Yesterday I posted the below blog post to Coffee Bar’s blog. I hope it may help shed some light on how to handle the ever increasing green coffee market for cafe and coffeehouse owners out there. As always, your feedback is welcome.
What to say about coffee prices? Well, long story short: prices are going up. The “C” market on the NYSE has nearly doubled in the past year. Coffee is at a 14-year high, and most roasters have increased their wholesale prices 2 or 3 times during that period, between 15 and 30 percent (or more). What the hell is going on, you ask? Under normal circumstances, there are a few supply and demand issues which contribute to a rise in prices.
– Unstable weather conditions have produced smaller, disappointing harvests in countries in Central and South America and Indonesia.
– Rising global demand due to increased coffee consumption in emerging markets such as China, India, and Brazil.
– Real estate and political pressures forcing countries to abandon their coffee crops for more profitable, shorter-cycle crops.
Now, that all makes sense, more or less. Unfortunately, investment bubbles have moved from the stock market to real estate, to the commodities markets. The influx of new investor speculation has turned what would normally be a moderate increase into a much larger one. It used to be that the majority of green coffee traded in the Coffee Commodities Exchange was made by coffee companies; but with the new investor interest in commodities, it’s now estimated that 70 percent of the transactions are made by speculators. Commodities are the new stock market and all this new money has created volatility.
There is some consolation for those of us affected by higher prices. After years of rock bottom prices, coffee farmers are now able to yield greater benefits from their years of hard work. Additionally, the average quality of coffee served in San Francisco has risen dramatically over the past few years, which, for the consumer, is absolutely fantastic.
Now, there’s still plenty of crappy coffee out there, but never before have we been able to reliably locate within each neighborhood a “go to” coffee source for responsibly sourced and prepared, high quality, specialty coffee, as we can now. And a top notch cup of coffee is still a relatively inexpensive luxury that we can all afford at a café or at home.
At Coffee Bar, we’re committed to serving you coffee of the highest quality, and that means a certain level of commitment on our part. It means that we brew your coffee strong and within SCAA recommended levels (8 oz of coffee per 1 gallon of water). It means that any drip coffee that we serve has been brewed within the last hour or we throw it away. It means that if we make you an espresso drink and we’re not happy with the finished product, we start over and make you a new one. It means that, in order to have well-trained baristas, we’re committed to letting them practice making drinks during downtimes or training sessions. It also means using high quality and responsibly-sourced products to pair with your coffee like milk from Clover Stornetta and pastries from Patisserie Philippe and Tell Tale Preserve Co.
After it’s all said and done? We’ll be raising prices on drip coffee (all sizes), Americanos (all sizes), 16 oz lattes, and 16 oz mochas, all by a quarter. Everything else will remain the same. We tried to limit our increase to those products whose prices needed to be adjusted the most, based on their costs.
Because of these economic realities, and many others related to all food costs, we are also currently reviewing pricing on our entire food menu. No final decisions have been made at this time, but as a small business, it’s important for us to understand how current events shape our organization’s health.
We truly appreciate your understanding and patience through all of this, and we’re happy to field any questions you may have. Above all else, thank you for your continued patronage; we’re nothing without our amazing customers!
Bay Area Coffee Drinkers Feeling Squeeze (SF Chronicle)
High Coffee Prices May Not Be Enough To Increase Production (Wall Street Journal)