Mismatch between supply and demand drives up coffee prices
We will know more about inflation on Tuesday when the June consumer price index is released. An increasingly expensive item in this basket of consumer goods that obsesses us all? Coffee.
A major drought in Brazil and the resurgence of Starbucks travel after the lockdown caused commodity coffee prices to hit their highest level in years. The US Department of Agriculture has said it expects global coffee consumption will exceed production in 2021. How do roasters – and drinkers – react?
Cuvee Coffee, a roaster from Austin, Texas, made his money selling beans to fine coffees.
But in 2020, survival depended on stay-at-home baristas, founder Mike McKim said.
“Our grocery business and our direct-to-consumer business have grown exponentially,” he said.
Drought in Brazil is forcing Cuvee to pay more than $ 3 a pound for beans, up from around $ 2.60 last year. McKim will raise prices, which could be dangerous.
Grocery stores have shelves full of cheaper brands, and McKim said, “Yeah, 100% I think they’re going to be more price sensitive. “
However, McKim is confident that most of his customers will buy more expensive beans. Plus, 2020 has been a big year for consumers to try something new, said Caleb Bryant of market research firm Mintel.
“We have seen a lot of experiments going on. Consumers are turning to more upscale coffees, trying to make specialty coffees at home, ”he said.
Bryant added that the price hikes won’t stop most remote workers from paying for more sophisticated blends – it’s Maxwell House and Folger drinkers who may switch to even cheaper store brands.
As for local coffee, Bryant said a few more pennies for a cold afternoon brew would be a small price to pay to get out of the house.
“Seventy-two percent of remote workers say buying coffee or tea away from home helps interrupt the day,” he said.
Coffee is notoriously volatile, and price spikes are nothing new.
“I’m old enough to remember that in the ’70s it was like petroleum and coffee,” said Ted Fischer, who does research on the coffee industry at Vanderbilt University. “And the American middle class felt it. Coffee prices have gotten so high.
Fischer expects even more volatility in the future. Climate change is making droughts like the one in Brazil more frequent.