Can coffee be resilient against Covid-19?
“Coffee is an affordable luxury. We should look to the future with some optimism because coffee as an industry is resilient.” – Yannis Apostolopoulos, CEO, Specialty Coffee Association.
Coffee has been resilient through many economic recessions and natural disasters, but the Covid-19 pandemic is an utterly unchartered territory. Can coffee be resilient?
Apostolopoulos offered his comment during a webinar that was organised earlier this week by the World Coffee Producers Forum (WCPF). In the webinar, “Coffee After Covid-19, What’s Next,” panellists from different sectors of the coffee industry were asked to share their thoughts on the current situation with coffee and what coffee – from origin through the supply chain – will be like after Covid-19 (the random date of December 2021 was used).
Moderated by Juan Esteban Orduz, president of the Colombian Coffee Federation, panellists included:
- Yannis Apostolopoulos, CEO, Specialty Coffee Association (SCA)
- William Murray, CEO, National Coffee Association (NCA)
- Nicolas Tamari, chairman, Swiss Coffee Traders Association (SCTA)
- Fernando Serpa, vice president, Global Sourcing Latin America & Fresh Food, Walmart Inc
- Takao Ueshima, executive director, Specialty Coffee Association of Japan (SCAJ)
Overall, panellists were optimistic about the coffee industry “coming back” after the Covid-19 pandemic, as many noted that coffee tends to be a resilient sector. While out-of-home (OOH) consumption has dropped due to the closures of restaurants, coffeehouses, cafés (either due to government mandates or because switching to a take-out/delivery model was not sustainable), as well as colleges and universities switching to online learning, at-home consumption and retail purchases have increased.
However, Nicolas Tamari, chairman, SCTA, said that premiumisation has been negatively affected because of the decrease in OOH coffee purchases, noting, “they might be switching to cheaper coffee at home.”
The SCA recently released a new report, The Specialty Coffee Industry During Covid-19 that was conducted in conjunction with Square Inc, which outlines the current state of the specialty coffee industry, predominantly in the US. During the webinar, Apostolopoulos shared some of the findings. The report revealed “major channel differences such as a significant decrease in walk-in sales (by approximately 80%), a decline in the wholesale business, but an increase in online purchases.” He added that the report also found a 520% increase in sellers offering curb side pick-up, evidencing how sellers are changing the way they do business, as well as an uptick in coffee subscriptions and an increase in the amount of each order.
Bill Murray, CEO, NCA, shared that what coffee will look like after Covid-19 depends on where the company is in the coffee chain. “For example, grocery stores have never been busier, [with increases ranging between 20 and 40%]. However, 20% of restaurants/cafés in the US could go under,” noting that some NCA members said they lost almost 90% of their foodservice business within three to four weeks following the stay-at-home directives. He said that Green Coffee Association reported stocks (US warehouses) have not changed much in January, February, and March of this year versus last year, which “indicates consumption is still strong.”
Murray said it is difficult to say how coffee will do after Covid-19 because there are too many variables. “The question for coffee is, what are the adjustments consumers will be making, businesses will be making and people who [comprise] the businesses will be making?” He explained that in the last few weeks, on importing side [in the US], has been one of frantically moving coffee from one place to another — from where they expected it to be to where they did not expect it to be. “What kind of coffee people buy will depend on economic impact — how much coffee are they now drinking, are they unemployed (if so, they will not be buying OOH coffee), will the in-home experience change, etc. There are many things we don’t yet know about how the re-balancing will take place.”
Walmart Inc has annual coffee sales of USD $4-5 billion in the markets it operates in around the world. Fernando Serpa, vp, Global Sourcing Latin America & Fresh Food, Walmart, said that since the stay-at-home directives have been in place, “there has been a huge shift from brick ‘n mortar purchases to online channel purchases, which is both a threat to and opportunity for coffee.” He noted that coffee is one of the most popular online products (within the top 10 purchases online), but that it is also a threat because it is becoming more competitive as everyone is vying for the business.
According to Serpa, consumer purchasing behaviour has drastically changed. Most notably, consumers are buying more or larger sizes because they want to minimize the number of trips they make to a store and because they are not making OOH coffee purchases. He noted that rather than 24-ounce bags of coffee, they are buying 48-oz, while with K-cups, it is 48 or 96-count rather than 12 or 24-count. “We have also seen a spike in sales of coffee filters because they are being used to create masks, as well as an increase in sales of coffee machines.”
“We can’t predict the future, but we can try to shape it,” said Serpa, offering ideas such as increasing digitalisation, finding new consuming occasions (more time at home, less time on the road — opportunity for coffee), increasing physical and digital shelf space, and thinking about quality and value as “more people are going to think twice about spending $3-5 for a cup of coffee.”
Takao Ueshima, executive director, SCAJ, said that Japan’s lockdown began on 7 April and since then, there has been a 90% drop in OOH consumption. However, the increase in at-home consumption helped offset some of the decreases in coffee shops and micro roasters. “Sales of roasted ground coffee and whole beans in grocery stores, online, mail order/subscriptions grew 30-50%.”
He believes that after Covid-19, consumers’ living and working styles will change. “[I think] consumers will be extremely careful about where they choose to eat out and purchase coffee. They will want a better coffee shop, a better restaurant and a better bar — they will choose where they really want to go.” He emphasised that coffeehouses/micro roasters will need to focus on quality beans, good hospitality, and an over good experience, to entice customers back to their shops.
Perhaps, Tamari best summed up the Covid-19 situation by stressing that companies should not make any rash decisions because no one really knows what is going to happen. He encouraged everyone to use common sense when making business decisions. “Stick to the core values and vision of your organisation. Too many companies are making decisions out of a fear of the unknown.”
- Vanessa L. Facenda, editor Tea & Coffee Trade Journal. She may be contacted via [email protected]