Caffeine is an expensive high in Perth

How much are you willing to pay for your morning coffee?

A recent consumer survey called the 'Real CPI - the Cappuccino Price Index' found that Perth's cafes have the most expensive cup in the country, at an average of $3.70 for a takeaway, compared to a national average of $3.20.

As those addicted to their daily fix will attest, this quite often hits the $4 mark.

Despite the high price, people are still flocking to their local espresso bar and in fact, according to coffee distributor Gilkatho which runs the Real CPI, Australian coffee consumption is up on the past few years.

But the question more and more people are asking is why is coffee getting so expensive?

Behind the price hike

The answer is found well beyond Australia's borders.

In the world's coffee growing regions, back to back poor seasons have damaged crops.

The fall in supply, coupled with a growing demand for coffee from the middle class in developing Asian nations, including China and India, has pushed the price of green coffee beans to a 13 year high.

Perth coffee roaster Kim Gordon knows how difficult it can be to source green coffee beans at a reasonable price.

"There's been a huge amount of uncertainty, the market has been going up steadily month by month and there's been a lot of [issues] from shortfalls in crops, weather and a whole range of other reasons that the market demand has increased but the production hasn't increased in line with it," he said.

"It's been more dramatic over the last two months, especially out of South America, so it has been starting to put a little bit of pressure on the market."

Peter Stathos works for Mocopan, a coffee importer based in Melbourne which has been in the business for 50 years. He says the coffee bean market has seen dramatic price hikes in the last year.

"Green [raw] coffee beans are traded on either the New York market for Arabica beans or London market for Robusta beans," he explained.

"In the last year, the market price for these beans has risen 115 per cent for Arabica and 78 per cent for Robusta beans respectively."

That price increase is starting to impact local roasters.

"We've been trying to absorb the pricing, we haven't had a price increase for four to five years, so we've actually been absorbing the increases," said Kim Gordon from Crema coffee roasters.

"Unfortunately at the moment it's getting to a stage where we're going to have to look at passing those increases on - you can only absorb it for so long and there have been a lot of other increases as well," he said.

Retail pain

Those price increases inevitably get passed along to cafe owners.

Andrew Justice manages the Kinky Lizard Cafe in East Perth.

He says the increasing price of coffee beans is adding to other rising costs, including the high cost of labour in Western Australia.

"The main pressures would be the higher wages and just trying to get someone that can make the quality coffee that people deserve to pay for," he said.

"Profit margins are very slim, there is not a lot of profit and you really do have to aspire to be one of the busier coffee shops, if you expect to make any form of profit, just to live off."

Mr Justice says the costs of running a cafe are going in one direction.

"That direction is up, the take away packaging, obviously that's due to rising oil prices etc, you always have your GST and the price of milk has gone up," he said.

Coupled with increasing costs is a higher consumer expectation.

Mr Justice says that if people are paying top price for a coffee, they should be getting the best product available.

"People have a greater expectation these days and they are more knowledgeable in what they are consuming," he explained.

"You have to be hands on, hard working and focussed on every single person that you're providing that product for.

"You can't afford to loose one customer; it's a competitive industry and therefore you've got to keep you're eye on the ball with every single thing that goes out of that cafe."

No reprieve

Every day, two billion cups of coffee are consumed across the world.

In Perth, the pressure on the supply of green coffee beans may result in price increases of as much as 50 cents per cup this year.

Peter Stathos from the coffee importer Mocopan says the main positive in the current economic climate is a strong Australian dollar.

"As green beans are traded in US dollars, the stronger Australian dollar has provided some benefit to costs of green beans," he said.

"However, it still does not balance the higher cost of green bean."

With no end to the cost pressures in sight, Andrew Justice has some sage advice for those thinking about entering the coffee industry.

"If you want to be a millionaire, don't open up a coffee shop, do it because you love it".

From: ABC News