Local coffee businesses hope they won’t have to raise their prices

 

It’s a little bit of a lot of things driving up the cost of the coffee beans used to make your morning cup of joe, shot of espresso or triple-shot latte.

Among the perceived culprits are: droughts in countries that are the largest growers of coffee beans; supply-chain issues tied to shipping; supply and demand, especially with growing demand in Asia; climate change; speculation in the futures markets; and the list goes on.

Whatever the reasons, coffee-bean prices increased dramatically throughout 2024, which means wholesalers and retailers paid more, and ultimately consumers paid more.

Local coffee roasters, coffee shops and grocery stores were affected, and many had to respond with price increases for their customers.

Then came December, when the price of coffee beans spiked again, this time to the highest futures market level in 47 years, breaking the record set in April 1977, according to a Dec. 10 Wall Street Journal article. Now, as prices continue to hover a little below that peak price, local coffee businesses hope they won’t have to increase their prices early in 2025.

At Colorado Legacy Coffee Roasters, 1048 Independent Ave., Unit A105, owner Roni Welsh said she raised prices twice in 2024, once in September and again in early December, for a combined increase of about a dollar per pound. The latter increase was before the 47-year high was realized on Dec. 10.

“It was astronomical,” Welsh said of the peak price, “as high as I’d ever seen it in the history of me doing business … and we’ve been in the coffee business 30 years.”

She said she looked at her numbers for the year, and her costs increased 38 percent in 2024.

“That’s huge,” Welsh said. “I mean, 38 percent might not sound like very much to somebody who doesn’t run a business, but we run a business on below 5 percent increases and decreases. I mean, if I take a price increase, it’s usually 3 percent or lower.”

She said she never had to increase prices twice in one year until this year, and Welsh called that a “bummer” for herself as well as her customers.

“The consumers have to pay the price, or the middle people go out of business. That’s the option,” she said. “It’s like anything else, I guess. Consumers have to pay it. We can’t absorb it.”

Fortunately, Welsh said, her customers understand.

“Consumers know,” she said. “I mean, coffee is one of those commodities that gets a lot of media (attention) … it’s a big industry, so it gets written up a lot. When coffee prices are high, our customers know. They come in, and they tell me that, ‘Yeah, I heard there’s a big drought in Brazil.’”

Colorado Legacy is primarily a roaster and much more a wholesaler for commercial accounts than a retailer.

At Kiln Coffee Bar, 326 Main St. in Grand Junction, the effect of rising coffee-bean prices hits it twice, because Kiln is roaster and a coffee shop.

Jon Foster, who co-owns Kiln with his identical-twin brother, David, said coffee beans were one of several items with increased cost, necessitating price increases on coffee drinks in early October. He said Kiln tried to keep its increase to a minimum.

“I actually reached out to our provider, Cafe Imports, that we buy probably 90 percent of our coffee from, just to verify where coffee trends were at,” Jon Foster said. “We had negotiated a little bit of a discount the past year, and then all of a sudden it seemed like that discount was gone.”

He said Cafe Imports showed him a graph of the green-coffee prices, and it showed the prices spiking several times throughout the year. Foster said that put his mind at ease, knowing “at least that we were getting the best price that we could for right now.”

“But again,” he added, “it put us in a position where we felt that it was necessary to increase the prices a little bit.”

Roastiva, a Grand Junction coffee roaster at 554 25 Road, Unit 7, raised its prices in January 2024, which was before the large coffee-bean-price spikes happened. However, owner Josiah Abshear didn’t need to do another increase.

Roastiva will mark four years in business on March 1, and Abshear thinks a different approach since its inception helped Roastiva during the 2024 tumult.

“There’s definitely been fluctuation ever since we started,” he said. “I think we started with a pretty high price point for our coffee, because all of our coffee is organic and fair trade, and then we also do donations to nonprofits that support the communities that the plantations are in. So, our cost for coffee has always been pretty high.”

Aside from its price hike in January 2024, Abshear said Roastiva’s only other price increase came about a year after it opened. And that wasn’t all about the price Roastiva had to pay for beans.

 Abshear added, “Part of that is coffee. Part of that is I was figuring out our business model and labor and stuff.”

The “stuff” includes free delivery of coffee beans to customers’ homes.

“A majority of our business is to households,” Abshear said, “and so we have a little bit more margin than if we were doing a whole bunch of wholesale accounts where we’re giving them, you know, wholesale discounts.”

When price increases do occur, they’re preceded by creative thinking and belt tightening.

For Kiln, Foster said, “We’ve been fortunate because we have extra space, having a warehouse, to buy some things in larger bulk to try to get our prices back down to where they were. (With) coffee we can’t do that, but things like our chai, alternative milk, we’ve been able to buy on pallets in order to try to get the cost down.”

At Colorado Legacy, Welsh said she didn’t buy as many holiday items this year to sell, so she could maintain cash flow for coffee beans.

“Beans are our bread and butter. That’s where we make money,” she said. “I mean, we’re a coffee roaster. Everything else is just extra. So, I cut back on extra inventory that we don’t need, to save cash to buy more expensive coffee.

“I have racked my head and racked my head on what else to do, but I run a really tight ship here, so I don’t have a lot of fluff that I can cut back on.”

The hope remains that coffee-bean prices will go down and level off, and there will be no need to increase prices to consumers.

Abshear recalls learning about the up-and-down nature of the coffee market about three months after opening Roastiva.

“Brazil had like the biggest freeze in their history, and so coffee prices shot up a ton,” he said. “And it came back down and stabilized a little bit.”

Foster said every industry and economy has ebbs and flows, so the coffee industry is no different, and he chooses to be optimistic.

He hopes for “a pullback this year on the coffee-bean prices, and we don’t need to continue to increase prices. … I don’t foresee that this year, doing any more price increases.”

Welsh’s three decades in the coffee business mean she’s seen a lot of the ebbs and flows that Foster mentioned. The thing that’s more concerning this time, though, is the increases in the coffee-bean market are the highest she has seen.

She said she has been buying on spot lately instead of on contract, because “that would mean signing contracts for months out, and I won’t lock into these prices. … I’m rolling the dice that they’re gonna come down.”

The question remains: Will they go low enough?

“Price increases have always been part of the business. They’re something none of us ever want to do,” Welsh said, “because we’re all small business owners, and we’re all consumers, and we hate doing it.”

“I just took enough to make sure that I was gonna still be here next year, you know, that it wasn’t gonna take me under. But still, it doesn’t cover the increase, at all. So, I’m still rolling the dice, I guess. I’m still hoping the prices come down, and then that increase will make up for that.” 

MORE ABOUT COFFEE BEANS

IT ALL ADDS UP

Diving a little deeper into the reasons for the higher cost of coffee beans in 2024, national media outlets, such as the Wall Street Journal, Reuters, National Public Radio and NBC, to name a few, came up with a plethora. Among them are:

• Droughts in Brazil and Vietnam, the world’s two largest producers of coffee beans. Brazil grows arabica beans and is the No. 1 coffee grower in the world. Vietnam is No. 2 in production and the top grower of the robusta bean. A combination of drought during the growing season and heavy rains at harvest time, is really bad for beans.
• Supply-chain issues, which appear to stem primarily from low water in the Panama Canal and attacks on vessels trying to use the Suez Canal. The latter is called the Red Sea Crisis and dates back to October 2023. Without the convenience of passing from the Indian Ocean to the Mediterranean Sea, and vice versa, cargo shippers are forced to use alternate routes, causing major delays.
• Supply and demand as Asia, with approximately 4.8 billion people (more than half of the world’s population), has a growing thirst for coffee.
• Climate change, which is increasingly diminishing the viability of some coffee-producing regions.
• Speculation on coffee’s futures markets. Betting on the future can lead to detrimental actions from buyers and sellers, and there’s not enough room in this information box to explain it. But if you really want to know more, go to efico.com and read Insight Into the C-Market and Its Influence on the Price of Coffee. Fair warning: Brew a pot of strong coffee first.

WON’T COMPROMISE QUALITY

When Colorado Legacy Coffee Roasters owner Roni Welsh racks her brain to figure out ways to avoid raising her prices, one thing never crosses her mind. She will not buy a lower-quality coffee bean to save money.

“I only roast current-year crop,” she said. “I don’t even use brokers that have last year’s crop. So, I don’t change the quality of my coffee based on the prices. … I could buy lower-grade coffee, but I’m not going to do that. That’s not something that we’ve ever done, nor will we, because that changes the consistency too drastically, and that’s not fair to our customers.”

Welsh said she switched to a different packaging company to save three cents per bag, but then the price of the labels that she puts on the bags increased this year.

“The labels absorbed my three cents plus a couple more, so that didn’t help,” she said.

BLAME IT ON BRAZIL…

One of the oft-suggested reasons for the spike in coffee-bean prices this year is drought in Brazil is expected to reduce the bean harvest about 25 percent from the original forecast.

Kiln Coffee Bar co-owner Jon Foster said drought talk about Brazil goes back further than 2024. Kiln uses a Brazilian coffee in its espresso, so Foster said he tracks that closely.

“We actually watched Brazil jump way high, and then we watched it pull back down to about what we were paying for it four or five years ago,” he said. “And so it now has increased again … it’s right around the top of where it had exploded during those droughts.”

Even then, Foster isn’t placing all of the blame on Brazil.

“I think it’s what we’ve seen across the board,” he said. “All of our coffees have gone up in prices, not just Brazil in the past year.”

Roastiva owner Josiah Abshear can explain why other coffee growers’ prices went up. For an obvious reason a drought in Brazil shouldn’t affect his business. Yet, it does.

“Whatever happens in Brazil – which is actually kind of funny, because we don’t source any Brazil coffee – but whatever’s happening in Brazil definitely affects our prices,” he said. “Which is just because of supply and demand, and the other roasters who use a lot of Brazil are substituting for stuff.”

… OR BLAME SUMATRA

If Abshear reads the above listing of reasons for coffee bean prices rising, he’ll have an “Aha!” moment when he reads about the Red Sea Crisis.

“It was probably six months ago, it might have been a year ago now, there was a lot of conflict along one of our shipping routes from Sumatra, and they had to do this big old roundabout thing,” Abshear said.

He was making a greater point about the many variables that affect coffee prices, and one of the ways he’s learned to compensate is by adding inventory.

“We try to keep two, three months worth of inventory,” Abshear said, “rather than like when we opened, we only had a month’s worth. … Just the general theme of increasing inventory has helped us kind of have flow through that.”