Is coffee a euphemism for some other sort of drink which is more readily available in Iceland at that time, or do they literally mean coffee?
Edit: Just realized that the book is set in the early 1900s. Question is still the same though!
First sources of coffee in Iceland date back to 1703.
In 1780 most priests and sheriffs had started drinking it, as well as rich farmers.
In the years 1819-1840 the import of coffee increased from 5 metric tons per year to 44 or about 800g per person.
Around 1830 farmers other than the richest ones started buying coffee. Sometimes at the expense of feeding themselves properly.
In 1849 it's estimated that import of coffee had increased to 213 metric tons or 3kg per person.
Almost all the coffee came to Iceland from the West Indies, through Denmark.
Judging by this it's safe to say that coffee had become widespread by the end of the 19th century. Source is in Icelandic sorry! It's a website run by the University of Iceland where people ask questions and experts from a relevant field answer.