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By M. Marin
OTC:SWSSF | TSX:SWP.TO
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Poor growth conditions, expected tariffs placing upward pressure on coffee bean prices… patterns in time.
British Columbia-based Swiss Water Decaffeinated Coffee Inc. (OTC:SWSSF) (TSX:SWP.TO) is a leading specialty coffee company and premium green coffee decaffeinator focused on producing chemical-free decaffeinated coffee. Prices for coffee beans have increased, reflecting a variety of factors including crop harvests and the expected imposition of tariffs.
According to Coffee Intelligence, prices broke the $4 per pound level last month, which represented a new high. The Coffee C futures contract, which is the global benchmark for Arabica coffee, recently reached their highest levels since the early 1970s. Combined with the potential for tariff impositions and greater regulator focus on sustainable sourcing, there could be further upward pressure on coffee prices as 2025 progresses. The trade publication notes that the upward pressure reflects factors including climate conditions that have hurt the production of coffee such as a recent severe drought in Brazil and geopolitical tensions including expected tariffs.
Not surprisingly, commodity prices of the coffee beans play a significant role in prices to consumers. In fact, in response to higher coffee prices, many coffee shops are raising prices of the beverages they prepare for customers, according to trade publications. In turn, this could hamper consumer demand for coffee in the short-term, we believe, and potentially constrain SWP’s volume shipments in the short-term. In fact, SWP had indicated that it anticipates that rising futures prices could have a temporary constraining impact on demand in the immediate aftermath of prices climbing, potentially pressuring Swiss Water volume shipments to coffee roasters.
We believe that consumers will get past the initial sticker shock…
It would not surprise us if consumer purchases and overall consumption of coffee declined temporarily, but we believe the popularity of coffee beverages will lead consumers to find ways to continue coffee consumption patterns. We believe that consumers will get past the initial sticker shock and, if consumption declines temporarily, return to normal consumption patterns in time.
Coffee ranks among the top beverages consumed and consumption has been growing, with consumption of decaffeinated coffee outpacing general growth. According to the National Coffee Association’s (NCA's) Spring 2024 National Coffee Data Trends (NCDT) report, daily coffee consumption in the U.S. reached a 20-year high in 2024, with some 67% of American adults reporting that they “had coffee in the past day (more than any other beverage). The spring 2024 study also found that 75% of U.S. adults had consumed coffee in the past week, which represents a 4% year-over-year advance compared to their Spring 2023 study.