Does it seem like coffee companies are gouging customers and taking advantage of our undying need for delicious coffee and our caffeine fix? Are these price increases really justified?
I get it, I really do. I too, feel the wallet being squeezed tight by so many price increases on a variety of products. We get it from all angles and we can’t help but to question the reasons.
Let’s break it down and consider the following:
- How much we’re actually paying.
- Coffee today vs. coffee in the past.
- Today’s business world.
- Environmental impacts.
- How our culture has changed.
- Is coffee expensive?
Have you ever thought about how much you pay per ounce for other specialty grade beverages like wine, bottled water and beer? We’re not talking the cheap stuff like Budweiser, Gallo, or Winco water; we’re talking about the good stuff; a Napa wine, a micro-brew beer and a Fiji Water, compared high quality specialty grade coffee.
* One pound of coffee weighs 16 ounces, and brews approximately 270 fluid ounces (45, 6 oz. cups.) A 6 oz. serving is considered to be one serving of coffee. However, since most people drink 12 oz. mugs, let’s say there are 22 servings per pound. This calculation evens the playing field a little more. Except when considering fine wine.
Keep in mind that most coffee comes in 12 oz. bags as the new standard. The mark up on smaller bags is higher. The smaller the package, the higher the price per ounce or gram. When cost comparing, it’s best to calculate how much things cost per ounce, gram, item, serving, etc. When something looks less expensive, check to see how much is in the package! We seem to be easily tricked by clever marketing. This is one of the reasons that Bean Hoppersoffers full pounds of coffee, like the good ‘ol days. The cost per ounce is similar to other coffee subscription services, and it may even get one person through the whole month.
As you can see, specialty coffee is not expensive, even with the increased prices over the past decade. But let’s look at why coffee prices increased.
- That coffee is NOT this coffee
Coffee has changed a lot. It’s not your mothers’ coffee anymore. The coffee of yesteryear was sludge in a cup, produced solely to help you get enough caffeine to not drown in the shower. And yes, compared to the mass produced commercial coffee, specialty does seem expensive, but it’s more about the fact of that coffee just being really cheap. That coffee, is NOT this coffee. That coffee is mass produced, low quality (low grown Robusta beans) it’s easier to grow, purchased from farmers who are not paid enough for their crops, and not graded for its quality. See, it’s more efficient, and cheaper to make a lot of something that is mediocre than it is to make even a little of something that’s fantastic and high quality.
But you, my coffee loving friends, want the good stuff, the really good stuff.
You want to taste the coffee’s origin, the nuances of the soil, the break-down of the sugars carmelized in your cup, and the brightness of the fruit, so you’ll pay more for it. And why wouldn’t you?
This coffee, Arabica Coffee, is grown at higher elevations, hand-picked, hand sorted for specialty grading, lovingly raked by humans on farms while it’s drying in the sun, and purchased from farmers who are paid a higher wage. Then, its hand roasted in small batches and shipped to your door by awesome companies that take the time to ethically source the beans and check them for quality for you every step of the way. Even after the coffee has been carefully roasted to bring out the best, it’s taste tested before being sent to you. So, yeah, this coffee, is certainly not that coffee. And we feel pretty good about it.
One of the best ways to get this quality coffee shipped to you is through coffee subscription services. They are growing hugely popular because they are all about curating the best of the best to get you what you really want.
- Rising business costs
A lot goes into getting your coffee to your doorstep. From increasing labor costs, high costs of permits to marketing, shipping and equipment. Everybody wants their cut.
Then there’s costs for staff to design, order and affix the labels, the cost of the label, the bag, the box the coffee goes in, and the packing materials… it all goes into the price of the product. It’s more expensive to run a business in this day and age, and you can see these costs reflected in not only coffee, but all products you purchase. The smaller the business, the more the costs will impact the bottom line because percentage wise it’s a higher percent of their overall profits. But they’re the ones who pay attention to all the little details to be sure you’re getting the best products. They roast in smaller batches and personally curate, and quality test for you with lots of love, because these people tend to be very passionate about their product.
Don’t you get excited when you see FREE Shipping? Yeah, everybody does! I mean the best things in life are free, right? Well, this is another one of those “check the price per oz. / item topics”. The cost of shipping goes up every year. It can cost anywhere from $7 - $10 to ship a single pound of coffee across the US via postal service. People expect free shipping, and they’ll go elsewhere if they don’t get it. But you may be surprised to learn that the profit margins for coffee beans are surprisingly low. Companies simply can’t cover all of the costs of shipping, or they would quickly go out of business. In turn, they are forced to include some of the additional costs into the price of the product, pushing product prices higher.
Coffee is a volatile industry as the plants are delicate and vulnerable.
Arabica accounts for about two thirds of global coffee production but is limited to subtropical highlands in Brazil, Central America, and East Africa. Brazil grows about 1/3 of the worlds’ coffee beans. The low-grade Robusta bean is more heat-resistant, though less tolerant of major swings in temperature and precipitation. And both species suffer from pests like the coffee berry borer, which causes over $500 million in annual damages and is spreading in a warming world.
Extremes in 2014 point to a concerning future. Drought hit Brazil and Vietnam — the world’s top two coffee producers — slashing yields. One Brazilian region saw just 10 percent of its typical wet season rainfall. Meanwhile, high heat and heavy rainfall intensified an outbreak of leaf rust fungus in Central America, leading to $250 million in production losses. The result: a near-doubling of Arabica bean prices in early 2014.
According to a Bloomberg report in 2017, coffee prices increased because of another drought in certain regions of Brazil, and too much rain in Vietnam and a smaller harvest in Indonesia. These factors contribute to a decreased amount of the Robusta bean. Retail prices were increased again by the end of 2017 at most large companies like Starbucks, Dunkin Donuts, etc.
5. Culture -How coffee went from commodity to luxury through the first wave, second wave, and third (awesome) wave.
Coffee was not interesting
The majority of us “older folks” used to drink Folgers from a can, you know, the dark sludge that your spoon could stand up in. That was the coffee of yester-year. Those were Robusta beans, and they were dirt cheap. It was more about the caffeine than it was something to be enjoyed. There was a lot of unknown issues surrounding the coffee industry. The coffee farmers were like slaves in poverty. We didn’t know where this product came from and back then we didn’t think a lot about it. They call this coffee era “First Wave” coffee.
Coffee got noticed
During the “Second Wave”, Starbucks came into being, and people started opening their eyes to the fact that coffee might actually taste good and we were intrigued. Very intrigued! More people tried espresso and experimented with new methods for making coffee at home, such as the French press. By the mid 90’s Starbucks was king, putting cool espresso drinks in our hands and educating us about what coffee could be. They started giving us fancy coffee based milk shakes and sweet coffee drinks that had a little coffee and a lot of milk. We can credit them with raising the profile of coffee, and getting people to pay attention to coffee quality. This ushered us into our current state, the “Third Wave”.
Coffee grew up
In the 2000s and beyond, artisanal coffee shops sprouted up across the country. As the “Third Wave” (aka – Awesome Wave) continues to develop, people have been learning more about coffee, its origins, who picked it, how it’s roasted and how to taste it… things are getting real my friend. This wave stresses quality and ethical sourcing. We care if farmers are making a decent wage, so we agree to pay more for the coffee. Aficionados these days go to coffee shops for "cuppings," which involve tasting coffee varietals from across the globe to identify flavor notes, textures, and more. The new wave of coffee companies are educating the public on the intricacies of fine coffee.
You might still make Folgers in a standard coffee maker, but more Americans are starting to learn about the complexities of specialty coffee beans and it’s popularity continues to grow. If you want to learn more about coffee, how to brew it properly and taste test it for quality, join Bean Hoppers. Our mission is to teach coffee lovers how to become connoisseurs and hone in their coffee tasting skill with easy guides. Sign up today!
Until we meet again, cheers to specialty beverages!
Milinda Lane – The Coffee Bean Queen
Climate Central report - January 16, 2019 – Here’s how Climate Change Hurts Coffee
Chow Hound – July 13, 2017 - By Erin Meister article
ATTN Stories – January 12, 2017 - By Thor Benson
HuffPost - January 18, 2017 – by Carley Ledbetter