The increase is higher than gold! After a year of rising coffee bean prices, who isn’t calm down?

Wen| Hongcan. com

How many practitioners are affected by the rise in coffee bean prices?

“The increase is higher than gold.

In the past year, gold prices have been soaring all the way, constantly refreshing consumers ‘perceptions. However, in the catering market, the price of an important raw material has also continued to rise, even exceeding gold, greatly affecting the entire industrial chain and attracting industry attention.

Wind data shows that in 2024, the cumulative increase of US ICE coffee futures during the year is about 70%. Spot gold in the London market will increase by approximately 27.22% for the whole year of 2024.

After a year of continuous growth, the price of coffee bean futures is still at a high level. At the same time, coffee beans in many important producing areas such as Brazil and Vietnam have been reduced due to the influence of the weather. Many industry insiders predict that coffee bean prices will still rise in the future, and this will inevitably affect the development of other relevant parties in the entire industrial chain.

Production has been reduced in major producing areas and consumer demand has increased, and coffee bean prices have been soaring.

How hard have coffee bean futures prices risen?

Relevant data shows that as of February 11, the Arabica coffee futures price on the Intercontinental Exchange (ICE) in New York has exceeded 430 cents per pound, setting a record high in 47 years. The increase in the past year has reached 118.57%. The increase is so big that it is surprising.

The rise in international futures prices has also affected the price of domestic coffee beans.

Yunnan is the largest producing area of coffee beans in my country. In the past year, coffee beans from this producing area have also become scarce, and prices have risen.

According to news released by Yunnan on the official WeChat account of the Propaganda Department of the Yunnan Province Committee, in 2024, the price of coffee beans in Yunnan exceeded international futures prices for the first time. You know, in the past, the supply of coffee beans was highly dependent on overseas countries, and international futures had the power to price. The quotations of Yunnan coffee beans were often lower than the international futures prices.

Since the beginning of this year, the price of coffee beans produced in Yunnan has been rising.

In early February, Li Xiaobo, president of the Yunnan Province Coffee Industry Association, told China Business News that the price of first-class raw beans from Yunnan origin fluctuated around 52 yuan/kg, compared with around 32 yuan/kg in the same period in 2024. Roughly calculated, the increase has exceeded 62%. Why is this round of coffee bean price hikes so fierce?

The sharp drop in supply is the main reason.

Coffee beans are the seeds of coffee trees, and coffee trees are mainly distributed in tropical and subtropical regions. They have high requirements on rainfall and light. The yield and quality of coffee beans are also highly affected by climate.

In the past year, many important coffee bean producing areas have experienced extreme weather. For example, Brazil, as an important producer of Arabica coffee, suffered a drought from July to September last year, which blocked the growth of local coffee trees. In October, it suffered heavy rains, further affecting fruit development and picking.

The U.S. Department of Agriculture’s Foreign Agricultural Service (FAS) predicts that Brazilian coffee stocks will fall by 6.6% at the end of 2024/25, from 22.347 million bags in 2023/24 to 20.867 million bags, the lowest level in 25 years.

As an important supplier of Robusta coffee beans, Vietnam has suffered from droughts and typhoons for three consecutive years, and its output is also not optimistic.

The Ministry of Agriculture and Rural Development of Vietnam predicts that in the 2023/24 harvest year, Vietnam’s coffee production may fall by 20% to 1.47 million tons, setting a new low in nearly four years. Exports of coffee beans have also decreased accordingly. A report from the National Bureau of Statistics of Vietnam stated that in 2024, Vietnam’s coffee exports will fall by 17.1% year-on-year to 1.35 million tons.

If production cuts occur in the main producing areas, the global supply of coffee beans will naturally be greatly affected. Moreover, unlike other agricultural products, coffee beans have a long growth cycle, taking 3-5 years from planting to fruiting. Even if the climate and environment improve, it will be difficult to restore normal supply of coffee beans in the short term.

International coffee trader Volcafe predicts that from 2025 to the end of 2026, global coffee bean production is expected to experience a shortage of 8.5 million bags.

While supply is decreasing, global coffee consumption enthusiasm is rising, especially in the coffee markets in countries such as China and Indonesia, which are releasing new vitality. This also promotes the price increase of coffee beans to a certain extent.

In December 2023, the research institute World Coffee Portal released a report showing that China has surpassed the United States to become the world’s largest branded coffee shop market, with nearly 50,000 branded cafes.

In the past year or so, companies from various other industries have been rushing to the coffee track, adding a boost to the China coffee market. Correspondingly, the demand for coffee beans is also increasing.

Supply is decreasing, but consumer demand is rising, which has led to an imbalance between supply and demand of coffee beans. It is not uncommon for the value of coffee beans to rise.

Price increases are inevitable, and small and medium-sized bakers face a survival test”

Today, the upward pressure on the cost of coffee beans has affected the development of the entire coffee industry. A number of companies have also taken actions to meet this round of challenges.

For example, Zhejiang Shangxia Coffee Roasting Company, which is mainly engaged in raw bean roasting, issued a notice letter on price adjustment of coffee products to customers as early as before the Spring Festival.

The company pointed out in the notice letter that the price of coffee raw materials alone has increased by more than 150% in the past year, causing an impact that has made it difficult for the company to bear. Taking into account operating profit, the company raised the price of cooked coffee beans, starting with an increase of 10 yuan per pound for its blended beans on an existing basis.

According to Chaochao. com, the owner of a coffee shop in Haining said that since last year, the bean supplier he has been working with for a long time has begun to raise prices. Recently, the cost of purchasing beans in my own stores has increased by more than 20%, and we have no choice but to adjust the prices of some products, but after the price adjustment, it still cannot cover the soaring cost increase. Although another local coffee shop did not raise its price, the merchant also said that as the coffee bean market continues to rise, a price increase is almost inevitable.

In addition, individual retail coffee giants failed to withstand this wave of price increases.

According to Snaoshi, at the Nestlé Group’s 2024 results conference, Nestlé ‘s global executives revealed that due to rising cocoa and coffee prices, the company took price increases on related products in the third and fourth quarters.

However, overall, some small and medium-sized coffee shops and small and medium-sized roasters have been mainly affected by this round of price hikes.

Small and medium-sized coffee shops and independent coffee shops do not have a large purchase volume, and for upstream suppliers, their bargaining power is relatively limited. As the price of coffee beans skyrocket, the cost of its own raw materials will also increase.

However, small roasters are small in scale, have limited sales channels and customer bases, and are also greatly affected by the price increase of coffee beans. As Ding Zhi, founder of Yiding Coffee, said: Most small roasters do small-scale coffee bean roasting with their feelings and hobbies to maintain their lives. The price rise of coffee beans will have a greater impact on them, and they can only follow suit.

△ Picture source: Screenshot of Xiaohongshu

It is worth mentioning that this round of coffee bean price hikes has also spread to the consumer terminal market. The catering supply chain guide notes that due to the uncertainty of coffee bean prices, consumers ‘enthusiasm for hoarding beans has increased significantly. On the Xiaohongshu platform, many netizens posted that the market for coffee beans is rising, reminding other coffee lovers to hoard beans in advance to save the cost of purchasing beans.

It can be said that the pressure of rising prices of upstream coffee bean raw materials has been transmitted to related enterprises in the middle reaches and downstream, and has driven the prices of other related products to rise all the way.

Coffee farmers are making money while large chains are still calm”

However, in this wave of price increases, some people are still very calm.

For example, the coffee farmers in Yunnan. Many coffee farmers have benefited from this round of price increases, and their income has been greatly improved, even doubling several times.

“A report on the Jasblu coffee public account also mentioned that a coffee farmer in Pu ‘er, Yunnan, said that in previous years, he could only earn 3000 yuan per mu, but this year it could reach 5000 yuan.

There are also some large coffee chain brands that purchase large volumes and have high bargaining power. Moreover, these large brands often sign purchase agreements several years in advance and hoard goods, so they will not face severe upward costs in the short term. Pressure, and there is no need to raise prices to respond to market conditions.

△ Picture source: Photo by Hongcan.com

Take auspicious luck as an example. In November last year, the brand signed a purchase order for coffee beans worth 10 billion yuan with Brazil, and plans to purchase 240,000 tons of coffee beans from 2025 to 2029. Puyin International Securities also stated in its research report that it is expected that Lucky will basically lock in the medium and long-term purchase price of coffee beans through this order contract, and will be less affected by fluctuations in commodity prices.

Even, Lucky started a business in B-end coffee beans.

Not long ago, Ruixing Coffee announced the launch of professional coffee bean products for the B-end market. Fino, which specializes in coconnet-based plant drinks, announced that it has become a special distributor of Ruixing to B professional coffee beans and will promote various Ruixing coffee bean products. It is not difficult to see that Ruixing’s stock of coffee beans is quite sufficient and it is not worried about the stock of coffee beans.

In addition, some brands have extended their business to upstream coffee beans, thus avoiding this round of price shocks.

For example, Yi Ding Coffee, the brand has established a coffee estate in Baoshan, Yunnan. Founder Ding Zhi said bluntly from the catering supply chain guide that the price increase of coffee beans has no impact on them.

In addition, chain coffee brands such as Kudi Coffee and Tims Tianhao Coffee have previously stated that they have not been affected by the rise in coffee bean prices for the time being.

Some people have been greatly affected by this round of price hikes for coffee beans, while others have escaped the price shock. Next, if there will be any new changes in coffee bean prices, the catering supply chain guide will continue to pay attention.