Yahoo Finance

By M. Marin

OTC:SWSSF | TSX:SWP.TO

READ THE FULL SWP.TO RESEARCH REPORT

Rising consumption of ‘decaf’ & specialty coffees important are growth drivers that are expected to continue…

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. The company’s proprietary Swiss Water® Process is a chemical-free coffee decaffeination process that is certified organic by the Organic Crop Improvement Association.

Key expected catalysts for Swiss Water growth

• Rising consumption of coffee generally

• Market share gains of the decaf category

• Growing popularity of specialty coffee beverages and company focus on premium category

• Consumer concerns around drinking caffeine later in the day

• Growing consumer interest in natural, chemical free food and beverages

Recent industry outlook pieces suggest that positive catalysts for Swiss Water Decaffeinated Coffee growth will continue. We believe Swiss Water Decaffeinated Coffee is poised to benefit from several factors, including rising consumption of decaffeinated coffee and, reflecting its 100% chemical-free decaffeination process, the growing consumer trend towards natural and more healthful food and beverages (F&B) and expanding decaf choices within the premium or specialty coffee beverage niche.

Beverage industry consultancy Ripples expects, “Health and wellness trends will influence coffee consumption. As people become more health-conscious, they will seek healthier options.” Separately, a 2025 outlook report from food conglomerate Nestle points out that about “82% of U.S. consumers currently view wellness as a top or important priority in their lives.” This is a likely factor behind why demand for organic coffee continues to rise. Reflecting that the company’s proprietary decaffeination process is 100% chemical-free, we see this as a positive for Swiss Water.

The Nestle report cited above also anticipates a growing focus on specialty coffee, which it notes “is increasingly considered a “little treat,” especially among Gen Z consumers. Decaffeinated choices within the premium segment are expanding, which we see as another positive for Swiss Water. Reflecting numerous factors including more healthful consumer choices and expansion of the specialty coffee niche, the decaf segment is growing and that trend is expected to continue. Te decaf category has room to gain market share, as it currently comprises only roughly 15% of coffee consumed in the U.S. and about 12% in Western Europe.

Coffee futures point to possible price increases, which could have temporary negative impact on demand for Swiss Water decaffeinated coffee…

Coffee futures have been volatile and under upward pressure. In 2Q24, they peaked at US$2.48/lb in mid-April. In 3Q24, the NY’C’ coffee futures price for Arabica coffee continued to display volatility, peaking at US$2.74/lb in late September. Over the span of the quarter, pressure on the futures market grew.

Combined with the potential for tariff impositions and greater regulator focus on sustainable sourcing, there could be further upward pressure on coffee prices in 2025. In turn, higher coffee prices could result in lower consumer demand in the immediate aftermath of prices climbing and also pressure Swiss Water volume shipments to coffee roasters.

Price increases could have a temporary negative impact on demand. Coffee futures price for Arabica coffee have been volatile, signaling potential increases in coffee prices that could constrain sales in the short-term. If so, we view the impact as short-term.

SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR. 

DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.