Business

Caffeine hit

As the world emerges from the pandemic, coffee growing nations like Brazil are having to deal with the additional threat of climate change. Drought, frost and shipping delays have destabilised coffee growers around the world, impacting the whole supply chain. And Western Australians are inevitably going to see an increase in the price of a cup of coffee.

The roasting process. Video: Matthew Ellul.

What is the impact on supply?

NASA reported prolonged dry conditions in Brazil in June causing the worst drought in its central and southern regions in nearly a century. Then the country faced severe frost beginning in July causing concern throughout the coffee industry as the extent of damage could be devastating, impacting the global price of coffee.

The issue with drought and frost is their potential to destroy large amounts of coffee crop. Damage to a coffee plant has significant long-term effects. It takes three years for a plant to grow to the stage where it is commercially productive.

Brazil accounts for about 40 per cent of production worldwide according to the Australian Coffee Traders Association.

A sack of Brazilian Arabica beans. Photo: Matthew Ellul.

ACTA committee member Joe Taweel says these weather events are concerning.

“The lack of rain in Brazil is a big concern long term … If that continues, the distress that causes on the coffee tree potentially could affect supply,” Taweel says.

Head roaster at Perth’s Offshoot Coffee Rummy Keshet says initially people were freaking out over the potential impact of the frost in Brazil and the possible price increase.

“It doesn’t look like prices are going back to where they were so 100 per cent we are going to see a price increase,” he says.

The price of coffee rose slowly after dropping in 2020 during the COVID pandemic, before surging in July 2021 amid news of the Brazilian frosts.

Offshoot Coffee head roaster Rummy Keshet. Photo: Matthew Ellul.

ACTA described these events as the perfect storm as the industry struggles to deal with global coffee prices rising, disruption to the industry’s supply chain and increasing shipping costs.

Café Imports Australia reported shipping out of Brazil was delayed by two months in an August 31 blog post.

Venn owner Matt Kenworthy says his Victoria Park café has experienced some shipping delays.

“If someone says something’s going to be in July, it’s probably going to be here in September,” he says.

Venn owner Matt Kenworthy. Photo Matthew Ellul.

Dimattina Coffee has been operating since 1954 expanding into Western Australia with their Osbourne Park roastery. Accounts manager Jonathan Parkes says the industry is bracing for the impact of this year’s events in Brazil.

Dimattina Coffee’s Osbourne Park roastery. Photo: Matthew Ellul.

“We have already seen quite a big rise in the cost of green coffee at the moment but we are kind of expecting it to go up even further,” he says.

Global green coffee prices increased from $A2.14 per pound on July 19 to $A2.83 on July 26.

Taweel says many traders had already purchased their coffee for this year and early next year back in March and they are not yet feeling the impact of the price increase.

“That’s normal, a lot of people buy coffee for future delivery,” he says.

He says it is becoming time to begin buying coffee again for delivery for 2022, meaning roasters could potentially be caught out by the inflated price. Taweel says these costs will have to be absorbed along the supply chain.

“Some of that will be absorbed by the green been suppliers, whether that be at origin or in Australia. Some of that will be passed on and I expect the roasters will be doing the same,” Taweel says.

Offshoot Coffee’s green coffee waiting to be roasted. Photo: Matthew Ellul.

Kenworthy says Venn has so far absorbed the cost of the price increase but will eventually have to pass the cost on.

“When we moved from sourcing from a roaster to roasting our own, we were able to get a bit of a drop in price because we are cutting out someone else’s brand … If we hadn’t have done that we would have had to pass it on already. But right now, because of those savings we made, we’ve just been able to absorb,” Kenworthy says.

The cost to the consumer

Parkes says the price of a cup of coffee will have to increase as the cost of all aspects of running a business go up.

“Price of everything goes up eventually: milk, take away cups. We’re going to see packaging increase, especially in WA with the move towards non-plastic lined cups,” he says.

The McGowan Government announced a plan to phase out single use plastics earlier in the year. By 2023 legislation will be developed and implemented state wide.

Coffee cups will soon have to be made with plastic free materials. Photo: Matthew Ellul.

“The reality is that cafés are going to increase the cost of a cup of coffee, and that’s just going to get filtered down throughout the whole chain. It has to, there’s not really any other choice,” Parkes says.

Infographic: Matthew Ellul.

The average price of coffee in Australia was $3.99 for a flat white according to data collected by Square in 2019, although according to a 2017 Bankwest Curtin Economics Centre report the average cost of a coffee in Perth was $4.31.  

Keshet says customers would be upset if he raised coffee prices in the café.

“I raise the price by 20 cents in the coffee shop and I get slayed,” he says.

Kenworthy says he would rather maintain quality even if he has to increase prices.

“In time the price of a cup of coffee in a café is either going to have to go up or the quality is going to have to go down, and I would much rather put prices up and have a high quality,” he says.

Education

A 2020 study from Mccrindle found three out of every four Australians consumed one cup of coffee per day, 28 per cent have three or more cups per day and 27 per cent say they cannot survive the day without coffee.

Parkes believes a high-quality Netflix documentary would be the best way to educate the consumer as to why their coffee is going to become more expensive.

“This is going to sound really weird and really silly,” Parkes says with a smile.

“I think we need a coffee Seaspiracy and I think we need Morgan Freeman to narrate it, but jokes aside, a high-level documentary is the way to go. If you can expose the whole supply chain to a large group of people through a medium such as Netflix.”

Keshet agrees, wishing someone would make a documentary about the complexity of the industry.

“It could be a proper three season Netflix series … It touches all fields of life and so many industries,” he says.

Infographic: Matthew Ellul.

Kenworthy says Venn has a constant rotation of coffee in order to help educate and foster an interested coffee community.

“We’ve got six profiles that we categorise our coffee into. We are trying to educate customers that, hey, if you like a particular type of coffee, you might want something else within that colour and sticking towards that when we are speaking to people … to make it as accessible as possible,” Kenworthy says.

Venn have a labelling system to educate customers about their coffee. Photo: Matthew Ellul.

New avenues

When asked whether the coffee industry is heading towards a finacially unsustainable future Keshet says, for roasters and coffee shops yes, but for producers no.

“[Producers] have been waiting for prices to go up,” says Keshet.

Keshet says the coffee industry has been built on the foundation of colonialism and exploitation, and consuming countries made sure it stayed this way, but this is changing.

“It looks like it’s going to flip on us very soon,” he says.

Despite Brazil having the most pull on the market, there are many other countries producing coffee worldwide.

Parkes says the detriment to the Brazilian market will allow other coffee growing nations to fill the void.

“It does open up the doors for some of these countries,” he says.

“There will be an interesting sort of thing going on, I don’t think we will be hit as hard as we are expecting because people will find there coffee elsewhere, and in a way, it will drive the quality, the desire for quality in these other countries … All those places that people don’t really consider for coffee, people will now be looking at them.”

The top five coffee producing nations in 2020 according to Statista were: Brazil, Vietnam, Colombia, Indonesia and Ethiopia.

The top five coffee producing nations are Brazil, Vietnam, Colombia, Indonesia and Ethiopia. Image: Matthew Ellul.

Coffee quality

Keshet says the industry might eventually see a shift to the less popular Robusta beans as opposed to Arabica in order to fill the void of blend coffee used mostly in milk coffee. A blend roast is a mixture of beans from different countries as opposed to coffee coming from a single origin.

“Maybe Robusta will be more popular and maybe Robusta could replace all the really cheap blends,” says Keshet.

Coffee from Brazil is usually used in most blends on the market explaining the ACTA’s estimation nine out of ten coffees contain Brazilian beans.

A blend of Brazilian and Costa Rican Arabica. Photo: Matthew Ellul.

Environmental impact

Global temperatures have risen exponentially since the 1980s and 2020 was the second hottest year on record. Climate change is becoming an ever-present threat to the coffee industry, not just Brazil.

Colombia is a nation experiencing troubles much like Brazil, as climate change takes its toll and weather conditions become less favourable for growing coffee. A 2018 article published in The Conversation raised the concerns of coffee farmers in Colombia who see climate change as an existential threat. About 90 per cent of the 45 farmers questioned reported temperature changes, 74 per cent reported longer and harsher drought and 61 per cent said heavier rainfall had resulted in increased mountain erosion.

Former Starbucks executive chairman Howard Schultz says in a 2018 article for Time Magazine climate change is going to play a big role in the coffee industry and the future of coffee is not guaranteed.

So, what does this mean for the coffee industry’s future?

Senior research leader of plant resources at the Royal Botanical Gardens in Kew Dr Aaron Davis is exploring more resistant varieties of coffee. In an article published in April 2021 in The Conversation he says “Disease and pests are becoming more common and severe as temperatures rise.”

Research conducted by Davis has highlighted the potential of the coffee variety Coffea stenophylla which grows in much hotter conditions and lower elevations compared to Arabica.

Davis says the industry will eventually have to move in this direction as the effects of climate change take their toll on coffee growing nations.

“It’s going to be very slow, dozens of years of transition, but I think it is going to happen,” Keshet says on the change to new coffee variants.

“Maybe there is going to be some alternatives coming through … Maybe the caffeine substance is going to start popping up in different products,”

What does it mean for WA?

Despite the impacts to the supply chain there is not going to be a substantial impact on WA coffee drinkers in the near future, but it will do no harm for us to be aware of what is going on.

For WA, coffee is not going to disappear. You will still be able to grab a coffee from your favourite café or knock back a cup of instant before work. What coffee drinkers need to understand is it is going to become more expensive to consume coffee in a sustainable way.

Taweel says the consumption of coffee is still there but the specialty coffee industry has been hit as people shifted to drinking coffee from home during the COVID pandemic.

“These days you can get good coffee out of the supermarkets and everyone has the new coffee machines at home but the consumption is still there which is good for the coffee industry,” Taweel says.

As Keshet says: “Coffee will find a way. Coffee people will find a way.”

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