A Compose Coffee shop in Seoul in this undated file photo / Newsis

Budget coffee franchise companies in Korea have begun adjusting their prices as coffee beans are become increasingly expensive worldwide. Compose Coffee, one of the top three budget coffee franchises in Korea, will hike its price on Thursday, prompting others to follow suit.

While Starbucks and other medium- to premium-quality coffee franchise brands have already raised their prices, it is the first time a budget franchise company here has done the same. The price adjustment came as the prices of globally popular coffee beans began rising to record levels late last year.

Compose Coffee, one of the largest budget coffee franchise companies in Korea, announced last week it will raise the price of Ice Americano to 1,800 won ($1.24) from 1,500 won on Thursday. Decaffeinated Ice Americano will also become more expensive, from 2,500 won to 2,800 won. The company's other items will remain unchanged for now.

It is the first time the company has raised its prices since its establishment in 2014.

The company said the price adjustment is due to the increased global prices of coffee beans. Price of Arabica beans, a coffee variety mostly used by coffee shops, recorded over $3.60 per pound last month, almost doubling from last year's $1.95. When the figure reached $3.44 in New York in December, it already surpassed the bean's previous record-high price of $3.38 from 1977.

Compose Coffee CEO Kim Jin-sung cited the bean prices as well as rises in other costs such as wages, logistics and ingredient prices among the reasons for its price hike.

While Starbucks and other medium- to premium-quality coffee franchise brands have already raised their prices, budget franchises have been resisting in order to keep their prices competitive.

Following Compose Coffee's announcement, it remains to be seen whether other major budget coffee franchises here such as Mega MGC Coffee and Paik's Coffee will also raise their prices. Mega MGC Coffee runs the largest franchise network in the domestic budget coffee industry with over 3,460 shops, while Compose Coffee runs over 2,750 shops and Paik's Coffee has over 1,730 shops.

Mega MGC Coffee in 2023 logged over 368 billion won in sales, while Compose Coffee posted 88.9 billion won in sales and Paik's Coffee over 135 billion won.

Compose Coffee's price adjustment came after more expensive coffee brands like Starbucks, Paul Bassett and Hollys raised their prices by 200 won to 400 won in recent months.

Global coffee bean prices hiked after the world's key coffee bean producers suffered extreme climate conditions last year. Brazil, which produces nearly half of the global Arabica coffee bean supply, suffered a severe draught last year. Reuters cited Brazilian food supply agency Conab saying the country's recent weather has been more favorable since last year but still the upcoming crop will be 4.4 percent smaller than the previous year.

India, the world's fifth-largest producer of robusta coffee beans — the main ingredient for instant coffee products — is also expected to reduce its exports by more than 10 percent this year due to lower production.