For all of us involved in the coffee industry, the price of what we sell is much more than just a market statistic: what consumers pay for their daily cup determines livelihoods, margins, even viability for some hospitality sector businesses writes Findlay Leask, Managing Director of Caber Coffee.
Added to all the other challenges the sector has had thrown at it lately, such as national insurance, minimum wage and business rate increases, and labour shortages variabilities in coffee prices are another piece of a challenging jigsaw and it’s crucial we work hard and with our customers to help them stay informed.
We always watch the coffee market carefully but lately we’ve been keeping an extra close eye on what’s happening because prices exceeded $4 per pound at one point, having been under $2 per pound just a year earlier. The record highs we’ve been experiencing since November last year have huge ramifications for us, our customers and coffee drinkers so it’s crucial that we stay up to date, not only with prices but also with the factors that influence them.
One of the primary considerations is the fact that coffee is a futures product, indeed it’s one of the most traded commodities in the world and ranks highly alongside oil and metals, but the coffee you drink today might have been bought months ago. The price is not just influenced by supply and demand but also by considerations such as weather patterns and their effects on growing/harvest, currency fluctuations, geopolitical events and more.
Changes in global market share also come into play too and, whereas Brazil used to be the world’s largest exporter of coffee, its recent move to hold the status of an importer due to more domestic demand than supply has been a shock to most people in the industry. Weaker currency and more Brazilians drinking more coffee means less to sell to others, and there’s no doubt it’s causing a stir.
Thousands of miles away, the once tea-loving nation of China is also developing a love of coffee at breakneck speed and the nation’s size means that shift has ramifications for the global market. The best example of this is the meteoric rise of the Starbucks-esque Luckin Coffee which added some 20,000 new stores to its portfolio between March 2023 and July 2024. That’s a lot of cups and a lot of coffee needed to fill them.
So, are all these factors combining to create an unprecedented spike, or has the coffee market fundamentally changed for good? Some coffee market boffins suggest that we could be entering a new era of high pricing and cite additional factors such as climate change making coffee production even less predictable, plus the fact that coffee demand is accelerating faster than new farms can be established, planted and start harvesting.
Current soaring prices might not be with us forever but, equally, we may not see a return to very low prices either, so we must continue to do our best to navigate these volatilities. It is, therefore, more important that ever for us to understand the real-world impact of coffee prices on our customers so that we can offer insight, practical support and as much stability as we can create to those we serve, one cup at a time.
To find out more, visit www.cabercoffee.com email info@cabercoffee.com or call 0845 302 4600.