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Insight of the Day: Coffee is becoming a luxury, and there’s no escaping it

Findings:

  • Coffee prices are surging, reaching a 13-year high.

  • This surge is driven by factors like climate change, adverse weather events, and increased demand for Robusta coffee.

  • Major coffee producers, like Brazil and Vietnam, have experienced crop losses due to frost and droughts.

  • Coffee retailers like Lavazza have already increased prices, and further increases are anticipated.

Key Takeaway:

The global coffee supply is facing significant challenges, leading to higher prices that are likely to persist and impact consumers.

Trend:

The trend is towards increasing coffee prices due to supply constraints and rising demand, particularly for Robusta coffee.

Consumer Motivation:

Coffee consumption is driven by habit and a strong preference for the beverage, with consumers unlikely to change their consumption patterns significantly despite price increases.

Driving Trend:

  • Climate change is causing more severe weather events and impacting coffee production.

  • Adverse weather events like frost and droughts are leading to crop losses.

  • Increased demand for Robusta coffee due to higher Arabica prices is putting pressure on the overall market.

People Referred to in the Article:

  • Tomas Edelmann, coffee farmer and vice president of the Coffee Farmer's Co-op

  • Ryan Delany, founder and chief analyst at Coffee Trading Academy

  • Michael Hoffmann, professor emeritus at Cornell University

  • Neil Rosser, commodity consultant specializing in coffee at Bison Luxley Commodities

  • Giuseppe Lavazza, president of Lavazza

  • Sharon Zackfia, head of consumer equity research and restaurants analyst at William Blair

Description of Consumers, Products, or Services:

The article primarily discusses the impact of rising coffee prices on consumers and the coffee industry. It also mentions specific coffee retailers like Lavazza, Nestle, and Starbucks.

Conclusions:

  • Coffee prices are expected to remain high due to ongoing supply challenges and climate change.

  • Consumers are likely to face higher prices for their coffee, but demand is expected to remain strong.

  • The coffee industry needs to adapt to these challenges by investing in sustainable farming practices and exploring alternative sourcing options.

Implications for Brands:

  • Coffee brands may need to adjust their pricing strategies to reflect the increased costs.

  • They should focus on communicating the value of their products and the impact of climate change on coffee production.

  • They should explore ways to support sustainable coffee farming practices and ensure a stable supply chain.

Implications for Society:

  • Higher coffee prices could impact consumer spending and affordability, particularly for low-income individuals.

  • The coffee industry needs to prioritize sustainability and climate resilience to ensure a stable supply of coffee in the future.

Big Trend Implied:

The big trend implied is the increasing impact of climate change on global food production and supply chains. This trend highlights the need for sustainable and resilient agricultural practices to ensure food security and mitigate the effects of climate change on food prices and availability.

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