News, Culture & Society

COVID-19 in Coffee Sector

The Covid-19 pandemic is likely to have a strong impact on many industries around the world, including the global coffee sector. Despite the steady overall growth in the coffee sector, coffee prices have decreased since 2016, dropping 30% below the average of the last ten years. There are more than 25 million farmers worldwide who are struggling to cover their operating costs as input prices continue to rise. One of the problems for this is the lack of investment in the modernization of the farms, but also the low ability to adapt to climate change.

Effects

One of the side-effects of the Coronavirus is that home coffee consumption is decreasing significantly, as well as the consumption in offices, restaurants, and coffee shops. The current lockdown happening in many countries has accelerated the trends towards online shopping. However, the data gathered from retail and supermarkets shows, in some countries, an increase in customer demand due to panic buying.

Further, the side-effects might be more serious than expected in the weeks/months to come. Due to the reduced household income, the demand for coffee might decrease. Also, price-sensitive customers might substitute higher-value coffee with lower-value brands.

Looking at the coffee-producing countries, the International Coffee Organization (ICO) foresees disruptions such as delay in shipment, lack of container space, and labour shortage due to lockdown and social distancing measures. The results show that a one percentage point drop in GDP growth is associated with a reduction in the growth of global demand for coffee of 0.95 percentage points or 1.6 million 60-kg bags.

Solutions

At this point, a global economic recession in 2020 is almost certain. As mentioned, the effects might profoundly affect the industry, but looking at the 2009 recession, there is a glimpse of hope. This is because, during the 2009 world economic crisis, coffee consumption remained fairly resilient. However, it did shift from out-of-home to more at-home categories and cheaper products.

As predicted, many industry events will be cancelled or postponed. Therefore, the coffee industry has turned to the online tools and platforms. Even though going online was more of a trend, now is a matter of survival.  This is why webinars and virtual commercial events started to take place. There are webinars offered by the Specialty Coffee Association (CAS), but also virtual events such as the Alliance for Coffee Excellence’s online auctions. Further, in response to Covid-19, many organizations within the coffee sector have already changed their cupping protocols to avoid cross-contamination.

For example, in the Netherlands, as everywhere around the world, suppliers or coffee shops are trying to adapt and find solutions. At Koffiebar Mica in Haarlem, they made an ‘improvised coffee counter” in the half-opened front door. Thus, people do not have to come in to buy a coffee, they can just walk past. Further, “Another Cookie”, suppliers of coffee, cappuccino, or late have switched their business model from B2B to B2C. If before they were selling to coffee shops, bars, restaurants, now they started to sell to home workers. Many different cafés in Rotterdam that have started to offer to-go menus. Customers can come on certain days, and on certain hours they will be open for takeaway coffee and food.

In conclusion, we can predict that the Covid-19 crisis will strongly affect the coffee industry together with others. However, suppliers have to look for business models and strategies to help them stay afloat, adapting to these unpredictable changes.

 


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