Rising bean prices are already straining coffee companies
Although the price you pay for coffee isn’t going up just yet, the price roasters spend to get it into your cup is. Because of supply shortages caused by extreme frost in Brazil, arabica bean futures recently hit almost $2.08 per pound, the highest price since 2014, and jumped about 30% last month, nearly tripling in the past year, according to The Wall Street Journal.
Coffee behemoths aren’t in danger. According to Carlos Mera, a coffee price expert and senior analyst at Rabobank, the world’s Starbucks will be alright for the time being (huge surprise) because of hedged purchase tactics, such as buying beans in advance.
Mera told Retail Brew, “Large organisations have far more financial power to up-front expenses and to adapt, to change locations.” “That necessitates a significant investment. [Smaller] coffee shops will face a slew of new obstacles, including labour shortages.”
Consider Counter Culture Coffee, a speciality coffee roasting firm based in Durham, North Carolina, which sources beans from 50 different supply streams in 18 different countries and distributes coffee to over 1,000 restaurants, coffee shops, and boutique hotels around the country.
CCC’s coffee manager, Katie Carguilo, claimed that increased bean prices had put a strain on the company’s retail partners. “Right now, the main way we’ve seen this play out is that farmers’ base price expectations for selling coffee are increasing,” she explained. “Anything that has an impact on our partners has an impact on our business.”
Some partners may be unable to maintain their margins and pay these higher prices, according to Carguilo: “[They] will either go out of business or producers will refuse to sell us coffee because the pricing isn’t competitive.”
Aside from the bean: Frost isn’t the only factor posing a danger to the coffee business. According to The Wall Street Journal, extreme weather events such as heat waves and floods have impacted agricultural markets, and these climate challenges have caused worldwide supply chain issues for coffee growers.
Carguilo stated, “Our costs are rising.” “The cost of transportation, as well as the cost of discovering and hiring containers, has risen dramatically. Other business expenditures, such as packaging, are rising. I believe we will see sales corrections unless the company is able to absorb those costs.”
According to Carguilo, the increasing C market, or coffee commodity market, is pushing internal prices in nations like Colombia and Peru to rise. “This implies that, in order to purchase high-quality coffees for our contracts, the associations and exporters with which we operate must boost the prices they pay growers and pass some of those expenses on to us.”
