At Toronto’s First and Last coffee shop, customers could see prices go up for their favourite drinks.Cole Burston/The Globe and Mail
Tucked in a residential neighbourhood at the edge of downtown Toronto, First and Last coffee shop serves cappuccinos, chocolatey treats and wildly popular matcha drinks to local students, artists and those needing a place to work.
Starting in the fall, however, customers may find themselves paying close to 10 per cent more for their go-to drinks and pastries, and prices will rise by about five per cent more later on, according to owner Sharon Nutzati.
“My first thought is always, ‘How can we make this cheaper rather than raise prices?’” she said, adding that the café tried to cut down on packaging and reduce waste. But, she said, “people don’t realize we’re eating a lot of the costs to keep customers happy.”
Harsh weather, shifting consumer habits and market disruptions this year have driven up the prices of coffee, chocolate and ground green tea powder known as matcha by as much as 30 per cent or more, with tariffs often exacerbating existing supply constraints.
And even those looking to save money by making these treats at home should note that while prices have spiked at both the retail and wholesale levels, consumers shopping at grocery stores have likely already seen their bills climb.
Sharon Nutzati, owner of First and Last, says prices for key ingredients like cocoa and matcha have skyrocketed.Cole Burston/The Globe and Mail
Coffee shops such as Ms. Nutzati’s have strived to absorb rising costs until the last possible moment to retain customers amid fierce competition and razor-thin margins.
In addition to a moderate increase in coffee prices, Ms. Nutzati said she started paying 30 per cent more for cocoa products this year. She also went from paying $8 to $11.85 per 100 grams of matcha while chasing multiple suppliers to work through persistent shortages.
“Things are either running out or the price is jacked up completely,” she said.
The price for an average bag of coffee at the grocery store, meanwhile, already peaked at about 20 per cent higher earlier this year, said Adam Pesce, president of Reunion Coffee Roasters, a Toronto-area specialty roaster selling to both cafés and retailers.
For a 340 g bag at an independent cafe, prices rose from around $18 to $20, to as much as $22, he said. At the grocery store, a $14.99, 340 g bag is now $16.99.
Mr. Pesce has also noticed shrinkflation, with 300 g bags sold for the same price a 340 g bag used to be sold for.
Café-level increases are also playing catch-up because smaller roasters often don’t use futures contracts. They instead buy “spot coffee” for when they need it.
Larger roasters and retailers purchase coffee futures – securing inventory months in advance by committing to locked-in prices – which strains cash flow immediately and often requires raising prices sooner for customers.
Extreme weather conditions this year are at least partially behind price increases for coffee, chocolate, and, to a lesser extent, matcha.
Rising temperatures and changes in precipitation patterns in the tropical belt, for example, have led to declining coffee yields this year, said Mr. Pesce. “Too little or too much water at the wrong time can devastate a harvest . . . the [beans] split and drop off the tree and they’re worthless.”
But financial speculators have also taken the opportunity to run up prices, he said.
Commercial roasters were caught short, having not locked in long-term contracts. Speculators went long, forcing roasters to buy at elevated prices.
These price surges were compounded by global macroeconomic volatility and trade disputes. The U.S. is the third-biggest source of coffee imports for Canada as major manufacturers are located there – and they’re often importing from places hit or set to be hit by tariffs imposed by the U.S.
In Japan and across East Asia, record temperatures have curbed matcha green tea production – but the biggest culprit is a skyrocket in demand driven by the product’s stardom on TikTok and social media.
Less than a decade ago, the rising popularity of coffee in Japan took a bite out of matcha’s market share.
“Within a decade, they went from having this problem of a lack of demand to now . . . huge, huge global demand,” said David O’Connor, the co-founder of Genuine Tea in Toronto.
His company often has to pay double for the same product as in previous years – and that’s when there’s supply at all.
In Toronto, Ms. Nutzati went on several wild goose chases across the city in search of matcha at inflated retail prices when her suppliers said they were sold out at the last minute.
The challenges are compounded when it comes to ceremonial matcha, a higher-grade product, said Jason Johnston, CEO of Lemon Lily Organic Tea in Toronto.
“We’ve gone up from about $129 a kilo to $200 a kilo,” he said, adding that his company has hiked prices three times in the past year alone.
While the surge in chocolate prices hasn’t been subject to the same attention as matcha, prices have risen because of pressures including extreme rainfall in West Africa, where a majority of the world’s cocoa beans are grown, as well as market speculation.
Cocoa bean prices spiked from around $4,000 to as much as $12,000 per metric tonne in 2024, said Daniel Poncelet of Vancouver-based Daniel Chocolates.
There is some good news. For coffee, prices have been falling since hitting about $4.30 per pound in February, all the way down to $2.90 in recent weeks, according to Mr. Pesce.
However, coffee shops are now the ones catching up to the even higher prices and preparing to pass those along to consumers because they buy their coffee in smaller amounts. Less frequently, the timing of when their higher prices could hit doesn’t line up with the retail market.
“[They’re] still using $3.50 to $3.60 coffee” bought months ago, Mr. Pesce said.
