NEWS

WARNING: Nerd Alert!

After reading approximately 2,391 news reports and LinkedIn posts about the "coffee price crisis" throughout the last 18 months, I figured it was time to share Summit's perspective.

Some Important (NERDY) Background // Coffee is the world's second-most traded commodity (behind oil), a true global supply chain for an agricultural product that only grows commercially between the Tropics of Cancer and Capricorn. Nearly all of this coffee is bought and sold using the global C market, a pricing matrix that takes into account supply and demand. The inputs that contribute to this are plentiful -- weather, shipping prices, tariffs (more on this in a moment!) -- and disruptions to any one can cause spikes in the C market. Disruptions to almost every input can cause chaos.

So What's Actually Happening // Since April 2024, we've had chaos. Constant and unpredictable climate change has made an historically predictable supply and demand equation anything but. Droughts in Colombia and unseasonable rains in Brazil (the world's largest coffee exporter) have led to instability, which spooks the market! Producers hoard their coffee to meet future contracts, importers and roasters (like Summit!) try to load up on future supply, the confluence of which sent the C price to its highest in more than 50 years. So we've got weird weather, and THEN government shutdowns in countries all over the world means coffee coming from Ethiopia ... isn't coming. So what happens? These same importers and roasters rush to fill their needs by purchasing pre-existing supply, coffee from other countries, etc. Everyone chasing their tails trying to get some coffee, even if it's choice C or D.

Yes, that is an arrow. Yes, Brian drew this on his computer mouse pad. Yes, it's a work of art.

OK, that's stressful. And then ... tariffs // Yeah, that's right. See, coffee can't really grow in the U.S., so there's no way for us to manufacture our own coffee. There's some in Hawaii, and some scientists are trying to grow it in California, but the volume of their output is inconsequential. So the U.S. government's volatile tariff strategy first caused a spike in overall trepidation (and price!), and then also just added a 10%+ cost to all of the coffee we're bringing into the States. Again, we've got chaos: a record-high C price, global unrest and unease, and tariffs.

So why haven't Summit's coffee prices doubled // (OK, maybe you aren't actually wondering this). The short answer: because that would suck for you guys, and you'd probably stop coming to our cafes. The longer answer: it's complicated. Our average price of coffee has gone up more than 50% in the last 18 months. We're grateful that we own our supply chain, so we can try to absorb these spikes in several different places. We've reduced the number of different coffees we're buying, to cut down on shipping costs. Then, we decreased our target margins at the roastery. Making a couple dollars less on a pound of coffee is better than nobody buying our coffee! Lastly, we adjusted cafe cost of goods targets. In some cases, we increased the price of drinks $0.10-0.25. This mostly covers our increased liabilities. But we decided our price headache is just one of several headaches that our customers are suffering from. So sure, we had to inch prices forward a bit so we didn't hemorrhage money. But we're playing a longer game here.

And now what happens // Oh, I was hoping one of y'all had the answer. IDK, guys, but we're committed to learning as much as possible. I legit have spent hours reading Brazilian weather forecasts in Portuguese. We bought 60,000 pounds of coffee during a dip before the August 1 tariff to Brazil went into effect (that was a win for us!). The gist is we're taking it week-by-week, and have gotten pretty good at reacting to which way the wind blows. We're grateful people still want to drink coffee, and we have a stable roster of really smart people throughout the global supply chain to help us find our way.

I have a headache now, too // If you take nothing else from this, I can confirm two things: 1) The global coffee market is in its most chaotic era (not the Taylor Swift kind); and 2) Summit is doing A-OK handling this, with you guys top of mind.

Anyone want to nerd out some more on commodities, economics, or global supply chains?? My inbox is always open - Brian@summitcoffee.com