Shipping Inflation Costs Roasters
March 8 - 2021
Coffee Geography Magazine
In the post Covid business restructuring, coffee roasters faced high service cost in purchasing green coffee beans.
Coffee processors in the United States, the world’s
largest consumer of the beverage, are reporting significant cost increases in
their operations, mostly related to transportation, and expect to raise retail
prices soon.
Mid-sized and smaller roasters, particularly specialty
coffee companies, have been hit hardest, company executives said, but even
larger companies such as Peet’s and JM Smucker Co say they are coping with
higher costs.
Other U.S. business sectors also face shipping inflation.
Market intelligence provider S&P Global Platts reported that freight may
have added nearly $10 billion to corporate costs on U.S. inbound routes in the
fourth quarter of 2020, a bill that could grow.
Last week, transportation backlogs helped push coffee
prices to their highest in more than a year.
“We’re currently signing contracts for delivery in the
summer and fall, and those prices have gone up quite a bit, about 15% increases
on everything,” said Oliver Stormshak, chief executive at Olympia Coffee
Roasting, based in Olympia, Washington.
“I’m trying to decide right now whether we eat the costs
or restructure our pricing and raise it”, he added.
Coffee executives said higher demand for shipping
services as more consumers shop online and extra safety procedures during the
pandemic are increasing costs in the United States.
“There are supply constraints, not because of production,
but simply hurdles brought upon us by COVID-19 and safety guidelines. It is a
systemic issue,” said Jorge Cuevas, an executive at Sustainable Harvest Coffee
Importers in Portland, Oregon.
“It is now more expensive than in the last five to 10
years to bring coffee to the consumer,” Cuevas said.
Coffee companies also said costs on transoceanic shipping
are rising due to imbalances in the flow of containers caused by the pandemic.
On some routes, demand for containers is increasing, while others are
less-traveled, causing an uneven flow and raising costs.
“The container cost is a major issue in the coffee
market,” said Rabobank’s analyst Carlos Mera, adding that routes from Southeast
Asia to Europe and the United States are seeing higher prices due to container
shortages. “Even if you are willing to pay, you may not find availability.”
Commodities including coffee, cocoa, cotton and refined
sugar are usually transported in containers, while others such as soybeans,
corn and raw sugar use bulk carriers.
Roasters reported delays for receiving coffees from
Africa and some South American nations.
Lee Harrison, a senior director at New York-based Joe
Coffee Company, said one coffee cargo from Burundi scheduled to arrive at the
beginning of the year has been pushed back to March. He said he would likely
substitute that origin.
JM Smucker, owner of brands such as Folgers and Dunkin,
said in a statement: “Like others in the industry, we have experienced some
recent coffee supply chain challenges.”
Smucker added: “While we regularly evaluate costs to
determine appropriate actions, we do not have any imminent planning to share at
this time.”
Large coffee companies boosted stocks last year as a
precaution during the pandemic.
“We are not worried about supplies, as we have good
inventory positions,” said Eric Lauterbach, president & chief operating
officer at Peet’s, who said the company had encountered shipping issues in the
United States and Asia.