Lavazza, the Italian coffee giant, has warned of further price increases as climatic changes, shipping disruptions, and new EU regulations drive up costs for coffee roasters. The price of coffee, which has already reached a record high, could continue to rise.

The London Robusta futures, the global benchmark, reached a new high of $4,844 per ton on Tuesday and have risen by about 70 percent over the past year. The cause is poor harvests in the main growing countries of Southeast Asia.

Giuseppe Lavazza, Chairman of the Lavazza Group, stated that the price of coffee in British supermarkets, which has already increased by about 15 percent this year, could rise by another 10 percent by next year. "Coffee prices will not decrease; they will remain very high," he said on the sidelines of the Wimbledon tennis tournament. "The coffee supply chain is under enormous pressure.

Coffee roasters like Lavazza are forced to raise prices and reduce profit margins as raw material costs have increased, Lavazza continued. While the industry is accustomed to dealing with fluctuating prices for higher-quality Arabica beans, the recent rise in cheaper Robusta beans is unprecedented and causing greater issues.

Climate change has severely impacted production in the world's major Robusta-producing countries, primarily Vietnam and Indonesia, significantly reducing the available quantity of these varieties," said Lavazza. Weather forecasts suggest that the next Vietnamese harvest will not replenish the dwindling stocks of Robusta coffee beans, which are used for espresso and instant coffee.

While roasters in the past had to pay higher prices for Robusta for a few months or even a year, 'in this case we are really paying a lot of money for the coffee for many, many, many months,' Lavazza added.

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"Hedge funds and other speculators have also invested in the market and driven the futures prices further up. 'Speculation is one of the major factors,' he said. Rising futures prices have added additional costs of 800 million dollars to the company since 2022, which equals 2.5 times its EBITDA.

Rising shipping costs also contribute to this, he added. Since October of last year, ships have been forced to take the longer route around the Cape of Good Hope to avoid attacks by Houthi rebels in the Red Sea. This is particularly challenging for a coffee company that sources beans from countries in Asia and East Africa, according to Lavazza.

The net profit of the Italian coffee roaster decreased in 2023 from 95 million euros in 2022 to 68 million euros, while the EBITDA fell from 309 million euros to 263 million euros during the same period.

Lavazza added that new EU regulations, which ban the import into the EU of coffee and six other raw materials grown on deforested land, will further drive up prices. The new regulations, which will come into effect early next year, will require food companies in the EU to determine the exact locations of the cultivation areas of their raw materials.

In the coffee business, only 20 percent of farmers are willing to comply with the regulations," said Lavazza. He warned that European coffee roasters would have to source almost all of their beans from Brazil, the only country prepared to implement the regulations.

The recent elections in Europe, which have shifted the composition of the EU Parliament to the right, could enable a change in legislation, said Lavazza. Otherwise, around 8 million coffee farmers would "lose the opportunity to sell coffee to you.