Coffee Demand at an All-Time High. Supply? Not So Much

Coffee

U.S. demand for coffee is at an all-time high. In fact, consumption of hot coffee will be 6.8 pounds per capita in the United States, according to Euromonitor International.

The proliferation of coffee shops, single-cup brewing machines, and the cold brew market have expanded the attractiveness of the industry to even more consumers in recent years. In fact, four out of five consumers now drink coffee, according to Mintel.

“Consumers want new experiences with their coffee, and coffee houses and manufacturers are providing premiumized innovations and experiences with culinary influences,” Elizabeth Sisel, a beverage analyst at researcher Mintel, told Bloomberg. “Luckily, there is a large audience available to reach out to.”

Perhaps not as lucky is the fact that there may not be enough supply to meet the demand. According to the U.S. Department of Agriculture, by the fourth quarter, global inventories of coffee beans could drop to a four-year low.

At the same, recent heavy rains in Brazil have hurt coffee plants. Drought has been so hard on robusta plantations that prices for the bitter-tasting type of coffee that’s usually the cheapest can now be at levels exceeding costs for some Arabica beans. Some roasters are changing their blends, which could squeeze supplies of the higher-quality bean even if farmers harvest a big crop.

“Between tight supply, potentially detrimental weather and extremely strong global demand, especially emanating from the U.S., China and India, that will continue to tighten coffee markets,” Harish Sundaresh, a portfolio manager and commodities analyst for Loomis Sayles, told Bloomberg.  “With the U.S. being the largest consumer, any demand growth there will create massive changes to the demand-supply balance.” Read more