South African coffee lovers feeling the heat

South Africa’s February 2025 inflation data revealed that hot beverage inflation rose by 14.8% from February 2024.

According to Stats South Africa’s latest Consumer Price Index (CPI) report, the country’s annual CPI was 3.2% in February 2025, unchanged from January 2025. The CPI increased by 0.9% month-on-month in February 2025.

The main contributors to the 3.2% annual inflation rate were housing and utilities (4.4%), food and non-alcoholic beverages (2.8%) and restaurants and accommodation services (4.6%).

In February 2025, the annual inflation rate for goods was 2.5%, up from 2.4% in January 2025, and services were 3.8%, down from 4.0% in January 2025

This hot beverage class had the highest annual inflation rate. However, a number of other groups also increased by over 5% during the period.

In terms of food items, fruits and nuts increased by 6.8%, sugar, confectionery, and desserts rose by 5.5%, and spirits and liqueurs increased by 5.1%.

After hot drinks, the highest increase came from electricity, gas and other fuels, which rose by 11.9%.

Insurance and financial services also saw notable increases of 8.1% and 5.2%, respectively.

Newspapers, books and stationery increased by 8.7%, accommodation services increased by 7.8%, and education services increased by 6.4%.

Finally, water supply and health services both increased by around 5.3%.

Interestingly, there was no change in terms of meat prices from February 2024 to February 2025.

Fortunately, there were also some items which saw negative CPI growth from February 2024 to February 2025.

This includes furniture, furnishings, loose carpets, fuel, passenger transport services, package holidays, household textiles, appliances, tableware, and equipment.

The most notable decline came from information and communication equipment, which decreased by 13.2%.

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Coffee prices

The main driver behind the dramatic increase in hot beverages was coffee prices, which have come under immense pressure over the last few years.

In February, coffee prices crossed $4 per pound in commodities markets – a new all-time high and more than double the price of a year ago.

Although coffee prices have come down slightly since, they still have not recovered to 2024 levels, which were already very high.

This increase has largely been driven by poor weather conditions in some of the world’s biggest producers.

Given that South Africa is a net importer of coffee, it is especially vulnerable to global market conditions.

For example, Brazil, the world’s largest producer, has faced serious challenges with rainfall, which has constrained its supply.

Vietnam, the world’s second-largest producer, has also experienced severe droughts and unpredictable rainfall patterns in key coffee-growing areas like the Central Highlands.

A more recent driver of higher coffee prices is the threat of tariffs from the United States’ Trump administration on South American countries.

In particular, the threat of tariffs on Colombia, the world’s third-largest coffee producer, has resulted in commodities traders betting the price will rise. This also introduces further uncertainty in global markets.

At the same time, attacks by Houthi militants in Yemen on ships in the Red Sea have led to soaring costs for European coffee roasters.

Container freight rates on the Asia-Europe route have surged by about 150%. Many shipments of beans from leading robusta producers like Vietnam and Indonesia have been delayed by as much as three weeks, as ships are now taking a longer route around the Cape of Good Hope.

This situation has prompted coffee roasters to look for substitute beans from countries such as Brazil and Uganda. Brokers have reported a rise in regional prices in these areas, which will result in higher costs for roasters.

However, production and freight challenges have not slowed the demand for coffee.

In the last few months, coffee consumption and culture have increased, especially in big markets like China.

This has led to more demand and higher pressure on supply chains, which are still recovering from the pandemic and other geopolitical challenges, such as conflict in the Middle East.

In South Africa, the popularity of at-home coffee consumption, global coffee chains like Starbucks, and niche cafes is on the rise.

Positively, though, experts estimate that as the demand for coffee keeps increasing, more players will enter the market.

This will eventually lead to increased supply and lower prices for consumers.