Home Coffee product Coffee Holding expects coffee price rally to continue – Commodity Commentary

Coffee Holding expects coffee price rally to continue – Commodity Commentary


By Marie de Wet

Coffee Holding Co. expects higher coffee prices to continue, although the wholesale coffee roaster and marketer faces rising costs amid rising steel and carbon prices. freight.

On his coffee business:

“After years of depressing coffee prices, this year has seen a return to a more traditional coffee market, characterized by sharp price fluctuations on a weekly basis and increasing trading volumes with heightened volatility,” said said President and CEO Andrew Gordon.

“We believe that higher coffee prices, partly caused by dry weather and a frost in July in Brazil, will continue in the near term, as the market recalibrates the shift in global supply and demand fundamentals. “, Mr. Gordon said.

“Although higher coffee prices proved beneficial to us in the second half of fiscal 2021 due to our ability to manage and control our green coffee inventory costs, we were not immune to the same factors affecting costs and the overall economy, including supply chain and inflationary pressures.

“Our costs for packaging supplies, particularly for the cans we use for our roast coffee products, have increased dramatically due to the increase in the price of steel.

“Freight also remained a challenge, as shipping costs for our roasted products increased by approximately 30-40% for many locations compared to fiscal 2020.

“Fortunately, we were able to pass on a percentage of these cost increases to many of our customers, but the net result had a negative impact on our profitability.

“However, given that over 50% of our total business is the sale of green coffee to small and medium sized roasters, we believe that current increases in coffee prices and the value of our current inventory should more than offset cost increases that remain outside of our control, as confirmed by our gross margin increase of seven basis points in fiscal year 2021, providing us with a strong positive wind of support as we approach the fiscal year 2022,” Gordon said.

On cannabidiol:

“While our initial entry into the CBD market was disappointing, we continue to believe that once the economy fully reopens, as well as continued changes in the regulatory environment surrounding the CBD industry, the sales potential of our CBD coffee offerings will improve dramatically,” Gordon says.

“However, we believe that the lack of face-to-face meetings and lack of trade show attendance has hampered our ability to introduce a new product concept like CBD Coffee to the market.

“Additionally, online sales of our Café Caribe and Harmony Bay CBD tumblers did not make up for the lack of sales we had originally anticipated at brick-and-mortar retail locations.”

Write to Mary de Wet at [email protected]