The increase in the price of coffee
Coffee is a product whose price fluctuates over time, much like a company's value on the stock market. As with businesses, coffee prices are influenced by multiple factors, including consumer confidence in political, economic, and climate-related conditions. In this article, we will explore the main drivers behind the recent significant rise in coffee prices.
Two years ago to the day, coffee was trading at $1.65 per pound. Today, it has reached a new record high of $3.19. This marks an increase of over 93% in just two years. The surge is even more significant when considering that coffee prices are set in U.S. dollars, with the exchange rate becoming increasingly less favorable for Canada. For coffee producers, distributors, and retailers, adapting to such sharp increases has become extremely challenging, often leaving them with little choice but to pass on the higher costs to consumers. With coffee prices having nearly doubled in the past two years, this upward trend is expected to persist over the medium to long term.
Now, let’s explore the potential causes behind these price increases and the possible solutions moving forward.
Climate changes
It’s no secret that the planet is undergoing significant climate changes. Brazil, one of the world’s largest coffee exporters, has been particularly affected. The country has experienced severe, record-breaking droughts, leading to one outcome: a rare and costly premium coffee!
As the top coffee exporter struggles to produce a quality product, the supply of premium coffee has sharply declined. Combined with increasing demand, high-quality coffee producers are taking advantage of this situation to raise the price of their now scarce beans.
Instability within the U.S. government
Following the recent U.S. elections, a host of economic and political concerns are weighing on people’s minds. One thing is clear: Trump is already planning to impose a 25% tariff on imported goods. This tariff will create significant additional costs for coffee businesses, forcing them to raise their prices to absorb the 25% tax. Beyond the financial impact, this potential tax also fosters a growing sense of uncertainty and fear, which is fueling the rise in coffee prices on the stock market.
Worldwide conflicts
It’s no secret that global conflicts, such as the war between Ukraine and Russia, have a significant impact on the stock market, and, in turn, coffee prices. No one has a crystal ball to predict the outcome of these conflicts. This uncertainty is yet another factor fueling the increase in coffee prices on the stock market.
Solutions
Purchasing low-grade coffee
This solution is possible as long as consumers are willing to accept that the coffee will lose some of the exceptional flavor they've come to expect. Like wine or cheese, coffee’s quality has a direct impact on the taste in the cup. While this alternative could definitely reduce costs, it would ultimately lead to a product of inferior flavor.
Sticking with good-quality coffee
This is the solution Tatum has decided to go with. The company’s primary value is to deliver a high-quality product. The trade-off, of course, is that some price increases will inevitably be passed on over time, in the hope that coffee prices on the stock market will eventually fall. In the end, the price difference per cup is negligible for customers, but the difference in quality between this solution and the first one is vast. That’s why Tatum chooses to prioritize quality and customer satisfaction above all.
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