Global Coffee Prices
It really is a crazy time in the world of coffee production and supply. In my 20+ years in this game I have never seen such a burst in pricing over such a short period of time. Prices have gone up and they have gone down and the market normally rides it out over a year or two. This time it’s different. Prices have gone up, and then they have gone up even more and they don’t seem to be stopping.
Since we started the AIRJO brand back in 2018, prices for green coffee have almost tripled. We have put our prices up two times through that period but this next one is the biggest. Last year green coffee prices went up 70% and so far this year another 20%.
There’s only so much we can do in terms of improving efficiency and reducing other costs before we need to up the prices on the front end. The reality is, the coffee game has changed and there’s little sign it will come back. The new challenge for both us and the consumer is to make this new playing field work for us all.
There was a great podcast on Reuters last month summarising what’s going on and why. You can read the full transcript HERE.
Below is a summary of the points from that interview.
Why have prices gone up so much in the last 12 months?
-
Brazil and Vietnam combined, account for over 50% of the world's green coffee supply. Over the last 3 years, both countries have had hotter and dryer weather than normal which has significantly decreased coffee production. This drop in production has led to higher demand for all other producers to compensate for the loss.
-
Normally, there are global stocks of green coffee stored around the world that get used and replenished through the year. Over the last 3 or so years, global demand has been greater than global supply and these stocks of coffee have been used but not replenished. This has never happened before and the unknown aspect of what that means long term has caused chaos in the markets.
-
Whilst the global supply has decreased, there has been a further increase in global demand. Particularly in countries like China as younger generations move from more traditional beverages like Tea, to new 3rd wave coffee products. Demand for coffee in China alone continues to increase by 10 to 20% a year. Global demand has outstripped supply to the tune of half a million tonnes over the last 12 months.
So what does this all mean for AIRJO and its products?
-
We will be keeping our current origins and specialty grade beans and not look to save money at the expense of quality.
-
We are working on new pricing models and offers that we believe will be the best way forward.
-
There will be incentives to buy multiple packs to take advantage of shipping costs.
-
There will be incentives for subscribers which gives the consumer more certainty with pricing and gives us better forecasting info to buy well.
-
We will work hard to maximise the value you get from your spend.
-
Most importantly we will maintain our Fast & Fresh focus ensuring we are market leaders in getting you the freshest coffee to your door as fast as possible.
It is a crazy time indeed in this wonderful world of coffee. We are up for the adventure ahead and hope you are too.
Sincerely
Dan