The View: The 2023 State of the Industry
2021 was filled with a lot of hope as the first wave of vaccines was released, people started returning to work, cafes started reopening, and the idea of normal life resuming was on the horizon. Unfortunately, all the promises of economic rebound and the return to personal comfort and security were relinquished through a series of global crises, including two wars, a frost in Brazil escalating inflation and a fluctuating job market that would give anyone whiplash.
Every step of the coffee value chain was affected by every global event. Green coffee prices rose to a suffocating point over the summer. The bulk of Central American coffees arrived so late this year that roasters had to start experimenting with new origins and adjusting their recipes. The boasted frost in Brazil turned out to be more of a short-lived chill, and crops seem to look healthy. Prices have started to deescalate; however, anyone who had to purchase over the summer still feels the pinch on their margins today.
Just when you thought you were done pivoting and adapting, we get the “Great Resignation” with a record number of people quitting and changing careers in synchronicity. Long-time executives and managers are scratching their heads trying to make their staff happy and want to stay in their positions. As business owners, everyone is fighting a war on two fronts. Owners are being squeezed on margins; as costs go up, profits go down, and at the same time, staff are harder to keep. As a result, their wages must be increased to support them. It is definitely a challenging time, and no one is immune to it.
In this issue, we will hear industry leaders across the country talking about the challenges they are facing, how they are dealing with them and what is coming our way in 2023.
The trends and success of companies will be a bit staggered as each city and state has been coming out of the pandemic on different timelines. Cities like New York seem to blast off right out into normalcy though the population still has not entirely returned. Boston climbed out a little slower however it has had a strong rally, and many cafes report returning to 2019 numbers which are encouraging. Of course, Florida never experienced the pandemic, so it has been pretty much business as usual there. California has been cautious about relapses during the pandemic, so its recovery has been slightly stalled though it grows stronger each month.
Following last year’s trend, coffee-at-home has continued to grow, and more companies are investing in this aspect of their business. As a result, cafes have been bouncing back in many parts of the country. Innovation in the RTD space has continued with different versions of cold coffee and alcoholic beverages. There is a fast-paced race for the most convenient and eco-friendly way to deliver specialty coffee, with Cometeer and Steeped leading the way. Blue Bottle has recently thrown its hat into the ring with an instant coffee offering.
Functional ingredients remain essential as more people seek ways to relax and relieve stress while indulging in their daily comforts.
At the SCA show in Boston, we finally got to see what everyone was up to during the pandemic. It turns out they were all doing the same thing: creating a direct-to-consumer product or pipeline and improving or creating their e-commerce channels. This year, that will get a little bit more difficult as data regulations will continue to shift, and new laws will roll out from state to state and federally.
The good news is that coffee consumption continues to grow even if it is growing in new directions. The new year is sure to bring change again and its own set of challenges. However, most of us have gotten into shape by now, so we should be able to keep up. This is the state of our industry.