliatory tariff on various U.S. goods, including coffee, on March 4, 2025, in response to U.S. trade actions. While this tariff was lifted in September of 2025 this further contributed to higher coffee prices for Canadian consumers in 2025.

These factors resulted in higher costs for grocery stores. In its September 30, 2025 food inflation report, Loblaw reported a 40.9% year-over-year increase in the publicly traded cost of raw coffee. The company cited U.S. tariffs on Brazilian products as a major contributor. The report also noted that Brazilian producers were holding back inventory amid market uncertainty, further tightening global supply.

How Consumers Are Responding

Demand for coffee is largely. but not entirely, inelastic. While overall consumption may not decline much as prices rise, how and where consumers buy coffee is changing.

Grocery retailers report that some customers are trading down from premium brands to private-label alternatives, purchasing coffee only when it is on sale, or switching from single-serve pods to lower-cost options. Convenience comes at a price. Single-serve systems such as Keurig and Nespresso can cost about $1.30 to $1.70 per pod respectively. As a result, some consumers are abandoning pods altogether and returning to traditional ground coffee.

Traditionally coffee was, and sometimes still is, sold in grocery stores in one-pound (454 gram) packages. As part of the overall “shrinkflation” in the food industry where the package size of food is reduced to make higher prices less noticeable, coffee suppliers and grocery stores have also reduced the size of their coffee packages, now frequently down to 340 grams. The volume of coffee in a bag has dropped by 25% to provide cover for the more than 25% rise in the price of coffee.

At the restaurant level, higher coffee costs have also reshaped product offerings. Despite rising input prices, chains such as Tim Hortons, Starbucks, and McDonald’s have maintained, or even increased, coffee revenue by expanding their offerings to include higher margin cold brew, specialty drinks, and customizable beverages.

Signs that coffee prices may ease or decline in 2026

While climate change may be a long-term challenge coffee prices may ease in 2026. Coffee production is expected to increase this year in Brazil and Colombia resulting in a surplus crop for 2026/2027. Some expect Brazil to increase production of coffee by over 37% this year. As a result, The World Bank expects the price of Arabica coffee to drop by 13% in 2026.

Arabica coffee on the futures market have fallen from the 2025 highs of over $4/lb (US) to trade closer to $2.80–$3.00/lb (US) as of March 2026. While there are clear signs that prices at the international commodity level are heading down this year, consumers shouldn’t expect to see sizeable declines in the price of coffee at the grocery store level and highly unlikely at coffee stores. Coffee prices tend to go up but are “sticky” on their way back down. Regardless of the price, Canadians seem more than willing to pay for their much-needed morning cup of coffee.

Douglas Hart is President of Hart & Associates Management Consultants Ltd., a firm that has provided business development services to Canada’s food and agriculture industry for more than 30 years. Hart & Associates specializes in business plans, feasibility studies, and market assessments to help companies identify opportunities to improve sales, profitability, and organizational performance.