Caffeine Inflation: The Soaring Costs of Your Daily Brew

If you've been wondering why your morning coffee fix is costing you more than it used to, you're not alone. New data shows that the price of a cup of coffee has increased by as much as 57% over the past five years. This surge in prices affects all the big names in the coffee business, including Starbucks, Pret A Manger, Costa Coffee, Caffe Nero, and Greggs.

The Big Picture: Price Increases Across Chains

According to data from Altindex, Pret A Manger has seen the steepest average price increase, with their drinks rising by 57% over five years. A cup of tea that cost £1.80 in 2019 now sets you back £2.90. Similarly, a latte has jumped from £2.45 to £3.80.

Costa Coffee and Caffe Nero also saw significant increases, with average price hikes of 38% and 39%, respectively. Even Starbucks, known for its pricey brews, increased prices by an average of 25%. Greggs, often the go-to for a budget-friendly coffee, kept their increase to a modest 7%, making it the most economical choice.

Why the Increase?

The rise in coffee prices can be attributed to several economic factors:

1. Inflation: General price levels have risen, affecting everything from raw materials to wages.
2. Supply Chain Issues: The global pandemic disrupted supply chains, leading to higher costs for coffee beans and other supplies.
3. Increased Demand: As more people turn to coffee for their daily caffeine fix, the demand surge can drive prices up.
4. Operational Costs: Rent, utilities, and other operational expenses have increased, especially in prime locations like London.

Chain Comparisons

1. Pret A Manger: The most significant increases, especially in popular drinks like lattes and flat whites. This could be due to their positioning as a premium, convenience-focused brand.
2. Costa Coffee and Caffe Nero: Both have increased prices significantly, likely reflecting their extensive presence in city centers and high street locations.
3. Starbucks: While still expensive, the price increase is relatively modest compared to others, possibly due to their global scale and efficient supply chain.
4. Greggs: Known for affordability, they have managed to keep price increases minimal, focusing on high volume sales and cost efficiencies.

Discussion Questions for Students

1. What factors might contribute to the varying degrees of price increases across different coffee chains?
2. How do inflation and supply chain disruptions specifically impact the cost of coffee?
3. What strategies can coffee chains employ to manage rising costs without alienating customers?
4. How might consumer behavior change in response to these price increases?

Glossary of Key Economic Terms

• Inflation: The rate at which the general level of prices for goods and services is rising.
• Supply Chain: The network of all the individuals, organizations, resources, activities, and technology involved in the creation and sale of a product.
• Demand: Consumer willingness and ability to purchase goods and services.
• Operational Costs: Expenses associated with the day-to-day running of a business.
• Price Elasticity: The responsiveness of the quantity demanded of a good to a change in its price.

Retrieval Questions for Students

1. By how much has Pret A Manger increased its prices on average over the past five years?
2. Which coffee chain had the lowest percentage increase in prices?
3. What were the 2019 and 2024 prices of a latte at Starbucks?
4. How does inflation affect the cost of coffee?
5. What are some possible reasons for the higher price increases at Pret A Manger compared to Greggs?