Say It Ain’t So — Now There’s a Coffee Supply Chain Shortage?
This blog was written by Bryant Miller, Corporate Communications, with insights from Jim Hull, Senior Industries Strategy Director at Blue Yonder
I could handle the toilet paper shortage — I wanted a bidet anyway. No chicken wings? Bring on the thighs. Eighteen months to wait for a new sofa? Eh, my old one is just fine. But you’ll have to pry the coffee from my cold dead hands before I accept any substitutes for my precious life juice.
Okay, maybe I’m being a bit dramatic, but coffee has gotten me through, well… everything… and now it’s in short supply.
So, what’s going on with your cup of Joe? The better question is: what isn’t? Let’s start with the summer drought in Brazil, the worst the country has seen in nearly a century. Since the South American nation provides a third of the global coffee supply, the higher-than-average temperatures and lower-than-average rainfall aren’t good news for farmers or java drinkers anywhere.
If devastating weather wasn’t enough, the supply chain is also pummeled with port closures and delays due to COVID-19 outbreaks and labor shortages at every stage of the process. So even if the beans manage to reach their entry port, they may spend extra days or even weeks at anchor waiting for a berth, only to find there might not be workers to unload the cargo, drive the trucks, or even roast the brews.
To get to the bottom of the cuppa crisis, Jim Hull — our Senior Industries Strategy Director and go-to retail expert — shared three predictions for what’s next with the coffee shortage: coffee substitutes will rise; soda sales will increase; and big coffee will prevail, but at a cost.
Coffee substitutes will rise
If you’ve spent any time on TikTok, you’ve undoubtedly seen the date seed coffee that’s been trending all summer long. Gen Z-ers all over the world are removing the pits from dried dates, roasting and grinding them, and then brewing a coffee-like beverage they swear rivals the original.
Maybe you’re not ready to trade in your morning cuppa for date seeds just yet, but we certainly predict the rise of coffee substitutes — especially tea, matcha, yerba mate, and energy and CBD beverages. Back in 2019, alternatives had already started an upward swing because of health benefits, and now with the added coffee shortage, we don’t see this direction changing anytime soon.
Soda sales will increase
After years of decline, soda is back. The carbonated soft drink (CSD) industry saw sales of $32 billion and a 9% year-over-year increase as of May 16, which most experts agree is due to familiarity and comfort during very challenging times.
And we don’t see the juggernaut CSD brands missing out on the opportunity to nab even more market share. We predict that soda will capitalize on any gaps left with caffeine seekers who might not be willing to make the switch to coffee substitutes or pay the premium spike for java.
Big coffee will prevail, but at a cost
Much like with other supply issues, bigger brands will be able to navigate the coffee shortage better than small, independent roasters. The bigger the player, the more purchasing power. It’s the same concept as how music superstars can still order timely vinyl records, while indie artists are waiting 12-24 months for an album to be pressed. Or how Target can send its own cargo ship to China to pick up goods, while smaller retailers have their orders waiting 70 ships deep at a port in Long Beach.
But all this comes at a cost. In fact, arabica bean prices were up 6% as of July 20, and they’re expected to continue increasing for the foreseeable future. So, you’ll likely be able to still get your favorite morning jolt — if you’re willing to pay.
Preparing for the future of coffee
No matter what happens with the coffee shortage or trends with substitutes and sodas, visibility powered by data science is the key to navigating the supply chain of today and tomorrow. Relying on historical data simply won’t work anymore in a world where pandemics and climate change create new challenges every day. Using artificial intelligence (AI) and machine learning (ML) to predict and pivot in real time will help ensure the right caffeinated concoction is delivered at the right place at just the right time.
To learn more about supply chain shortages and our predictions to navigate them, head over to our thought leadership hub: https://blueyonder.com/thought-leadership