Coffee: is it possible to reduce the price?

If the special tax were to be abolished, according to the president of the Greek Coffee Union, Tassos Yagoglou, this would mean a simultaneous reduction in the price on the shelf by at least 10%.

Introduction special tax on coffee served as a “stimulus” for the development crimes and smuggling, as announced at a meeting with the media on Thursday (May 23) by the management of the Hellenic Coffee Union (HEK) and its president Tasos Yagoglou. Reportedly The volume of illicit trafficking in Greece is estimated at 10–15%.

The largest amount of smuggled coffee is imported from the northern borders of the country. It is noted that the total organized retail market, including Lidl in Greece, stands at EUR 340,000,000 year on year in the first quarter of 2024, with an increase of 3.2% in value terms compared to the first quarter of 2023. Consumption increased by 1.6% over the same period. Sales turnover coffee capsules in supermarkets alone is estimated at approximately 60 million euros per year.

Of course, there is also consumption in the catering sector, etc., for which there is no data. It is estimated that he is heading there most of the coffee smuggled into the country.

As you can see the introduction special tax on coffee “encourages” crime, which is what the tax authorities discovered. “There is an intention to create mobile control points, but when this will be implemented by the Ministry of Finance is currently unknown,” said the EEK management, emphasizing that there is a proposal allocate a portion of the annual revenue collected from a special consumption tax to combat illegal coffee consumption.

However, it appears that the introduction of VAT has been quite effective for government coffers. According to the EEC administration, from 2017 to 2023, the state treasury received a total of 1 billion euros from the special consumption tax, The original budget for the measure was 70 million euros. In the first year, 90 million euros were collected instead of the 70 million that were in the original budget, and since then the amount has grown until 2023, when it reached 140 million euros. It should be noted that Other countries where excise tax applies, besides Greece, are Germany and Belgium.

The excise tax is 2 euros per kilogram on green (raw) coffee, 3 euros on ready-made imported coffee and 4 euros on instant coffee.

In fact, enterprises in this sector pay excise tax in advance. When the special tax was first introduced, active businesses required twice as much liquidity as they had up to that point. Initially, the tax was approximately 80% of the then market value of green coffee upon import.

However If the special tax were to be abolished, according to the president of the Greek Coffee Union, Tassos Yagoglou, this would mean a simultaneous reduction in the price on the shelf by at least 10%. This comes at a time when the reduced 13% VAT rate on coffee is due to expire at the end of June, so unless there is a corresponding extension, prices are expected to automatically rise by at least 11%. Let us remind you that according to the current regime, Until the end of June, the VAT rate on coffee served in a store or to take away will be 13%.

It should be noted that this year international markets are again experiencing an upward trend in price growth, because, as mentioned, there are problems at various production sites. In particular, due to recent growth trends in the coffee market, there has been an increase in prices for Robusta varieties (38% of world production), which also affected the prices of Arabica varieties (62% of world production). Robusta varieties were sold at up to 60% of the peak price, and Arabica varieties were sold at up to 30% of the peak price of the variety.

According to Mr. Yagoglu, the cost of coffee will increase depending on the price level, at which the company will be forced to buy the product from now on. The price of coffee in the supermarket will increase from 5% to 15%. The last price increase in the coffee sector occurred in 2022.

However, regarding the fee for a glass of coffee the situation is not so dire. The increase may be 1-2 cents. Since the pandemic, coffee consumption has increased by about 4-5%. In the first quarter of 2024, supermarket sales increased by 1.6% compared to the corresponding quarter of 2023. In Greece, about 40,000 tons of coffee are consumed annually.

It's actually interesting to follow the consumption trend. In particular, in February 2023, there was a shift in coffee consumption from external consumption to domestic consumption, with 81% of consumption occurring at home and the remaining 19% outside the home, which is a consequence of the restrictive measures of the pandemic and quarantine, as well as the subsequent inflation crisis.

However, the current ratio of coffee consumption is 60% indoors and 40% outdoors.

Regarding the distribution of consumption in organized retail trade by volume, Greece ranks first in terms of quantity with a 50% share, and in terms of value it occupies a 30% share. This is followed by instant with a percentage of 18% by volume and 30% by value, espresso with 15% by volume and 25% by value. Filter coffee (Gallico) has a share of 17% by volume and 13% by value. The capsule accounts for 50% by volume and 71% by value in total espresso consumption.

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