Lavazza: coffee prices set to remain high into next year
The Italian coffee giant is warning of a double-digit drop in earnings in 2023 amid soaring costs
Lavazza, the Italian coffee giant, has warned over a double-digit drop in earnings this year amid surging coffee bean costs, and said its prices are not set to come down for consumers until 2024.
The firm said it is braced for a hefty drop in underlying earnings over 2023 as it looks to limit price hikes. It raised its prices by 6.2 per cent in 2022, but saw its costs jump to €550 million, almost double its underlying earnings last year.
Giuseppe Lavazza, chairman of Lavazza, told the PA news agency that it has not increased prices further in 2023, but that this is impacting its profits as it faces “unprecedented” increases in coffee bean prices. Robusta coffee beans recently reached their highest level in 15 years.
Lavazza said the group hopes to be able to cut its prices next year as energy and raw material costs are expected to come down.
“We’re still in a situation where it’s very difficult to predict what’s going to happen,” he said. “In 2024 we think the situation can change a little bit and we can have more stability in terms of price of raw materials and energy, currencies and the rises in interest rates.”
The group said it has been hit hard by coffee bean increases - up 80 per cent over the past two years - as well as energy costs, freight prices and the stronger dollar, in which it buys its beans.
“The global economy has seen an unprecedented increase in operating costs in most sectors and in all aspects of the supply chain,” Lavazza said, adding that prices are still under pressure despite energy costs easing, in particular as central banks hike rates.
“The situation is still highly sensitive,” he said. “But we will absorb most of these costs and believe we are well positioned now for when inflation starts to decline significantly, which we expect will be next year.”
He went on to say that consumers are downgrading their coffee and cutting back on how much they buy. He said the firm has looked to protect its sales, but this has come at a cost to its profit margins.
“I know households are under pressure from inflation for many reasons. It’s very concerning,” he said.
