Rising demand: A worker prepares to roast robusta coffee beans in Indonesia. The price of Indonesian robusta coffee beans rose about 40% in June from a year earlier. — AFP
New York: The world’s growing love for instant coffee is keeping roasters reliant on the robusta variety once snubbed by java snobs, even as prices reach the highest in about half a century.
Consumers are enjoying instant and grab-and-go drinks more than ever, and global soluble-coffee consumption is on track to hit a record high this year.
That is sustaining demand for robusta beans, even after droughts affecting growers in top producer Vietnam sent prices soaring to the highest since the 1970s.
A robusta run-up shot futures up more than 65% this year to hit a high of US$4,728 a tonne last Friday.
The convenience of instant coffee won over consumers during the pandemic lockdowns, leading to a surge in demand.
While growth subsided as people began returning to offices and coffee shops, “the public that was conquered remained there,” said Aguinaldo Lima, a director at Brazil’s soluble-coffee industry group Abics.
That’s led to a greater reliance on robusta, which offers better caffeine extraction for beverages, said Judy Ganes, president of commodity analytics company J. Ganes Consulting LLC.
Even a large supply of arabica beans – long considered a higher quality coffee – and record robusta shipments from Brazil weren’t sufficient to offset the imbalance created by ongoing droughts in Vietnam, the world’s biggest grower of robusta.
“That’s where the market is getting stuck,” Ganes said.
Elevated robusta demand – and costs – are a big change for an industry that up until recently saw the variety as less-desirable.
Many roasters also blend robusta and arabica beans, as the robusta bean helps give coffee a fuller body but has been associated with a bitter taste.
Adjusting the ratio of the two varieties helps manage costs when disruptions hit parts of the supply chain.
Higher living costs around the world also encouraged a move toward cheaper coffee blends, while a growing consumer base in China drives higher soluble and overall coffee imports.
Other robusta-heavy products are also on the rise.
Canned or bottled ready-to-drink coffee in the United States was worth US$4bil last year, according to data presented by Keurig Dr Pepper Inc during an international seminar held in May.
The market has grown an average of 5% a year for the three years ended 2023, according to the same data.
A spike in robusta demand would normally spur roasters to seek cheaper alternatives within the arabica market.
While arabica coffee is considered high quality, not all beans are made equal. In the physical market, beans of a smaller size and with more imperfections can cost less than futures prices.
It’s these cheaper arabica types that roasters usually tap to replace robusta.
The industry has begun to shift back toward poorer grades of arabica as the premium the bean carries over robusta is near the lowest in data going back to 2019.
But “the decrease that we’re seeing is fairly small compared to the price increase”, said Andre Acosta, Marex Solutions’ director of commodities for Latin America, referring to the slight drop in robusta demand.
Volcafe Ltd, one of the world’s biggest coffee traders, said earlier this year that robusta demand would need to fall further to ease tight supplies and forecast a fourth year of shortages in the season starting October.
Coffee makers risk getting “squeezed” between high input costs and the reluctance of retailers to raise prices for fear of hurting sales, said Bruno Giestas, a commercial director at Brazil’s roaster Realcafe.
J.M. Smucker Co, whose brands include Folgers and Cafe Bustelo, already raised prices across part of its coffee portfolio earlier this year.
Nestle SA, which owns the instant coffee brand Nescafé, is facing “pressure on input costs for both coffee and cocoa” that will weigh on margins in the second half of the year, chief financial officer Anna Manz said on a July 25 conference call. — Bloomberg
