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SPECIAL REPORT
First of two parts
MANILA, Philippines — Smoke billows from Antonio Street in Sampaloc, Manila, wafting with an unusual mix of vapor juice, tricycle fumes, cigarette puffs – and coffee.
Beneath the smoke clouds of the so-called Yosi Lane stands a Japanese-inspired coffee stall. A queue forms in front of it.
Ma. Alyanna Selda finds herself seventh in the line. She pulls out a square, black power bank-like device from her pocket.
“This is my second time here today,” Selda says, taking a puff from her black vape infused with melon-flavored juice.
This is a small haven for the third-year journalism student where she gets her daily caffeine fix. For Selda, coffee is as ubiquitous as water.
It does not matter if she has not taken her lunch yet before classes. What matters most is that she has a 16-ounce ice-cold caramel macchiato in hand, enough to tide her over for a day’s work of lecture and writing news stories.
“You will never go wrong with Caramel Macchiato. It’s sweet, not that creamy and still packs a punch,” she says while checking the time on her phone. It’s 10 minutes past noon. Her next class is at 1 p.m. Her lunch? That sweating iced coffee.
The likes of Selda are driving the growing demand for coffee in the country, creating new segments in a market that has been dominated by soluble coffee in sachets.
But that demand may find some resistance now as coffee bean prices, both globally and locally, are breaking records one after the other without any sign of immediate halt.
All-time highs
World coffee prices surged to record highs last year after extreme weather conditions affected supplies from key producing countries such as Vietnam, Indonesia and Brazil compounded by higher shipping costs.
The United Nations’ Food and Agriculture Organization (FAO) said in a recent report that Vietnam’s coffee bean output for market year 2023 to 2024 fell by 20 percent, with exports declining by 10 percent.
Meanwhile, Indonesia saw a 16.5- percent drop in its production during the same period while Brazil coffee production was seen falling by 1.6 percent, according to the FAO.
World Bank data showed that arabica coffee averaged $5.62 per kilo last year, more than a fifth over the $4.54 per kilo average price in 2023.
Meanwhile, robusta coffee saw a 67- percent surge in average price to $4.41 per kilo in 2024.
And global coffee prices are not showing any signs of slowdown. Arabica coffee averaged $7.81 per kilo in January before surging past $9 per kilo in February.
Robusta coffee, on the other hand, has breached the $5-per-kilo level this year, averaging $5.41 in January and $5.81 last month.
Domino effect
Lucrezia Cogliati, a commodities analyst at BMI of the Fitch Group, said elevated coffee future prices would result in higher domestic coffee prices in the Philippines since the country relies heavily on imports to meet its consumption requirements.
“We expect companies operating in the coffee space to cope with the rise in input costs by increasing prices for consumers,” Cogliati said in an email interview.
Worse, the uptick in coffee prices may “weigh on” the country’s coffee consumption despite its market being considered as “relatively mature,” Cogliati added.
Indeed, the Philippines relies on imports for the bulk of its coffee supplies.
The country’s import dependency ratio, or the share of imported stocks to total supplies, peaked in 2022 at 61 percent. This means that six out of 10 coffee beans in the Philippines were imported.
Coffee bean imports have averaged around 48,000 metric tons in the past five years from 2020 to 2024.
Last year, coffee bean imports hit record highs, both in terms of volume and value at nearly 54,000 MT and $229.52 million, respectively, according to the Philippine Statistics Authority (PSA).
The country’s average import cost of coffee beans in 2024 rose by 42 percent to $4.25 per kilo from $2.98 in 2023, reflecting the surge in world prices.
But just how huge is the country’s coffee consumption?
The Philippines ranks fifth in terms of coffee consumption in the world with an estimated demand of almost 400,000 MT, according to the US Department of Agriculture (USDA).
Filipinos drink so much coffee that the country imports 300 million kilograms of soluble imports or locally known as 3-in-1 or instant, every market year (July to June period), making it the top importer of the product in the world, based on USDA data.
Inflation
The FAO estimated that a one percent increase in international coffee prices caused a 0.24-percent hike in retail prices in Europe after 19 months with the shock persisting for at least four years.
In the US, a one- percent increase in international coffee prices will translate into a 0.20-percent increase in retail price after a little over a year, according to the FAO.
In the Philippines, it might be a little faster than the Western economies.
Multiple cafés with varying sizes and market segments in Metro Manila monitored by The STAR have already increased their prices by as much as P10 per drink offering this year.
One local coffee bean seller hiked its prices four times last year since December 2023 to cope with the rising prices.
The seller’s wholesale price for Benguet coffee beans increased cumulatively by P200 in the past year to P630 per kilo from P430 kilo recorded at the end of 2023. Its other coffee beans such as arabica have increased by P170 per kilo in total to P650 per kilo from P480 per kilo.
The country’s inflation on coffee and coffee substitutes hit 4.2 percent in February, the fastest in over a year since the 4.8 percent recorded in October 2023, according to PSA.
Coffee inflation was even faster than the country’s headline inflation of 2.1 percent in February. It means that coffee prices rose at a faster rate than the average rate of increase in the prices of all goods and services nationwide.
The suggested retail price on some soluble coffee products have also increased by as much as P0.5 on an annual basis, based on the latest suggested retail price matrix released by the Department of Trade and Industry.
Some 3-in-1 coffee brands are now priced at P7 for a 20-gram sachet from P6.5; P7.75 for a 26-gram sachet, previously P7.25 and P8 for a 30-gram sachet from P7.5, based on the DTI matrix.
Keeping the demand
But FAO paints a different picture on coffee demand given the current global market developments: people will continue to consume coffee despite the price spikes. And why is that? Because coffee demand is inelastic.
“Consumption changes only marginally in response to a change in price. Similarly, coffee supply is inelastic due to the perennial nature of the crop,” according to the FAO study authored by El Mamoun Amrouk, Fabio Palmeri and Emiliano Magrini.
“As a result, both demand and supply characteristics contribute to sharp and persistent price movements,” the study added.
Chit Juan, president of the Philippine Coffee Board Inc., agrees that price increases will not stop Filipinos from consuming coffee. In fact, not even the high heat indices can prevent them from drinking hot coffee on a sunny day.
“If prices go too high, then some consumer segments like students will just shift to 3-in-1,” Juan, who has been in the coffee industry for more than three decades, told The STAR.
Juan said the growth of the country’s coffee market has been exponential throughout the years, leading to the creation of various market segments.
There’s the ubiquitous soluble market or the 3-in-1 sachets. And then the home brewers. There are the low-cost coffee stalls, which sell coffee for P39 or P49 a drink. There’s also the mid-sized, where you find most of the new coffee players today. And the high-end cafés.
“The consumption is still high and continues to increase, driven by various segments,” Juan said.
But all is not lost with the current global coffee “crisis.” The surge in global coffee prices have brought some good news to Filipino coffee growers who are now enjoying favorable farmgate prices.
To be continued…
