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Challenges for Specialty Coffee in 2025
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This past year of 2024, the Specialty Coffee industry has faced a storm of challenges that have left businesses of all sizes grappling for stability. As coffee prices surged to historically high levels, the delicate balance of supply and demand was thrown into disarray, creating what many industry insiders are calling a “challenging operating environment.”
Weather and Coffee
The reasons behind this spike in pricing are multifaceted. For starters, climate change has emerged as a significant disruptor. Coffee crops are particularly sensitive to temperature fluctuations and extreme weather events. Many coffee-growing regions have reported erratic weather patterns, including droughts and excessive rainfall, which have heavily impacted yield and quality. Growers in Brazil, Vietnam, and Colombia, who make up around 70% of production, have faced extremes linked to the El Niño climate pattern, which had significant impacts on the first half of 2024. read more
Changes in Regulations
As farmers struggle to cope with these unpredictable weather conditions, the supply of high-quality beans has diminished, pushing prices even higher. Compounding this issue are new regulations that have emerged globally, such as the European Union Deforestation Regulation (EUDR). These regulations, aimed at promoting sustainability and combatting deforestation, while commendable, have added layers of complexity for coffee businesses. Compliance requires careful tracking and documentation, which translates to increased operational costs. But the EUDR has been delayed by every possible legal tactic, including the argument of how to define the word "forest." read more
Demand Outpacing Supply
For small roasters and coffee shops, the burden of higher costs can be particularly heavy, and many are now forced to pass these challenges on to consumers. This comes at a time when coffee consumption outside the home has reached its highest level since January 2020, according to the latest edition of the United States National Coffee Association‘s biannual consumer trends report. 36% of people who said they drank coffee within the past day did so “out of home” (i.e., in a coffee shop, cafe, office, etc.), so the pressure is firmly on the shoulders of small businesses to figure out the best course to survival.
Big Coffee Keeps Getting Bigger
Companies that were once small businesses have grown to where their expansion is now fueled by acquisition. For example, JDE Peet's acquired Caribou Coffee in a 260-million-dollar transaction. From humble beginnings, Peet's now claims to serve 4,100 cups of coffee (or tea) per second. The National Coffee Association reported that coffee consumption has topped 2 billion dollars per day in the US alone.
No One Is Winning
Unlike other industrial changes, there is neither a winner or 'bad guy' in this current coffee scenario. Yes, prices are higher, but the farmers aren't winning because they have less crops to sell so their income isn't rising. Coffee traders are getting caught in volatile markets, so their contracts are often turning into losses when prices exceed negotiated purchase rates. Small roasters and coffee shops are the final frontier to the consumers who can't understand why the prices they have been paying are ever increasing.
Thanksgiving Coffee is positioned to Withstand the waves
Because of our long term relationships with our innovative farmer cooperatives and producer partners, Thanksgiving Coffee Company is built to withstand many of the challenges brought on by changing market forces. We are as secure as we can be with our sourcing. However, weather impacts on harvest, transportation costs, and political impacts will continue to have influence over our prices. We have always paid our partners a premium for their best beans and that is why you keep coming back to us for the best cup possible. We will continue to do our best to get you the best beans - sourced ethically and artisan roasted - for your cup.
Additional Reading:
Roast Magazine: What is the Price of Coffee?
Reuters: Coffee Prices Surge