Cafés raising coffee prices has long been a topic of discussion in Australia. Dean Merlo details why it’s time for operators to bite the bullet.
Coffee is one of the world’s most heavily traded and valuable commodities, but as global demand has increased and green coffee production has stalled, price rises have shown little sign of slowing down in recent times.
The average price of green coffee almost doubled across 2025, and the early signs in 2026 indicate similar pressures. The consistent jumps have had Australian cafés and roasters feeling the squeeze in what Dean Merlo, founder of Merlo Coffee Roasters that supplies to more than 1500 venues, describes as the most tumultuous period he’s witnessed.
“It’s a tough time for roasters right now, the coffee prices aren’t just unprecedented, they’re ridiculous. They’re closing in on double what they were a year ago. It’s incredibly hard to pass that onto cafés who are already struggling with rising costs,” says Dean.
“Coffee is basically a traded commodity now, I don’t believe this is just a spike – if you look at the history of the past 12 months, it’s kept rising. This is the greatest turmoil I’ve seen in the coffee market in my time.”
Merlo, under Dean’s stewardship, has grown to become one of Australia’s largest family-owned coffee roasters since being founded more than three decades ago. In that time, it has also opened 16 cafés in its home market of Queensland, from Brisbane to Toowoomba. Dean has seen some roasters look to offset rising prices by changing their blends, a move he believes would send a negative message to Merlo’s loyal customer base.
“What I’ve explained to our people is everyone likes to buy cheap coffee, but no one wants to sell cheap coffee,” he says.
“We could have used cheaper origins or cheaper blends in the past year, but we refuse to do that and compromise the quality of the coffee. It doesn’t send the right message to customers, as well as culturally throughout our organisation.
“I simply will not do it. We use the same blend now as we did 33 years ago, and that’s important to us.”
What, then, is the tipping point? What levers can be pulled to ensure Australia’s roasters and cafés continue to not only survive, but thrive? The simple answer, according to Dean, is pricing changes in cafés.
According to the La Marzocco Future of Australian Coffee Report, the average coffee price in an Australian café in 2025 was $5.50 – which is significantly lower than other developed markets around the world. That figure rises to $6 to $7 in major metropolitan hubs like Sydney and Melbourne and drops to under $4 in some regional areas and budget options.
The average price of a coffee in Brisbane sat at around $6 last year, and Dean believes raising prices to match the rest of the market doesn’t have to be as scary as it seems. In fact, Merlo’s own locations increased prices from $4.90 to $5.50 in one fell swoop and felt next to no blowback from customers.
“We knew we just had to charge that price, otherwise it’s a question of when you go broke,” says Dean. “It’s tough when you’re talking to cafés out there and they’re nervous since their costs are going up and they’re getting strangled in their own business, and they’re too worried that the café across the road isn’t putting their prices up,” Dean says.
“We’ve explained our pricing to all our customers. We charge $5.50 for a basic flat white with $1 for extras. We only charge once for extras, so say if you have a double shot with soy and a shot of syrup, that’s still just $1 more.”
This approach is reasonable for both the café and the customer, he says. Dean discovered it’s difficult to individually charge for each addition on top of the coffee itself.
“We explain to our wholesale customers that’s what our cafés charge, and we’re in their business so it’s difficult – in some respects it’s hard to be a wholesaler and a retailer at the same time, because you’re effectively selling wholesale to your competitors, but we don’t see any of the cafés we sell to as competitors as there are so many things that differentiate the customer experience.”
Dean says that end consumers are willing to accept – or won’t notice – price increases as long as the other aspects of the café experience remain up to scratch.
“The thing we’ve tried to impart onto our customers is that if you’re charging five bucks for a coffee, you’re going broke. It’s as simple as that,” he says.
“If you have a quality product and offer a quality service, the food’s good, and you’re just doing all the right things as good retailers, people won’t even blink – they won’t even look at the price.
“We proved that with our stores in that the increases barely got a mention from our customers when it happened.”
Despite the external pressures, Merlo’s café locations did not stand still in 2025. The opening of a wholesale bakery at its Bowen Hills Roastery looks set to expand further in 2026.
“2025 was so big for us, we opened a bakery, and it’s a full-on wholesale bakery and we sell retail at our shop. It’s in our Bowen Hill Roastery and it’s been going incredibly well,” says Dean.
“It’s not easy to produce both in the same spot, but we’re excited about it, and we feel it’s an investment that makes us stand out.”
“It’s crucial to diversify, you can’t just stand still. If you’re trading exactly as you were last year, it’s not going to work,” says Dean.
“It could be as simple as a change in menu where you’re showcasing that you’re now making iced drinks or adding cold foams, but you must be up on all of that. I believe a big warning sign for a café is if they haven’t changed anything in the past 12 months. It doesn’t have to be something as large scale as switching up the entire fit-out, but even small changes help step things up.”
For more information, visit merlo.com.au
This article appears in the February 2026 edition of BeanScene. Subscribe HERE.
