CreditorWatch warned that almost one out of every six (16.2%) hospitality firms is at risk of failing due to high interest rates, rising rents, cost-of-living pressures, and the pandemic hangover.
CreditorWatch forecast that roughly one in eleven (8.9%) food and beverage enterprises would close in 2025.
The latest insolvency data from the Australian Securities and Investments Commission (ASIC) shows that the accommodation and food industry experienced the sharpest increase in corporate insolvencies.
There were 2194 insolvencies across the accommodation and food industry in the financial year to 2 March 2025, up 79% from the same time a year earlier (1226) and 182% on 2023 levels (779).
Global coffee prices have more than doubled over the past year, currently sitting at $US391 a pound.
Rising rent, energy, and labour costs are also pressuring the margins of cafes.
As a result, the CEO of independent coffee company Single O, Mike Brabant, tips that the price of a cup of coffee from an Australian cafe will soon hit $7.
“We think between $6 to $7 for a regular coffee is where it’s going to be”, Brabant told The Australian’s Global Food Forum in Melbourne last week.
“And I think you’ll see that prices increase quickly over the next six months“.
“We certainly believe consumers will continue to pay for well-sourced, well-made coffee,” he said. “We don’t see at the moment that slowing down. We see continued growth”.
Brabant added that $7 coffees would still “represent good value”.
A poll by The Australian suggested that only 44% of readers would pay $7 or more for a coffee.
In Melbourne, paying $5.50 for a regular coffee is usual. This is already beyond what many consumers can afford, as indicated by the decline in demand and the increasing number of cafe insolvencies.
If coffee prices were to average $7 over the next six months, it would inevitably lead to lower demand, fewer sales, and more cafes going under.
Why would consumers pay $7 when a decent coffee from Coles Express costs only $2?
Most Australians cannot afford to pay $7 for a latte or $20 for a basic avocado on toast.
The number of cafes in Australia has skyrocketed over the last 15 years to unsustainable levels. There was never sufficient demand to support so many cafes.
Soaring coffee bean prices, rents, and energy costs have created a perfect storm for the industry.
This will result in further closures until the supply of cafes realigns with customer demand.
