THIS ISSUE: WE'RE ALL IN THIS TOGETHER
STATE of the INDUSTRY 2022 | Vol. XXXIV No.8
State of the
Industry {2022}
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CONTENTS STATE of the INDUSTRY 2022
08 14
STAFFING STRUGGLES
18
SUSTAINABLE STRATEGIES
22
SUPPLY CHAIN SOLUTIONS
26 {4}
2022 | STATE of the INDUSTRY
PIVOT OR PERISH
WHAT'S NEXT
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Primera Technology Inc.
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THE VIEW
{ We're All In This Together } KERRI GOODMAN
{
W
elcome to CoffeeTalk's 2022 State of the Industry issue. Given that this is a busy time of the year and wanting to hear from as many industry voices as possible, we switched up our format to a Q&A and opened to all in the industry. I think we can all agree, our world has changed forever, and it is more important than ever to support each other. Thank you to the 31 contributors who took their valuable time to share their insights on our industry's future. Together we are stronger, let's keep the communications open! Below are a few of my favorite quotes from this year's issue. I would like to embrace some common themes seen in the responses: Respect & Sharing. I hope you enjoy reading this year's issue!
Those who fail to see the trends developing and hesitate to act, may eventually find themselves in a very challenging position. We have been able to rely on our relationships in the industry to help mitigate issues.
Educate by sharing best practices. Able to share and show reference plants. Able to connect individuals in the same industries to discuss challenges. OSKAR RUTISHAUSER
DARRON BURKE
There are myriad issues that challenge the coffee industry. However, one stands well above all others. Respect! Respect for the environment, the soil, the forest, the microorganisms, the birds, the bees, the animals, etc., all of which provide the substrate from which coffee itself grows. BILL FISHBEIN
One of our purposes is to make sure we include the voice from the producing countries' farmers to improve their quality of life, address their socio-economic challenges, and generate constructive conversations with coffee exporters, importers, roasters, and primary consumers.
We should be embracing these new (green coffee) prices as a step toward economically sustainable sourcing. This is an opportunity to more deeply embed producer livelihoods into strategic plans and ensure everyone has the chance to achieve dignified livelihoods. CORY GILMAN
I hope forever. It cannot be that for a cup of $5 the farmer gets only 5 cents. LUZIUS WIPF
During the pandemic, there was a movement toward convenience and coffee products consumed at home. When the pandemic subsidies, I don't see this trend going away. GERRY FORD
OLGA L CUELLAR
We should be looking for alternatives to commodity pricing of coffee. The problem with commodities pricing is that all the prices are based on availability without regard to the cost of production.
Something has to change. How can the specialty coffee industry endure both rising costs and a labor shortage and keep the “Specialty” in Specialty Coffee? RAY BUERGER
JAMES KOSALOS {6}
2022 | STATE of the INDUSTRY
COFFEETALK MAGAZINE
{ Pivot or Perish } How important is it to adapt to constantly evolving industry conditions?
Bill Fishbein
FOUNDER & EXECUTIVE DIRECTOR, THE COFFEE TRUST AND COCOMIEL
The only rule of evolution is adapt or die. A more appropriate question for an ever-evolving industry is, “What is the most fundamental issue that demands the industry either adapt or die?” I would say that, even to the most casual observer, the answer lies in the question. It is beyond very important. For the coffee trade the question is existential.
Chad Montgomery OWNER, CIVIL POUR
Vitally important. Businesses that do not adapt will not survive. Online ordering, keeping staff happy with high pay and benefits, all these things are important.
Darron Burke
PRESIDENT & CEO, BURKE BRANDS / DON PABLO COFFEE
I think it's critical to stay ahead of, and to adapt to evolving industry conditions. Those who fail to see the trends developing and hesitate to act, may eventually find themselves in a very challenging position. It happened to us back in 2010 when the market price of green coffee more than doubled almost overnight. We were buying spot back then and learned a hard lesson. This time we are much more prepared and are thriving in a challenging economic environment with significantly increased green coffee costs. We also have an eye on the supply chain and are actively searching for alternatives to more conventional logistics and supply chain management; in case we need to pivot in the event of another crisis. {8}
2022 | STATE of the INDUSTRY
Jeremy Gursey
PRESIDENT, COFFEE MANUFACTORY
It’s very important in any business to always look to the future and predict how the market will change and how can you adapt to remain sustainable and relevant as a company. You want to continue your brands ethos, while at the same time continuing to remain adaptive to changes.
Olga L Cuellar G
FOUNDER AND CEO, PROMISING CROPS
The industry and its leaders must constantly adapt to evolving industry conditions. Some sectors and leaders use the VUCA effect vision (short for Volatility, Uncertainty, Complexity, and Ambiguity). This approach helps businesses better prepare their responses to external factors and changes that we are experiencing in the current coffee industry. Leaders capable of using it can be better prepared for decision-making and implementing its strategy. Using this approach in day-to-day activities will help industry leaders to find the appropriate tools. Some examples are constantly doing research, talking with their partners, chain suppliers, and clients, using risk management methodologies, among others, and preparing them and their team for the unpredictable environment.
Oskar Rutishauser
ACCOUNT MANAGER COFFEE PROCESSING, BUHLER INC
We need to be part of the ongoing evolution "ideal to be the driver" to ongoing enhance processes for better finish product results by constantly looking for a better way to reduce process energies and to continue find solutions to eliminate any wastes generated. COFFEETALK MAGAZINE
Susan Freeman
OWNER, HIGHER POWER INVESTMENTS
It is only slightly important. Some consumers want things to stay the same at least the basics.
Tony Salas
CEO, SHARED-X
Fundamental! Adapting to industry conditions in agriculture, especially for specialty coffee markets, is the only way to survive AND thrive. At
Shared-X we accelerate businesses within the industry, such as specialty coffee production, import / export, and commercialization of packaged consumer products, in order to lead in technology and in sharing it with our associated smallholder farmers. This translates into producers farming with the latest technologies, importers and distributors with a highly traceable and certified product, and a coffee roaster that can tell a bean to bag story.
What have the largest challenges been?
Bill Fishbein
FOUNDER & EXECUTIVE DIRECTOR, THE COFFEE TRUST AND COCOMIEL
There are myriad issues that challenge the coffee industry. However, one stands well above all others. Respect! Respect for the environment, the soil, the forest, the microorganisms, the birds, the bees, the animals, etc., all of which provide the substrate from which coffee itself grows. Chemicals may offer short-term, high production. But chemicals like drugs, provide short-term "highs” always requiring more and more inputs to yield the same and even less production. Sadly, by that time, the producer is as addicted to the chemicals as the addict is to drugs. And then there are the people. It has become an acceptable reality, a part of the way the coffee trade operates, that chronic poverty at origin is ok. There are untold numbers of non-profits that provide different levels of support for coffee producers. But these non-profits would not be even exist if the coffee trade respected the people and the environment so essential to the trade's very existence. WWW.COFFEETALK.COM
The coffee industry has complained for decades about low coffee prices for producers, but complaints are cheap and have only resulted in pennies being added to a paltry C-price that has largely remained the same for generations. And, the C-Price has annually eroded to inflation since the Cold War. If the average price of coffee in 1988 ($1.31/lb) kept up with inflation, today’s C-Price would be $3.06/ lb. Keep in mind that chronic poverty was the norm at origin in 1988, so even if the C-Price had increased to $3.06 to meet inflation, it would have only maintained the same level of chronic poverty at origin that there was in 1988. But it didn't rise along with inflation. It dropped. The C--Price dropped to $2.49/lb and that rise is strictly due to today's disrupted supply chain and other temporary factors. The average C-Price of coffee in 2020 (without supply chain disruptions) was only $1.11/lb when it should have been closer to $3/ lb, almost a third of the actual value. And, at best, that value provided a life of chronic poverty for coffee producers in 1988. Today's price is a third of what provided chronic poverty in 1988.
STATE of the INDUSTRY | 2022
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Darron Burke But, who in specialty coffee pays the C-Price? Does it really matter? Premiums on specialty coffee are primarily based on the C-Price, so adding premiums to a paltry C-Price result in paltry premiums. In the meantime, coffee prices at the retail level have soared, not due to increased coffee prices, hardly! But rather due to the cost of doing business, which has risen incrementally, but steadily over the years. If the price of coffee were allowed to have risen incrementally along with all the other increased costs, the price of coffee would be higher on retail’s shelves, but it would include a significant increase for producers, and no one would be thinking twice. It would have occurred gradually as the retail price has incrementally increased. The industry speaks profusely about so-called Sustainability, but the industry respects only short-term, sustainable supply chain for merchants with little regard for producers and the environment. As the climate changes more dramatically year by year and as producers leave their families and their farms, the S-Word continues to be used as a marketing tool that provides phony cover for a trade that is patently unsustainable. If the industry were actually sustainable, there would be no need for these non-profits, including my own. Never has an industry boasted so loudly and done so little as the coffee trade has about sustainability.
Chad Montgomery OWNER, CIVIL POUR
We kept the interior of our shop closed for about a year, waiting on vaccine availability. Now that that issue is resolved, our challenges are increasing wages and increasing supply costs. We have mostly kept our prices stable but suspect this will need to change soon. { 10 }
2022 | STATE of the INDUSTRY
PRESIDENT & CEO, BURKE BRANDS / DON PABLO COFFEE
Our problems have always revolved around managing demand and growth. It's a good problem to have as they say, but it's still a problem, and unfavorable economic/industry conditions have compounded the challenge. Covid and supply chain issues have frustrated our international expansion and increased green coffee costs have forced us to allocate cash away from marketing and building capacity. On the positive side, our pricing has proved to be more elastic than it was during the last coffee market surge back in 2010 and customers also seem to be much more open to purchasing more exotic, higher priced offerings.
Jeremy Gursey
PRESIDENT, COFFEE MANUFACTORY
The biggest problem we have faced are labor shortages, supply chain shortages and the closures of many sectors of hospitality due to Covid.
Kurt Shaw
PRESIDENT, SHAW SERVICES
Reduced staffing at businesses and people working from home.
Olga L Cuellar G
FOUNDER AND CEO, PROMISING CROPS
Some of the challenges that the industry is experiencing today were generated by the COVID-19. For example, an increase in logistics cost, the adaptation of new distribution channels due to new consumption habits and trends, the new restrictions for business and people, the business hours restrictions, the political decision of closing frontiers, new travelers' requirements. All this made companies change their marketing, purchase, and sales strategies. For some, this was not so simple and caused bankruptcy, especially for new businesses that opened their doors just before COVID-19. Some companies
had to redefine their strategies, reach customers, and be creative with many restrictions and economic household crisis. Nevertheless, we cannot forget the challenges the coffee industry has faced for decades: climate change, price volatility, cost of production, deforestation, labor conditions in coffee-producing countries, and reaching holistic sustainability of the coffee industry, among others. Challenges are also pressuring for compliances and fulfilling many requirements from new standards, new trends, and the adoption of new technologies with good connectivity, appropriate training, and affordable cost.
Oskar Rutishauser
ACCOUNT MANAGER COFFEE PROCESSING, BUHLER INC
People and Business to become part of change and look at new ways of doing things differently. Also observed that many companies do not have the capital to invest into new technologies.
Susan Freeman
OWNER, HIGHER POWER INVESTMENTS
Overcoming those that try to tell you how you should run your business in light of reopening and health and when they don't agree to shame you on social media.
Tony Salas
CEO, SHARED-X
Climate change is at the root of many challenges. As specialty coffee producers, altitude is a key variable in quality. As the climate warms, so does the need to grow at higher altitudes to avoid the reach of a fungus or other pests. However, as Shared-X has worked to accelerate a leading biostimulant producer, as a climate stress controller, we have been experimenting with natural solutions to strengthen coffee plants and produce healthier soils, as well as include rust resistant varieties that can withstand the increased temperatures and assault by pests and diseases. COFFEETALK MAGAZINE
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STATE of the INDUSTRY | 2022
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What have you done to meet these challenges or how have you helped other business to overcome the challenges?
Bill Fishbein
FOUNDER & EXECUTIVE DIRECTOR, THE COFFEE TRUST AND COCOMIEL
Along with Dean Cycon of Deans Beans in Orange, Massachusetts and David Abedon, retired professor of International Development at the University of Rhode Island, I helped to create Coffee Kids, the first nonprofit to benefit small-scale coffee producers, improve their environment and diversify their income. I am the founder and executive director of The Coffee Trust [thecoffeetrust.org] working with indigenous Ixil coffee producers in Guatemala as they create more sustainable livelihoods aiding in their efforts to remain at home with their families and their farms and aiding in their efforts to become less dependent on a coffee trade. I have recently established CocoMiel, a for profit US business importing organic coffee, honey, cacao, and chocolate from the same producers who work with The Coffee Trust. What makes CocoMiel different is that it shares half of its Gross Profits directly with the producers. The other half of its Gross Profits (less CocoMiel’s expenses) are shared with The Coffee Trust for projects that benefit their respective producers. It is my hope that by example, CocoMiel inspires other businesses to adopt similar practices that respect coffee producers as full partners and respects the coffee lands as the roots of our trade and as the roots of our lives. Another question begs to be asked. Do we have enough respect for the people who produce our coffee and enough respect for the land from which it is produced to pivot?
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2022 | STATE of the INDUSTRY
Chad Montgomery OWNER, CIVIL POUR
We have shortened our hours, so that we need slightly less labor than we need to. We removed as many monthly expenditures as possible too. For example, we downsized to one POS terminal, and reduced the subscription level on some of our monthly bills to reduce costs. This has helped us stay lean and efficient. So far, things have mostly remained constant based on our ability to pivot. We had to use every available government dollar to keep things afloat and keep our bills paid. We helped fellow businesses apply for and secure the necessary funding to also keep their doors open.
Darron Burk
PRESIDENT & CEO, BURKE BRANDS / DON PABLO COFFEE
We have been able to rely on our relationships in the industry to help mitigate issues related to supply and have also worked with our overseas partners to continue our expansion strategy, albeit from a distance via video chat and conference calls. We are also diversifying our business to include distribution of non-coffee items to help spread our risk across multiple markets.
Jeremy Gursey
PRESIDENT, COFFEE MANUFACTORY
To remain competitive and overcome these challenges we as a company have paid our employees livable wages, healthcare benefits and have also pulled labor from staffing agencies when we have large projects to get out. When we need parts for machines, we buy duplicate parts a lot of times to prevent supply chain shortages. With the loss of approximately 30% of the COFFEETALK MAGAZINE
hospitality sector clients due to Covid, we’ve changed our direction from targeting coffee for hotels, restaurants, and hospitality related businesses to opening our own licensed stores within the hospitality industry. This is allowing us to build brand awareness while focusing on a targeted high volume end user with little to no build out, operational, and upfront equipment cost. We have developed a team and curriculum to maintain our brand standards and educate our clientele. We’ve also focused heavily on growing the grocery sector with utilizing national food reps and pre-marketing new territories and regions to give people across the country an opportunity to try our coffee.
Kurt Shaw
PRESIDENT, SHAW SERVICES
Just keep working to get new and better clients that fit our business.
Olga L Cuellar G
FOUNDER AND CEO, PROMISING CROPS
As part of the core of our business, we have been communicating, transferring knowledge and technology, helping farmers comply with certification standards, adopting best agricultural practices successfully. Also, we engaged in diverse conversations with different stakeholders in the industry to understand the current challenges and evaluate how we, as consultants and services providers, can support them. One of our purposes is to make sure we include the voice from the producing countries' farmers to improve their quality of life, address their socio-economic challenges, and generate constructive conversations with coffee exporters, importers, roasters, and primary consumers. We believe that our strength in the industry has
WWW.COFFEETALK.COM
been generating alliances, creating direct relationships between farmers and buyers on the value chain, towards a more sustainable business model in a win-win scenario for all actors.
Oskar Rutishauser
ACCOUNT MANAGER COFFEE PROCESSING, BUHLER INC
Educate by sharing best practices. Able to share and show reference plants. Able to connect individuals in the same industries to discuss challenges.
Susan Freeman
OWNER, HIGHER POWER INVESTMENTS
We have responded to some comments but mostly have made those that comes in know our stance and feel comfortable with their choices. It has positively helped our traffic.
Tony Salas
CEO, SHARED-X
At Shared-X we have taken climate change seriously across all our businesses, even extending to our associated farmers. A priority is to focus on the soil. That is the backbone of sustainable success. We share leading regenerative agriculture technologies with our partners, demonstrating reduced costs, increased protection to the coffee plant, and certainty to the harvest. Using application of compost, soil microbes and biostimulants will become key. Specifically, each of our farming business led frequent technical trainings to demonstrate innovative farming practices to increase yields, manage diseases, and ensure the quality of each production. This win-win relationship with farmers has yielded tangible results: increased incomes, environmental sustainability awareness, and improved socioeconomic status.
STATE of the INDUSTRY | 2022
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2022 | STATE of the INDUSTRY
COFFEETALK MAGAZINE
{ Staffing Struggles } How are you dealing with staffing difficulty? What are you doing to encourage people to come to work and stay?
Bob Baker
OWNER, WHITE ROCK COFFEE
We've been consistently paying over industry wages and with our happy staff, they've been able to achieve a very high tip rate.
Chad Montgomery OWNER, CIVIL POUR
We have had no issue staffing our shop. In fact, we regularly must tell people we'll get back with them. For us, it's a matter of managing a culture employees love, paying at the top of the industry, offering paid time off, health, dental, and vision insurances, and we are quite busy, so our tips are also very good. We are also very flexible with employee scheduling.
Ray Peck
OWNER, WIND HORSE COFFEE & TEA
First, I come from there are people that want to work. I do not complain that there are not. I request a two-year minimum stay. I pay $2 to $3 over min. I offer PTO and a employer sponsored IRA. I look for like values. I meet their needs.
Gina Swan
OWNER, MURAL CITY COFFEE COMPANY
We have not had difficulty with staffing. Starting wages are above minimum and employees rightfully receive all tips.
Kurt Shaw
PRESIDENT, SHAW SERVICES
Not been a major issue. Biggest concern is keeping existing staff with labor costs on the rise and all the government incentives not to work. WWW.COFFEETALK.COM
Janet McAthie
CO-OWNER, CARMEL VALLEY COFFEE ROASTING CO.
We take good care of our long-standing employees by being empathetic to their needs and supporting them through their stresses. We also try to hire people who have worked through the pandemic and have shown some job stability. On the rare occasion we are under-staffed on a given day, we don’t ask for overtime from our baristas because they need life-work balance. Instead, we close the shop early and accept that it’s the business’ turn to take the hit. Employees that are a good fit will stay until life takes them away-we don’t expect everyone to stay, we expect them to be courteous and happy on the job and then to go follow their dreams, whatever that may be.
Ronny Billemon
AREA SALES MANAGER, PENTAIR WATER
It is hard to find qualified labor for many businesses these days. Encouraging people to join is to give them also faith, trust in their abilities. Attending coffee, events you will find some passionate people that might not yet be a Barista. Showing them the beauty of our coffee community and giving them some attention to improve that coffee passion can get them on board. Allow them to take part in the coffee selection procedure, let them join cupping and elaborate drinks, make them feel as part of the business rather than just an employee. And reward them with bonuses when business goes well.
STATE of the INDUSTRY | 2022
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Gerry Ford
CHAIRMAN AND GROUP CHIEF EXECUTIVE, THE CAFFE NERO GROUP
We are facing staff shortages all around the world. There is the combination of employees going off work during the depths of the pandemic and not coming back, and then pay inflation has been extensive everywhere. Nonetheless, relative to most other hospitality businesses, we have fared well. Many of our employees have stayed with us throughout the
pandemic, wages have been increased, and we have started to look at other practices such as retention bonuses. In our organization, employees have the ability to move up fairly rapidly, and that is helpful. We believe in internal promotion, so a barista can move to an assistant store manager within six months if they work at it. They can even move to a store manager within 12-18 months if they are committed and good. Further, we are coming out of this crisis ready to grow again,
opening stores and moving forward with our Coffee at Home products. So, there will be more opportunities in the days ahead for employees.
Susan Freeman
OWNER, HIGHER POWER INVESTMENTS
So far, I have not had difficulty hiring but may soon. As a small business owner, it is hard to compete with large franchises that are able to pay a higher rate.
There is a healthy consumer market willing to eat out and spend. How do you manage the opportunity to grow locations while dealing with staffing difficulties and slow openings due to equipment supply shortages etc.
Bob Baker
OWNER, WHITE ROCK COFFEE
Offering a "real" career in the coffee business, with several locations and a SCA certified lab, and training facility.
Chad Montgomery OWNER, CIVIL POUR
At the moment, we are balancing when we might open a new location and making sure to be attentive to our current staff and internal challenges. We have plans to open 1-2 more locations in 2022. As far as managing how to deal with that, we just promoted a staff member to be our general manager and help us as owners to order/procure what is needed. This will allow us time to hire when needed and expand the business.
CO-OWNER, CARMEL VALLEY COFFEE ROASTING CO.
We are focusing on the three shops and organic roasting facility we have and are not choosing to expand given the uncertainty of the pending market correction, supply chain and ongoing pandemic. We are counting our blessings and focusing on improving our operation. Bigger doesn’t necessarily mean more profitable.
Ray Peck
OWNER, WIND HORSE COFFEE & TEA
I do not look for expansion opportunities. There are many. I continually work the social marketing media formats to build on what we have.
Gina Swan
Ronny Billemon
We have decided to expand via mobile unit rather than another brick and mortar. The labor expense and overall cost or a large brick and mortar is not worth the return.
Where staffing is difficult, the newest generations fully automatic espresso machines can help. Rather the stability of the automatic than a bad barista behind the coffee machine.
OWNER, MURAL CITY COFFEE COMPANY
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Janet McAthie
2022 | STATE of the INDUSTRY
AREA SALES MANAGER, PENTAIR WATER
When equipment supply is an issue, there are basic brewing methods that can help start the business. There is nothing wrong with serving a high-quality filter coffee or cold brew. Thinking out of the box, the barista team should be able to deliver. Issue moments are sometimes the base for new concepts, new trends. When you bring out something different to handle issues, people will understand and might even reward you for it. Focus: deliver quality drinks!
Susan Freeman
OWNER, HIGHER POWER INVESTMENTS
We have trimmed be our evening close by time to allow more staff hours during the busy weekend days. We moved from a 9 pm close to a 7 pm close since we were basically paying a staff person to be there babysitting the customers. When the bulk of our clientele, and staff, are home on break (we are located in a college town) we trim or hours even more.
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STATE of the INDUSTRY | 2022
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{ Sustainable Strategies } What solutions can you suggest for a more sustainable future for our industry?
Brandon Woods
CHIEF MARKETING OFFICER, SHARED-X
A new model of regenerative agriculture focused on smallholder farmer access to technologies and premium markets, thus empowering both producers and consumers. By working closely with smallholder farmers to increase yields, quality, and options for market access, farmers earn more for their crops while telling a more direct story to consumers. In addition, regenerative agriculture provides a pathway to sustainable coffee farming by reducing pesticides and increasing the use of biostimulants, offering higher than market pricing with bonuses for quality, and ensuring a strong socioeconomic foundation for farming communities by providing jobs, infrastructure improvements, and opportunities for additional education.
James Kosalos
PRESIDENT, SAN CRISTOBAL COFFEE IMPORTERS
We should be looking for alternatives to commodity pricing of coffee. The problem with commodities pricing is that all the prices are based on availability without regard to the cost of production. Every producer does everything they can to reduce the cost of production, including abrogating all responsibility to the environment { 18 }
2022 | STATE of the INDUSTRY
and for the maintenance of a quality product. We have been working to help producers with harvest financing and market access; we have done this by promoting a substantial increase in consistent quality while simultaneously raising the efficiency of production. Our experience shows that a consistent quality product can be sold for modest and consistent prices that are only loosely tied to the commodities market. We firmly believe the best way to make coffee more sustainable is to change the focus and view the business from the bottom up, instead of from the top down. The impact of the Coffee Quality Management Systems on the wellbeing and market access potential of producers at origin is vast. Grupo Terruño Nayarita (GTNay), in Mexico is as an example. GTNay has some 400 producer members plus another 300 associate producers, spread throughout six coffee producing communities and eight producing societies across the state of Nayarit. Without a QMS (Quality Management System) and a centralized corporate structure in place, any one producer from one of these locations has no guarantee they will have a buyer for a given harvest, and they have no insurance if their coffee quality is not good. This producer would be left to the whim of
pricing offered by coyotes (as regional middlemen are called in our part of Mexico) and would be forced to view other producers and/or neighboring communities purely as competition. With the umbrella organization and a coffee QMS in place, however, each producer receives assurance that his or her coffee fruit will be transformed into the highest quality coffee possible and will be sold into the highest value market possible.
Elif Özbey
FOREIGN TRADE OPERATION REPRESENTATIVE, TEKNIK ISISAN
Question of Coffee Grinding- We believe that in order not to harm planet more, coffee grinding industry needs to lean more on using electrical heating elements, rather than gas.
Ron Kleist
PRESIDENT, VORTX KLEANAIR SYSTEMS
Which is more important: reducing local air pollution or slowing GHG emissions? Talk about being on the horns of a dilemma! Climate science supports the idea that greenhouse gas emissions from burning of fossil fuels is the major culprit behind acceleration of global warming. Specialty coffee roasters prefer to be close into their consumer base and therefore grapple with the keeping their emissions below the point where their neighbors COFFEETALK MAGAZINE
are offended and at the same time many feel a moral obligation to not contribute further to GHG emissions. Should governments impose more stringent environmental protection
regulations to deal with GHG emissions or wait for people of good will to act on their own? If GHG emissions are a threat to mankind, then a global response is called for. Of course, not
all nations will choose or be financially able to follow stringent regulations. Perhaps coffee, a globally sourced/ roasted commodity, can provide a leadership example to the world.
Green coffee prices are at an all-time high. How long do you see this trend lasting?
Christopher Marsitto
VP OF BEVERAGE OPERATIONS, CULT ARTISAN BEVERAGE COMPANY
I feel like an increase in the green market was necessary for the sake of the farmers. The market has been too low for way too long! If you look at the process and the labor of love that goes into coffee farming or farming in general, it amazes me that a cup of coffee doesn't cost thirty dollars. Many of us don't recall the market being in the three-dollar region in 1977 and close to
it more recently in 2010 and how it was dealt with. I feel we will get close to that point again for the next year and then will see a drop off like in the past as we reach a "normal", whatever that may be.
size of breakage we will have. If the breakage is big, prices will continue this strong pace the rest of the year.
Bruno Giestas
This is price roller-coasting... We will see a decrease in the prices, hopefully soon. For those who are fervent admirers of Arabica (80% rise in prices), please be patient and do not be tempted by the Robusta timid price increase (30% rise)
COMMERCIAL DIRECTOR, REALCAFÉ SOLÚVEL DO BRASIL S.A.
I think prices will continue strong and with some increase at least until Mar/Apr/22 just before the next harvest. Depending on the actual
Amin Younes
MANAGING PARTNER, CAFE YOUNES
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STATE of the INDUSTRY | 2022
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Luzius Wipf
FOUNDER, LUZIKAFI
I hope forever. It cannot be that for a cup of $5 the farmer gets only 5 cents. There is a lot of room to the top. Usually for any product the material costs are one third of the sales price. That would mean when roasted coffee is sold today at $12 per kg, the coffee cost is about 10 cents a cup, what shall make it possible to price a cup of an espresso at $1.
Cory Gilman
STRATEGIC INITIATIVES MANGER: COFFEE & COMMODITIES, HEIFER INTERNATIONAL
I think it’s important to remember green coffee prices are high comparatively to the last few years; they’ve not only been higher historically, but the market does not take into account inflation, so these prices should be considered a baseline for the new normal— a normal that starts to return more equitable value distribution at origin. We should be embracing these new prices as a toward
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2022 | STATE of the INDUSTRY
economically sustainable sourcing. This is an opportunity to more deeply embed producer livelihoods into strategic plans and ensure everyone has the chance to achieve dignified livelihoods. The future of coffee is farmers. So, let’s celebrate mechanisms that provide reasons and avenues to keep this industry going strong.
Monica Boringer CFO, WINECOFFEE
I feel that there is no estimated date, since it will depend on the behavior of the markets and especially on the continuation of the pandemic
Robert Thurston
MANAGING PARTNER, OXFORD COFFEE COMPANY
Until Brazil's coffee crop rebounds in 2022-23. With nearly every coffee producing country trying to increase output, I see no chance in the next decade or longer for green coffee. Prices depend above all on the
Brazilian crop. Maybe climate change will begin to cut into production, but so far, we have not seen that result.
Dawn Berry
OWNER, THE RED BRICK CAFE & GIFT HOUSE
I think with the supply chain issues this will carry on for at least another year. With the control that unions and governments are trying to exert it makes an accurate guess even more challenging.
Erick Smithe
FOUNDER, CLOUDWALKER TEA
2-3 years would be the best guess. Increased automation in transportation logistics will be needed to stay the current free for all on pricing. I believe that as the drive toward home consumption increases, the general perception will be that the cost of use has decreased, while this is only relative to buying at a cafe.
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{Supply Chain Solutions} What are some of the major adaptations you have made to alleviate supply chain issues in your company?
Anna Gutierrez
is in our coffee plant also we help them to sell the coffee to importers.
We have really tried to work closely with our manufacturers and purchasing team to be as proactive as possible with potential inventory issues. We are tracking daily and weekly volume trends as well as meeting monthly to discuss new customers on the horizon as well as upcoming seasonal product spikes. We have upped our inventory to give us more flexibility on freight timelines and have also suggested the same for our customers and it has helped a ton! Our products all being made in the United States has been a great benefit as well.
Salinawati Salehuddin
DIRECTOR OF BRAND DEVELOPMENT BARISTA 22, BARISTA 22
Nelly Manzanares
MANAGER, EXPORTADORA DE CAFÉ DE OCCIDENTE, S DE RL
We have coffee export license and a plant production to prepare the coffee to export. We have our local bank line financing to help small producer or cooperative to have access to money at the moment the coffee
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2022 | STATE of the INDUSTRY
CO-FOUNDER, NEKOFFEE CAFE
Resourcefulness, agility, and flexibility is few adaptations to ensure that my company does not experience highrisk operational disruption. Working directly with the manufacturer of the product and diversifying the suppliers. Optimizing Company Inventory and capability in improvising when facing possible operational disruption.
Chad Montgomery OWNER, CIVIL POUR
We've had to look to a variety of vendors to supply everything we need, including local mom and pops, physical in-person stores, online retailers, and more.
Susan Freeman
OWNER, HIGHER POWER INVESTMENTS
We have not made any changes but just explained that we are out of an item. It had mostly affected our
frozen prepared bag asked goods. We had a few scares on paper products but ended up getting them okay. We did stop using Styrofoam for some take out packaging and started using paper bags instead.
Gerry Ford
CHAIRMAN AND GROUP CHIEF EXECUTIVE, THE CAFFE NERO GROUP
We have had to switch our primary distributor because they were unable to deliver with the same frequency and were forced to raise prices. We managed to consolidate our distribution with minimal disruption. However, this was a painful experience. It wasn't the distributor's fault, as they are under wage inflation and staff shortages. It has meant we have had to consolidate our product range and live with less frequent deliveries for the time being. It has not changed our offering too much but certainly has meant a lot of work behind the scenes to adjust.
COFFEETALK MAGAZINE
How are you communicating with customers why products or services are missing?
Chad Montgomery OWNER, CIVIL POUR
Luckily, we haven't had too much issue with not being able to get something at all. We've had to search extensively on some things, but nothing has gotten completely out of stock.
Nelly Manzanares
MANAGER, EXPORTADORA DE CAFÉ DE OCCIDENTE, S DE RL
We have an excellent relationship with customers through the 36 years in the coffee industry. To be an exporter in Honduras we must have an investment of about one million dollars in machinery and
installation. We just let them know at POS since there is already too much signage and they don't pay attention to most signs. Most have come to expect outages so don't usually ask.
Salinawati Salehuddin
CO-FOUNDER, NEKOFFEE CAFÉ
Spreading awareness through all means of communication, including face-to-face and social media. Being open is one of the most important factors in ensuring that customers understand why a product or service is unavailable. It's a win-win situation for both my company and my customer.
Susan Freeman
OWNER, HIGHER POWER INVESTMENTS
We just let them know at POS since there is already too much signage and they don't pay attention to most signs. Most have come to expect outages so don't usually ask.
Kurt Shaw
PRESIDENT, SHAW SERVICES
By email and when available in person.
How can we improve the situation with the supply chain? Is it a problem for the trucking industry or someone else? What can the coffee community do to improve goods and supply?
Nelly Manzanares
Salinawati Salehuddin
Kurt Shaw
Having more access to local bank financing. We are at the beginning of the crop in Honduras. It is important to have shipping instructions in advance to book the contracts and to ship at time. There is a lot work to do in the coffee field. Coffee producers needs to learn more about how to cut the coffee and avoid problems in cup. Must be more aware about organic production.
Improvement is related to governance over the supply chain. A council that offers a clear strategy for functionality and efficiency to companies and businesses. The Council's aim is to give directions and align the supply chain strategy with the company’s core goals, which helps in removing barriers within the organization. To ensure seamless and effective supply chain management in the future.
Just keep the green coffee supply coming into the country.
MANAGER, EXPORTADORA DE CAFÉ DE OCCIDENTE, S DE RL
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2022 | STATE of the INDUSTRY
CO-FOUNDER, NEKOFFEE CAFÉ
PRESIDENT, SHAW SERVICES
COFFEETALK MAGAZINE
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{ What's Next } There was a boon of products but nowhere to put them in 2020, now there are limited products and limited labor and increasing inflation.... What do you think the next turn in the wake of the pandemic will bring? Amin Younes
MANAGING PARTNER, CAFE YOUNES
Dark kitchens, and, if I dare say it: dark coffee bars! I am afraid that we will be selling coffee and coffee-based beverage only through delivery. At the risk of deleting the coffee shop experience from our lives.
Bruno Giestas
COMMERCIAL DIRECTOR, REALCAFÉ SOLÚVEL DO BRASIL S.A.
2021 was a very challenging year with all sorts of problems caused mainly by the pandemic. Problems like inflation will still be on in 2022. The coffee will be specially impacted due to the long drought and frost that may cause a big breakage in next year's crop. We may see prices going even higher.
OWNER, THE RED BRICK CAFE & GIFT HOUSE
It is going to be very challenging. As a cafe owner in Ontario’s north, it has been even more challenging because we were limited as to what we could get before the pandemic.
Erick Smithe
I believe that areas with less government restrictions will thrive, while those areas that might have governments intervene in their ability to do business will be hampered. We are in Texas and believe we'll mostly be shielded from these issues.
I see a significant shift in the way people interact with their tea/coffee. A shift further into craft and away from gimmick, for some, and a far greater reliance on automation for others.
Monica Boringer
FOUNDER, LUZIKAFI
CFO, WINECOFFEE
Product shortage, and this will be reflected in the cost, possibly restructuring of several production companies in personnel, costs, and production.
Ray Buerger
CEO- FOUNDER, BREW BOMB COLD BREW EQUIPMENT
Something has to change. How can the specialty coffee industry endure both rising costs and a labor shortage and keep the “Specialty” in Specialty Coffee? An impossible task if one is looking to the past, but a smart future may have some 2022 | STATE of the INDUSTRY
Dawn Berry
Chad Montgomery OWNER, CIVIL POUR
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answers. The choice can quickly boil down to sacrificing excellence for something that is generally acceptable since the challenges of scaling excellence are seemingly impossible. But is it really? We live in a world where a car was driven up and down every road on the planet and now this information is readily available on a device that fits in your pocket? Come on Specialty Coffee, let's re-imagine the solution and innovate!
FOUNDER, CLOUDWALKER TEA
Luzius Wipf
I hope the trend to more added value for the farmer will persist. Even when coffee export prices will double, the end consumer shall pay less for his drink. Coffee is a simple drink to make, and the supply chain and margin should be as lean as possible.
Susan Freeman
OWNER, HIGHER POWER INVESTMENTS
We may see more focus return to environmentally friendly choices especially in our packaging though that will be hard especially for small businesses due to the cost. COFFEETALK MAGAZINE
There has been a focus on product development for consumer single use products this year. What do you believe the focus will be on for 2022?
Gina Swan
OWNER, MURAL CITY COFFEE COMPANY
I do not have any clue what product development focus will be on, however I do think the single use trend will at least in part continue.
Ronny Billemon
AREA SALES MANAGER, PENTAIR WATER
Certainly, with covid, single use solutions are high in the picture. However, a lot of them do deliver quite some trash. Focus 2022 should be to handle that trash, go local, go for more ecologic and sustainability all the way. There is a wide range of affordable compact espresso machines coming to the market that can produce small espresso as well as a jug americano coffee. Such developments offer flexibility and minimize waste, enhance the sales of freshly roasted coffee beans. Compared to cost of single use solutions, the customer can go for higher quality coffees at similar total cost. Better quality will again boost the specialty market, bring the expertise of the local coffee roaster in the picture, local economy revival. Focused to deliver quality and variety should also benefit the farmers as they are producing the base ingredient and delivering higher quality they will be paid more for their work. A win-win for everyone.
Gerry Ford
CHAIRMAN AND GROUP CHIEF EXECUTIVE, THE CAFFE NERO GROUP
During the pandemic, there was a movement toward convenience and coffee products consumed at home. When the pandemic subsidies, I don't see this trend going away. People will still visit coffee houses, but they will also consume at home more often. More people are working from home, and more WWW.COFFEETALK.COM
customers have started ordering coffee products online. Technology emphasizing convenience, from a click of a button getting the customer home delivery to having their product ready in-store, will continue to grow. Coffee at home products will be more available and accessible than ever before with more choice. Amazon or others delivering coffee products to your house will increase. I think there will also be a bit of a flight to quality. With more product accessibility will come a desire to have higher quality products if they are not too expensive.
Chris Burger
DIRECTOR, COFFEE PACKAGING, FRES-CO SYSTEM USA, INC.
Originating from a trend we have seen in Europe, in 2022 we believe the focus will move away from single-cup coffee products and into bean-to-cup machines. This type of machine solves multiple issues, including addressing sustainability, rising single-cup costs, and quality of the cup. The consumer can simply buy a large bag of fresh, whole bean coffee, pour the entire contents into the bean-to-cup machine, and fresh brew a single serving of coffee. A prime example of a next generation bean-to-cup machine is the Spinn coffee maker that allows the user the dictate exactly what style of coffee they desire, all while using fresh, whole bean coffee.
Kurt Shaw
PRESIDENT, SHAW SERVICES
I believe it will be the same
Susan Freeman
OWNER, HIGHER POWER INVESTMENTS
Pick-up and delivery will continue to be a big demand but methods of fulfillment may change. STATE of the INDUSTRY | 2022
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Home consumption increased dramatically in 2020 and continued at a high level through 2021. Do you feel this trend will continue and how are you preparing for it?
Amin Younes
Erick Smithe
This will depend on new viruses and new variants of the virus. The more we will spend our time confining in the not-so-pleasing-anymore comfort of our home, the more coffee we will be consuming. And for those who are still tempted by their specialty cup of java, made by the neighborhood's local barista, we will see a further increase in the consumption of fancy coffee preparation methods
I highly encourage home consumption. It is the model which allows for total creative control and concentrated action. This is far more significant in the ethos of tea — but relevant in coffee considering health concerns.
Bruno Giestas
Luzius Wipf
MANAGING PARTNER, CAFE YOUNES
COMMERCIAL DIRECTOR, REALCAFÉ SOLÚVEL DO BRASIL S.A.
We do not see that consumption increased in 2021 but the opposite. It might increase in some niches in detriment of other segments, but in general both here in Brazil and worldwide the higher costs are already causing a reduction of consumption of coffee and most probably replacement by another cheaper product.
Chad Montgomery OWNER, CIVIL POUR
We noticed a trend back towards prepared drinks in our cafe, and reduced home preparation. For us, this is perfectly fine because we'd rather make drinks than sell bags of beans to-go.
Dawn Berry
OWNER, THE RED BRICK CAFE & GIFT HOUSE
We have seen a drop in customers due to this trend. We are really starting to push the atmosphere at the cafe that you don’t get at home. { 28 }
2022 | STATE of the INDUSTRY
FOUNDER, CLOUDWALKER TEA
Kurt Shaw
PRESIDENT, SHAW SERVICES
Yes, we are focused on how to gain more market share. FOUNDER, LUZIKAFI
The way is to provide the home consumer with freshly roasted premium quality coffee beans, that he can make himself a great pour over or cold brew drink without any use of expensive equipment.
Monica Boringer CFO, WINECOFFEE
Yes, because today more people are in the home office, and this increased consumption locally and this will continue during 2022.
Robert Thurston
MANAGING PARTNER, OXFORD COFFEE COMPANY
Yes, it will continue. We are trying hard to persuade people to take a little more time and care to brew coffee than they put into using pods, capsules, or most electric drip machines. People need to use whole beans, grinders, scales, and filters at home.
COFFEETALK MAGAZINE
Thank You TO OUR CONTRIBUTORS THIS ISSUE
Amin Younes { MANAGING PARTNER – CAFE YOUNES } Anna Gutierrez { DIRECTOR OF BRAND DEVELOPMENT – BARISTA 22 } Bill Fishbein { OWNER – THE COFFEE TRUST & COCOMIEL } Bob Baker { OWNER – WHITE ROCK COFFEE } Brandon Woods { CHIEF MARKETING OFFICER – SHARED-X } Bruno Giestas { COMMERCIAL DIRECTOR – REALCAFÉ SOLÚVEL DO BRASIL S.A. } Chad Montgomery { OWNER – CIVIL POUR } Christopher Marsitto { VP OF BEVERAGE OPERATIONS – CULT ARTISAN BEVERAGE COMPANY } Cory Gilman { STRATEGIC INITIATIVES MANGER: COFFEE & COMMODITIES – HEIFER INTERNATIONAL } Darron Burke { PRESIDENT & CEO – BURKE BRANDS / DON PABLO COFFEE } Dawn Berry { OWNER – THE RED BRICK CAFE & GIFT HOUSE } Elif Özbey { FOREIGN TRADE OPERATION REPRESENTATIVE – TEKNIK ISISAN } Erick Smithe { FOUNDER – CLOUDWALKER TEA } Gina Swan { OWNER – MURAL CITY COFFEE COMPANY } James Kosalos { PRESIDENT – SAN CRISTOBAL COFFEE IMPORTERS } Janet McAthie { CO-OWNER – CARMEL VALLEY COFFEE ROASTING CO. } Jeremy Gursey { PRESIDENT – COFFEE MANUFACTORY } Kurt Shaw { PRESIDENT – SHAW SERVICES } Luzius Wipf { FOUNDER – LUZIKAFI } Monica Boringer { CFO – WINECOFFEE } Nelly Manzanares { MANAGER – EXPORTADORA DE CAFÉ DE OCCIDENTE, S DE RL } Olga L Cuellar G { FOUNDER AND CEO – PROMISING CROPS } Oskar Rutishauser { ACCOUNT MANAGER COFFEE PROCESSING – BUHLER INC } Ray Buerger { CEO- FOUNDER – BREW BOMB COLD BREW EQUIPMENT } Ray Peck { OWNER – WIND HORSE COFFEE & TEA } Robert Thurston { MANAGING PARTNER – OXFORD COFFEE COMPANY } Ron Kleist { PRESIDENT – VORTX KLEANAIR SYSTEMS } Ronny Billemon { AREA SALES MANAGER – PENTAIR WATER } Salinawati Salehuddin { CO-FOUNDER – NEKOFFEE CAFE } Susan Freeman { OWNER – HIGHER POWER INVESTMENTS } Tony Salas { CEO – SHARED-X }