What Does a $3.00 C-Market Mean for My Store?
I was recently in a conference room listening to smart coffee people talk about the current price volatility in coffee. Here ‘s basically what was said:
- A $3.00 C-market price could happen this year. Everyone in the coffee business should develop a plan for that scenario – just to be prepared.
- What goes up must come down. So yes, there are strong forces driving up prices (like demand over supply and continued trading volume from speculators), but some sort of correction seems likely before the new equilibrium price is established. We should all have a plan for that scenario.
- The cost difference between low quality and high quality coffee is getting smaller on an absolute scale. So the risks of value engineering blends (like reducing the quality of the product) might now outweigh the rewards.
- It is highly unlikely that people will start drinking worse quality coffee than they’re used to. Specialty coffee continues to grow in dollar volume and total consumption at retail. Private brands are in a good position because of their long term margin advantage over national brands. (Reminder: Your private brand coffee costs you less than 3rd party brands. Or at least it should.) And no 3rd party coffee brand will be able to source better coffee for less. There are no secret farms in China that deliver better quality for half the price. So there is no need to panic. All retail prices will go up. So should yours.
This last point is critical. How much and when are the two decisions you need to make. Here’s a little cheat sheet to get you thinking about pricing moves you should consider given your situation: