Why Coffee Prices are Surging
Are we crazy for starting a coffee company amidst an extremely challenging and volatile market? Absolutely.
Things are expensive right now, and coffee is no exception. Coffee prices have slingshotted since the beginning of the year, driven by a number of factors including climate change, global supply chain issues, and tariff shocks. Let's take a look at what's happening, what it means for you, and what we're doing to weather the storm. Because life's already throwing a lot your way – you shouldn’t settle for average coffee.
WHY COFFEE COSTS MORE RIGHT NOW
You may have seen the headlines - green coffee prices increased over 30% several times this year, and at the time of this entry, is tracking at 25% over the market price in January. This volatility has a trickledown effect on everyone. Let's break down two of the main contributors. First, how climate change squeezed supply. Next, how tariffs pushed prices even higher.
CLIMATE CHANGE SQUEEZES SUPPLY
The conditions that coffee thrives in are rapidly changing. Two of the world's major coffee producers - Brazil and Vietnam - have both faced unprecedented drought in recent years, while heavy rains and crop disease have been the culprit in other regions. These swings have resulted in lower yield, creating increased risk for farmers, who are working tirelessly to manage a consistent, forward supply.
The value chain for coffee touches numerous parties along its journey to your mug. As supply tightens, these intermediaries are forced to make pivots in order to meet their business goals, further exacerbating the problem. Increased business risk affects labour, transportation, and crop protection. While it might not have been quickly spotted, rising costs have slowly raised coffee prices in the background over the past 4-5 years.
Then, politics hit with a sharper shock.
TARIFFS "ON" (...AND THEN "OFF")
In April, the Trump administration imposed sweeping tariffs on imports from almost every country. The baseline tariff rate was 10%, but some countries faced extra duties. Brazil, a major coffee supplier, was one of them. Market prices immediately adjusted to this news. By September, coffee prices in the US were reportedly 40% higher. Multiple reports identified tariffs to be a material contributor to this increase.
Public pressure grew fast. As grocery costs continued to rise, frustration climbed. By November, the US removed tariffs on food imports, including coffee. Reports cited election concerns and voter frustration as reasons behind the reversal. With tariff relief, global coffee prices eased again.
ARE THE PRICES HERE TO STAY?
Even with tariff reversals, unpredictable climate conditions remain at play. Wholesale price increases and supply chain pivots tend to have a lagging effect when responding to the market; even as coffee futures start to relax. More often than not, increases to commodity prices remain at the new level in the long-run. And coffee is most certainly, a commodity. Consumers grow accustomed to paying $1 more for their daily coffee, and this becomes the new standard.
WHAT WE'RE DOING ABOUT IT
While we wish we owned a weather machine or could flex on global trade policies, that's far beyond our capability. But that doesn't mean we're sitting idle, either. We're up for the challenge of building Stim Coffee amidst the chaos, and believe the work we're doing today will serve us well for the journey ahead.
The concept of shrinkflation is cringe. We see it happening in the market, and we battle with it. What you paid for coffee yesterday shouldn't get you less coffee today. Not only that, it's the often 'silent introduction' of this tactic that really irks us. Fortunately, our "Over the Counter" coffees were designed to be available year-round. We've worked tirelessly with our suppliers and roasting team to ensure we can continue sourcing premium, arabica beans to deliver the coffee you expect in every bag.
We've also built strategic inroads with logistics partners to ensure we can maintain our commitment to put fresh coffee into your hands, and selected distribution partners that share the same philosophy as us.
The work is far from done, but we'll continue to fight the good fight on the things we can control.
Thank you to all of our "Stim Users" for your ongoing support, and for the opportunity to stimulate your life!
