It means something entirely different here. It means that you have been blind to, or ignoring, an unpleasant truth, and it's time for you to realize it.
For example, your husband comes home late often without a good excuse, smells like another woman's perfume, and (other signs that make it clear to everyone else he is having an affair). You keep saying how hard he works and that he just works with a lot of women. One of your friends says to wake up and smell the coffee -- he's cheating!
The emphasis is in the "waking up" and realizing this situation is going on, not on the coffee, which is just something that is associated with morning.