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“It’s a real tsunami.” Last May, Giuseppe Lavazza, grandson of the founder of the Italian group, traced the first traces of the year 2022 for coffee. The tsunami in question is that inflationary wall that was then waiting for all of Europe, a few weeks after the outbreak of the war in Ukraine. The Italian was not wrong: the last year has been formidable for the coffee market, the third most consumed drink in the world after water and tea.
According to the latest figures from Eurostat, the price of coffee in the European Union rose 17% in November in one year. In the countries most sensitive to inflation, such as Lithuania or Hungary, the increase exceeds 35%. “Recent price increases could turn this morning staple into almost a luxury,” the statistics institute worries. But if coffee cherry prices have skyrocketed on all commodities, the war in Ukraine is far from the only reason for this inflationary pressure.
In reality, coffee faced a conjunction of factors. It is above all the health crisis that has started this trend. Grown in the tropics, the coffee is roasted and then imported, which incurs significant logistics and energy costs. However, the Covid-19 has paralyzed the world transport that finally arrives, almost two years after the first confinement, to recover from this unprecedented economic disaster. At the same time, the conflict between Russia and Ukraine has skyrocketed energy prices. This situation affects all coffees, all plantation areas in the world and all players in this 385 billion dollar market.
However, this ban on coffee professionals – which ended up having an impact on consumer prices – did not affect the general public’s appetite for the drink. Away from. “Demand remains stable, despite the crisis,” observes Christophe Servell, founder of Terres de Café, one of the pioneers of specialty coffee in France and an expert in the market. His company, a little thumb in this ocean, even saw a 30% increase in demand this year.
A little coffee glossary
convenience cafeteria: ordinary coffee, not famous for its taste but with a low price. It represents the vast majority of coffee consumed in the world. Its price is determined by the market.
specialty coffee: a better quality and more expensive coffee, usually sold in specialty stores. Its price does not depend on the world coffee market but is negotiated over the counter.
arabica: is a variety of the Coffea bush, recognized for the quality of its beans, which represents 70% of world production.
robust: This is another variety of the Coffea shrub. Less qualitative, grows more easily and offers a better yield. It represents 30% of world production.
This is the whole paradox of this inflation: we continue to drink coffee. And we are even willing to pay the price. “We are witnessing a movement upscale in coffee, particularly in France,” continues Christophe Servell. The market share for specialty coffee, the most expensive, has taken another 20% this year and represents around 5-6% of the French market. “Of a total of 300,000 tons, it begins to be made” emphasizes the patron of Terres de Café.
Especially since the French, like wine, are beginning to perceive coffee as a quality good with its flavors and terroirs. As proof, the market for self-grinding coffee beans is literally exploding, even among the big manufacturers. In 2021, Lavazza registered a growth of 17% in this part of the French market.
“We are part of the consumer mentality,” explains Giuseppe Lavazza, who promotes a “trip” through the tropics. Proof of this leap towards luxury, the Italian group has teamed up with the famous chef Alain Ducasse to develop ranges of exceptional coffees, types of grand crus where the kilo of beans exceeds 50 euros, five times more than the coffee of large distribution .
This explosion in coffee bean sales is also helped by those of machines with an integrated grinder, promoted in particular by the Swiss Jura or the Italian De’Longhi, whose sales have multiplied by five in 5 years. “We are also seeing the reopening of roasteries throughout France”, still abounds Christophe Servell, who specifies that the movement towards luxury is global. So here are the most ambitious coffee lovers now carefully sipping a Reunion Bourbon or a Jamaican Blue Mountain, among the most expensive in the world.
always more coffee
But these beautiful prospects hit a considerable wall. Demand increases and supply decreases. Global coffee consumption is expected to increase by 3.3% for coffee year 2022/2023, which began in September: 170.3 million 60kg bags compared to 164.9 million the previous year. At the same time, production is estimated at 167.2 million bags, 2.1% less than the 170.8 million bags of coffee the previous year. This therefore makes a deficit of 3.1 million bags between supply and demand, or 186,000 tons.
This stimulation of demand is not so much linked to Europe or North America, which are already mature markets, but rather to regions that used little or no coffee, such as China or now Africa.
Valued at $385 billion in 2021, the coffee market is expected to reach $500 billion by the end of the decade. In 2021, 9.9 million tons were consumed worldwide, including 3.2 million in Europe and 1.85 million in North America. Africa accounted for 734,000 tonnes, but recorded the highest growth in three years (+3.4%).
So much for the near future.
But the next few years promise to be more worrisome. Two great challenges await coffee. The first is the most obvious: climate change.
A quarter of the country’s production has been reduced to nothing. And when the first producer and exporter coughs, the world of coffee catches a cold.
The cold wave in the Brazilian production is not the first, but it was particularly violent, just after a drought. Above all, it comes at the worst time, in the midst of a global pandemic.
But the violent climatic event masks a more pernicious phenomenon, that of global warming that is rapidly reducing the size of plantations. A tall shrub, the Arabica coffee tree needs fresh air, between 18 and 20 degrees Celsius. A small variation in the thermometer and an entire plantation is in danger.
However, a few years ago, these projections were announced for 2100. Brazil, Colombia, Vietnam, Indonesia… so many countries that will be the most affected by this loss of production, announced last January an alarming study published in the scientific journal Plos One.
And it is not about starting new plantations in these countries. “We are fighting for a coffee without deforestation, so it must be grown where it exists. To maintain the volume, we must increase productivity”, says Giuseppe Lavazza. How to stay where the sun burns the plants? Price it. “We must implement solutions to provide shade and better watering: digging ponds, planting trees, making polycultures”, lists Christophe Servell. “It’s obviously expensive.”
Botanists are also working on hybrids that are more resistant to heat, but here again the equation is not simple. All world production comes from two species, coffea arabica and coffea canephora (also called robusta). The former, prized for the quality of its cherries, continues to dominate but shows very low genetic diversity. Therefore, it is difficult to change it to be more resistant to climate change. “And the more we hybridize, the more we lose quality”, adds Christophe Servell.
A unique plant to flood America
Originally from Africa, the coffee tree finally reached Java in 1696 under Dutch rule. From there, a plant will be sent to the botanical garden in Amsterdam which will then be multiplied and then offered as a botanical curiosity to European capitals. They will take the opportunity to plant it in their colonies. Virtually all the Arabicas of the American continent come, therefore, from this original plant.
The other challenge for the next decades is that of the planters. “There is a generational transition problem” admits Giuseppe Lavazza. The average age of a coffee farmer is 50 years old and the next generation is not there. Backbreaking and unprofitable, the trade could disappear as quickly as the plantations, although rising prices may convince farmers to plunge into it.
Will coffee then be able to meet the pressing demand from around the world? Opinions differ on your ability to meet needs, even if the market is too big for you to bypass without reacting. For Christophe Servell, “we will drink less but better”.
Last solution to hope to maintain production: trust in nature. Of the 130 known varieties of coffee trees, some could help counteract this predicted crisis. In 2022, Cirad, a French agricultural research organization, asked some “noses” in the profession to evaluate a beverage extracted from several little-known coffee trees: coffea congensis, coffea brevipes, and especially coffea stenophylla. The first two are similar to robusta and the last one is closer to arabica. Above all, these varieties tolerate higher temperatures much better. And among the “noses”, these new cafes have clearly caused a sensation. There are still long years of study to determine its performance and its resistance to diseases.
But this is not the first time that a mass product like coffee has changed its variety on a global scale. Until the mid-1950s, the star banana was called “Gros Michel” before a fungus destroyed almost all crops to be replaced by the Cavendish, the one we eat today. For arabica or robusta, the question is not yet its survival, but rather its ability to meet the ever-increasing demand. And this change is being prepared today.
Source: BFM TV
