CoffeeTalk recently conducted one of our “snapshot” surveys to our Specialty Roaster and Roaster/Retailer community and asked, “How important are a group of topics to you and your business?” The answers we received were often a surprise and unexpected.
In the included graph, you notice that there are four potential answers to each of the possible issues. If you add the bars from each issue, they equal 100% of the roasters who responded.
Clearly, the point of greatest concern is the price of green coffee. Even though the price of coffee has fallen more than 50% from its peak, this would indicate that there is not a lot of confidence amongst the roasters that the price has stabilized and will be low for the long haul. Since green coffee is the single largest non-capital expenditure a roaster makes and the purchase of green coffee is essential to his or her business model, this weak confidence by inference, will affect other decisions such as new equipment purchases, market expansion, hiring, and new credit shopping. A typical reaction to this may be that roasters can be expected to examine their blends in order to reduce costs. This interpretation is supported by the another top concern – the economy – that draws high levels of concern and is aligned with the general population’s opinion on the length of time needed for the economy to return to post 2007 levels. These concerns are most likely also reflected in the low level of concern about credit and financing since by extrapolation most roasters think that getting new credit anytime soon seems unlikely.
Expanding sales is of huge concern with more than 80% of respondents either somewhat or hugely concerned about expanding sales and this may be coupled with the dramatic concern about consumer price sensitivity and sustaining consumer interest in paying for quality.
One surprise was the 10% of the responders who are completely unconcerned about quality control and maintaining consistency. One has to assume that the question was misinterpreted or that these respondents simply have already placed the necessary technology and QC controls in place such that this is no longer a worry.
One trend that we have noted and seems to be backed up by the responders is the apparent decline of focus on social and environmental issues as the more pressing needs of ensuring business sustainability rise to the forefront. Amongst roasters and roasters/retailers, the national economy seems to have trumped issues beyond their immediate ability to affect. Focus has shifted to competitive pricing and undercutting within their region, the impact of rising in-home consumption (particularly the rise of single serve systems and brewers) and distribution of their own products. Although this was not specifically addressed in the scope of this survey, on the significant number of concerned responses associated with distribution of roasted coffee, one can infer that this is a result of uncertainty about fuel costs, product and business liability, operation and maintenance of vehicles, and similar operational exposures.
One area that should be of concern to all us pundits who think that if we think it is a big deal, then everyone must feel that way, is the significantly low level of concern about Acrylamides (potentially carcinogenic compounds developed through the roasting process and out-gassed into the environment) amongst specialty roasters. Apparently, this idea is only of interest to legislators, lawyers, and activists (so far).
The second part of the survey also delivered some interesting results. We asked the same respondents if they were actively shopping for new green coffee suppliers and how many they currently carried as vendors. As shown in the pie chart, the largest segment of roasters do business with only 2 or 3 importers but a substantial majority are actively looking for more vendors.
The reason for this is beyond the scope of this limited survey but it certainly raised some potential opportunities for increased sales by importers.
With any survey of this limited scope, it is chancy to be too definitive in extrapolating conclusions; however there does seem to be some potential trends. Based on our interpretation of the information provided, it would seem that our industry in the roaster segment continues to express uncertainty about the economy and the behaviors of consumers of higher priced products. This coupled with uncertainty about the future price of green coffee, stability of supply chains (possibly including credit with vendors), and business operations issues, will likely lead toward 2013 being a year of flat growth with minimal reinvestment. Since the lynchpin in this conclusion is uncertainty about the general economy and the future price of green coffee, if either or both of these factors should stabilize favorably in the coming year, then this survey showed no reason why the concern levels will remain high. If economic circumstances in the general population shift toward positives, then we expect that restraints on demand for reinvestment will ease.