Coffee beans have been skyrocketing for a year. How long can the price of 9.9 yuan hold up?

Text | Yang Yafei

Editor | Qiao Qian

The price increase of coffee beans is pushing 9.9 coffee to a dead end.

According to ICE data, as of December 23, the futures price of "US Type C Coffee" corresponding to Arabica coffee beans has increased by as much as 70% in the past year, which is more than twice the increase in gold during the same period.

Arabica coffee beans are the core raw material for freshly brewed coffee, and the pricing power is in the hands of the Brazilian producing area, which accounts for as much as 1/3 of the global output. Affected by extreme weather, the Brazilian Institute of Geography and Statistics has previously lowered the coffee production forecast for the 2024/2025 fiscal year. Coupled with emotional speculation, The futures price of Arabica coffee beans has been rising continuously and has reached the highest level in the past half century.

This is obviously a blow to 9.9 coffee, which pursues the ultimate cost performance. After all, all the premiums ultimately need to be paid by the brand.

A 9.9-yuan coffee, with coffee beans costing 2.72 yuan

How will the price increase of coffee futures be reflected in the cost of a cup of coffee?

Li Peng, the founder of Modou Si, once made a rough calculation. Calculated based on the bulk raw beans from Brazil, the largest producing area corresponding to the coffee futures price of 340 points, the raw bean price delivered to China is 68 yuan/kg, and after processing, the reasonable price of roasted beans is 136 yuan/kg. Calculated based on the consumption of 20g of powder per cup, the bean cost of a cup of coffee is 2.72 yuan.

From this perspective, for a 9.9-yuan coffee, the cost of coffee bean raw materials alone may account for 27%.

A franchisee of a leading coffee brand interviewed by 36Kr also verified the above judgment - Calculated based on the cost structure provided by the other party, for a 9.9-yuan coffee, the cost of a single cup of raw materials (including milk, coffee, and packaging materials) is about 4.5 yuan, the labor cost is 1.5 yuan - 2 yuan, the rent per cup is 1 - 1.5 yuan, and the average cost per cup is 7 - 8 yuan.
 

It can be seen that 9.9 is an extremely cost-effective business. When the raw material cost, which accounts for nearly 30%, is still rising, whether brand merchants can continue the 9.9 price war in 2025 may be a big question mark.

Not only Brazilian beans, but also the price of Yunnan coffee beans in China has also increased in response.

Although Yunnan is not the main coffee bean producing area, more and more brands have chosen to label with "Yunnan" in recent years. However, in the current latest production season, the procurement cost has increased significantly, which is the common feeling of leading brands.

"Last week (fresh fruit) was still 7 yuan/kg, and this week it has increased to 8 yuan/kg," Li Ming, a coffee bean trader, told 36Kr Future Consumption recently. The price of Yunnan coffee beans has soared, and many coffee farmers are waiting for a higher price and reluctant to sell.

Li Ming told 36Kr that level 1.1 is the "uniform price", which is the price of the vast majority of Yunnan first-class coffee beans. On December 26 last year, the reference price of this coffee at Nestle's purchasing station was only 30.57 yuan, and the quotation has increased to 44.6 yuan within a year, with an increase of 46%.

The increase is secondary. "The key is that goods could be received last year," Li Ming said. Nestle's quotation may not be able to receive goods at all. "Now the origin price is approximately 46 yuan - 47 yuan."

Regarding the reason for the price increase, a person in the Yunnan coffee industry told 36Kr Future Consumption that the main reason is the continuous increase in international futures prices. It is also related to the overall quality improvement of Yunnan coffee, as well as the rapid development and huge potential of the Chinese coffee market.

Upstream price increase, collective self-rescue

9.9 coffee is a coffee popularization and education method of local brands. It is not only the result of high investment by capital, but also relies on the relatively low coffee bean prices in the past, leaving room for operation at the cost end. However, the high increase in the past year and the expected supply shortage make it an unknown when the prices will fall again.

When the future coffee bean prices are uncontrollable, brands can only collectively self-rescue by hoarding more goods.

In order to cope with the upstream price increase, Luckin, which sensed the signal, recently placed a large order directly to Brazil. Within 5 years from 2025 to 2029, it plans to purchase a total of 240,000 tons of coffee beans from Brazil, worth 10 billion yuan. This is also their largest coffee bean purchasing plan so far.

However, the order cannot solve everything. There will be a contractual price agreement between traders and brand customers. However, when the futures price soars, it means that the future delivery of raw beans will inevitably result in a significant loss, leading to a reduction in supply or even the termination of the contract. A coffee raw bean trader told 36Kr that if the futures price fluctuates only slightly, it can almost be ignored. But a sharp increase means that the price needs to be renegotiated.

In fact, this price increase trend is not the first in history. The previous sharp increase in coffee bean futures prices occurred in 2021. According to Investing.com, the futures price of US Type C Coffee increased by more than 90% that year. For brand merchants, in addition to operations at the futures level, raising prices at the terminal is a direct measure.

As an old player, Starbucks has dealt with the situation of upstream price increases many times, and this coffee brand has directly chosen to raise prices. In October 2021 and February 2022, Starbucks raised prices twice to transfer the impact of cost increases on performance. In August this year, Starbucks Korea once again raised the prices of its products. This is their second price increase since 2022, and the earlier price increase dates back to 2014.

The price increase of coffee beans may greatly affect the top players of 9.9 coffee, but it may not necessarily have an impact on small and medium-sized brands and specialty coffee shops.

The person in charge of a store of a new coffee brand told 36Kr Consumption that the impact of cost increases on them is limited, mainly because the purchase volume is relatively small.

The situation of specialty coffee is similar. A person in charge of a specialty coffee supply chain enterprise told 36Kr Future Consumption that the purchase price of the origin of specialty coffee - Ethiopia - has not increased significantly at present, and good coffee beans still have a cost-effective advantage. From the perspective of the store model, the higher product pricing also gives them more room to cope with the price increase of coffee beans.

As for 9.9 coffee, cost control has already been compressed to the extreme. Now, with the high futures prices, the topic of cost control can only be said to be getting more and more difficult.