By the time this publishes, we’ll know if the double top forming in coffee futures held to keep prices at bay for awhile or if we march to new All Time High coffee prices into the Holiday season.
Regardless of near term direction, the coffee market has been of interest lately with rising futures prices and a glitzy press release about the new Work From Home CEO at Starbucks — known as Mr. Fixit in the restaurant industry.
His aim is to bring back the hipster era of coffee houses after a slow decline to a commoditized, transactional, online experience in brick and mortar shops today.
Will it work? Tough to say. It’s less tough to say that the price for a cup of coffee is unlikely to go down anytime soon so an appealing atmosphere to drink it is the least they can do.
The Future of Coffee
Visual Capitalist put out a great chart on the current supply chain dynamics for a single cup of coffee.
A few things stand out to me:
Coffee is an immensely interconnected supply chain
The retail location overhead is the biggest cost by far
Growing and buying up coffee beans is currently the lowest cost item in the chain
Geopolitics expert Peter Zeihan thinks this will all change soon.
Zeihan’s central premise for the future is accelerating de-globalization trends towards more nationalistic and regional supply chains. Combined with a decreasing working-age population and adjusting climate zones, coffee will be an early victim.
Don’t worry. Coffee won’t disappear. Zeihan always speaks in terms of years and decades, not days or months but if his trends continue; they translate to a world of a single strain of coffee bean grown in bulk, like corn or wheat, to make it cost effective.
The cost of production will become a major roadblock for getting that exotic, high-end coffee bean from your local barista in the coming years.
If we look back at the different stages
Climate change will affect who and where growers can produce coffee (Stage 1)
New de-globalization costs like tariffs and shipping upcharges will hit (Stage 2)
Roasting and processing the beans will require workers and factories closer to home (Stage 3)
Shortages in raw materials and commodities for anyone who can’t grow it themselves (Stage 4)
High labor costs and real estate shifts will impact the profitability of physical locations (Stage 5)
A more detailed breakdown here-
So enjoy the high-end stuff while you can because instant ground Maxwell House/Chock Full O’Nuts/and Costco brand may be in your future soon more than you think.
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Thoughts? Questions? Comments?
Reach out! Maybe I’ll do a full post on the topic or as a Q&A
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