Soaring coffee prices are not the negative being portrayed by multinational giants like Nestlé, supplier Pact Coffee has claimed.
Pact director of coffee and social impact Will Corby said the commodity had been “sold for far too cheap from its countries of origin to the west for far too long”.
“Huge coffee companies might say that these market highs are bad news, but, in reality, farmers are finally being paid enough to live on,” he said. “Quite frankly, if these prices mean your business can’t make profit with coffee, it means your business model isn’t fit for ethical trading.”
Corby’s comments came after Nestlé last week confirmed it would continue raising prices and making packs smaller to limit the impact of higher bean prices on its bottom line. The price of Nescafé Original Instant Coffee in UK supermarkets is up 15% year on year, according to The Grocer’s Key Value Items tracker.
“Like every manufacturer, we have seen significant increases in the cost of coffee, making it much more expensive to manufacture our products,” said a spokeswoman for Nestlé. “As always, we continue to be more efficient and absorb increasing costs where possible whilst maintaining the same high-quality and delicious taste that consumers know and love.”
What is causing coffee price hikes?
Coffee commodity prices have surged this year on the back of weather concerns in major growing countries Brazil and Vietnam. Arabica futures have climbed around 50%, while robusta futures are up 65%.
Higher prices for shoppers were linked to challenging growing conditions, but also to suppliers switching from robusta to arabica, and speculators distorting the market, Corby said.
“It’s widely reported that this market high is mainly due to harvests in Brazil being short, but that’s not even half the story,” he said. “We’ve seen near-perfect growing conditions in Brazil this year, and many technical reports suggest a surplus in the 2024/25 crop.
“There’s been a reduction in robusta production in Vietnam, driving its commodity price up significantly to near that of arabica,” Corby continued. “Because of this, many coffee companies are choosing the better-quality arabica beans, driving up demand and price.”
Elevated prices were helping to lift coffee farmers out of poverty, but represented a risk if “the commodity market suddenly drops again”, Corby said.
“There are many different motivations in the commodity market, and unfortunately, there are far more people whose agenda is to make money, not coffee – driving this huge high,” he said. “These people have been keeping the market high for about six months now by buying up an enormous volume of forward contracts to keep prices high.”
Pact, which operates predominantly as a DTC supplier of specialist coffee, but also sells into Waitrose and on Ocado, trades directly with farmers rather than buying on open commodity markets. Last year, it paid an average 46% above the Fairtrade base price.
Dealing directly with farmers was the only way to “to protect farmers from the fluctuating commodity market,” insisted Pact CEO Paul Turton.
“For us, it’s vital to trade directly with the farmer, and bypass the commodity market, its traders and all the middlemen that come with it,” he said. “Through direct trade, we can guarantee that the farmer is the one to receive the premium price.
“Ultimately, for us, the higher price is a giant leap up in quality through truly ethical sourcing, and it’s worth every penny.”
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