{"id":411,"date":"2017-09-23T10:11:22","date_gmt":"2017-09-23T09:11:22","guid":{"rendered":"http:\/\/unitedbaristas.com\/blog\/ub\/2017\/09\/predictions-on-the-near-future-price-of-coffee\/"},"modified":"2022-01-14T10:33:23","modified_gmt":"2022-01-14T10:33:23","slug":"predictions-on-the-near-future-price-of-coffee","status":"publish","type":"post","link":"https:\/\/unitedbaristas.com\/articles\/insights\/predictions-on-the-near-future-price-of-coffee\/","title":{"rendered":"Predictions on the Near-Future Price of Coffee"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div>\n<h4 class=\"wp-block-heading\">Here\u2019s why specialty coffee cup prices are going to rise \u2013 and why you should act&nbsp;now.<\/h4>\n\n\n\n<!--more-->\n\n\n\n<p>Last week we published an article explaining how coffee propositions can be developed into more viable niches using the concept of <em>The Iron Triangle<\/em>.<\/p>\n\n\n\n<p class=\"has-text-align-right advance-link-arrow\"><a href=\"https:\/\/unitedbaristas.com\/blog\/insights\/2017\/09\/insights-from-the-iron-triangle\/\">Read insights from the Iron Triangle<\/a><\/p>\n\n\n\n<p>In summary, this concept puts forward that the three permutations of <em>fast<\/em>, <em>cheap<\/em>, and <em>quality<\/em> are viable, but offering all three is not.<\/p>\n\n\n\n<p>This means specialty coffee business are likely to segment into:<\/p>\n\n\n\n<ul><li>Fast and cheap (lower quality)<\/li><li>Fast and quality (more expensive)<\/li><li>Cheap and quality (slower)<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"800\" src=\"https:\/\/unitedbaristas.com\/wp-content\/uploads\/2017\/09\/Iron-Triangle-Venn.png\" alt=\"\" class=\"wp-image-3804\" srcset=\"https:\/\/unitedbaristas.com\/wp-content\/uploads\/2017\/09\/Iron-Triangle-Venn.png 1200w, https:\/\/unitedbaristas.com\/wp-content\/uploads\/2017\/09\/Iron-Triangle-Venn-300x200.png 300w, https:\/\/unitedbaristas.com\/wp-content\/uploads\/2017\/09\/Iron-Triangle-Venn-600x400.png 600w, https:\/\/unitedbaristas.com\/wp-content\/uploads\/2017\/09\/Iron-Triangle-Venn-768x512.png 768w, https:\/\/unitedbaristas.com\/wp-content\/uploads\/2017\/09\/Iron-Triangle-Venn-416x277.png 416w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><figcaption>The three ways The Iron Triangle concept proposes speciality coffee propositions can develop.<\/figcaption><\/figure>\n\n\n\n<p>We also pointed out that at present many specialty coffee shops are trying to offer all three qualities\u200a\u2014\u200aand therefore find themselves with limited profitability&nbsp;.<\/p>\n\n\n\n<p>We took the time to write the article because we wanted to suggest that it is the industry\u2019s cultural norms\u200a\u2014\u200arather than consumers\u2019 preferences\u200a\u2014\u200athat is currently shaping many speciality coffee shop\u2019s propositions. If you haven\u2019t already read the article, we suggest <a href=\"https:\/\/blog.unitedbaristas.com\/insights-from-the-iron-triangle-e42bddb456da\" target=\"_blank\" rel=\"noreferrer noopener\">you read at least the second half now<\/a>.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"800\" src=\"https:\/\/unitedbaristas.com\/wp-content\/uploads\/2017\/09\/Ditta-Florence-800x800.jpeg\" alt=\"Ditta Artigianale, Florence\" class=\"wp-image-3805\"\/><figcaption>Ditta Artigianale, Florence\n<\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Why we\u2019ve focused the discussion on cup&nbsp;prices<\/h3>\n\n\n\n<p>Over the summer we suggested that coffee prices ought to rise in an article on how the specialty coffee industry had made a mistake <a href=\"https:\/\/blog.unitedbaristas.com\/the-true-cost-of-espresso-937da0860aba\" target=\"_blank\" rel=\"noreferrer noopener\">linking the price of a cup of coffee in our customers\u2019 minds<\/a> with the cost of espresso machines and green beans. Many baristas liked it and it sparked conversation about how the industry could add greater value to specialty coffee. Others, however, have communicated their reluctance to charge more for a cup fearing that they might loose customers or reduce accessibility.<\/p>\n\n\n\n<p>While the iron triangle concept proposes three different types of viable proposition, in practice many specialty coffee shops actually currently have more limited options. Let\u2019s explore these current constraints:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Limitations to going&nbsp;faster<\/h3>\n\n\n\n<ul><li>Five years ago we would have argued that specialty coffee could prepare drinks considerably faster, but a good amount of work has been done on this front and smart operators have sufficiently developed their configurations and training so additional gains are becoming increasingly more difficult to achieve.<\/li><li>Speed of service is critical at peak times, but often only at those times. As staff and equipment investments have cost implications, it has become less and less worthwhile to invest in solutions that meet these spikes in demand.<\/li><li>We don\u2019t foresee any technological innovation from the coffee-equipment manufacturers that is going to facilitate a step change in speed in the coming two years.<\/li><\/ul>\n\n\n\n<p>Now this is not to say that additional speed is not possible or desirable, but rather to point out that until a key technological or operational innovation occurs, it is not operationally or financially viable for already fast speciality coffee businesses to significantly further increase their speed.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"800\" src=\"https:\/\/unitedbaristas.com\/wp-content\/uploads\/2017\/09\/Society-Cafe-Bath-800x800.jpeg\" alt=\"Society Cafe in Bath serves Origin\u2019s espresso blend on a customised La Marzocco Linea\u00a0PB.\" class=\"wp-image-3806\"\/><figcaption>Society Cafe in Bath serves Origin\u2019s espresso blend on a customised La Marzocco Linea&nbsp;PB.\n<\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Managing quality<\/h3>\n\n\n\n<ul><li>There are many routes open for specialty coffee to further lift quality \u200a\u2014 \u200aprimarily through better buying, roasting and making \u200a\u2014 \u200abut at present most of the work being done at retail is actually going into <em>reducing<\/em> quality in order to protect or enhance profit margins.<\/li><li>\u2018<a href=\"https:\/\/blog.unitedbaristas.com\/speciality-is-dead-lets-hope-specialty-dies-too-7fdad6d07c4c\" target=\"_blank\" rel=\"noreferrer noopener\">Specialty<\/a>\u2019 has traditionally been defined as grades above 80 or 83 points. Many businesses in the UK are now buying coffee right at the bottom of the specialty range with a number having tipped over into the top end of commodity.<\/li><\/ul>\n\n\n\n<p>We think that this development is neither to be condemned nor celebrated; it was inevitable for a bunch of reasons we can unpack some other time. However, since a good proportion of the United Baristas community use the term \u2018specialty coffee\u2019, we think it\u2019s important to point out that the industry has now hit the limit of reducing green quality whilst formally retaining its specialty status (our guess is that the definition of specialty will be redrawn over the coming years to include some of the lower grades).<\/p>\n\n\n\n<p>This is yet another reason why, as an industry, we are going to have to broaden the concept of quality in customers\u2019 minds so their willingness to pay doesn\u2019t hinge on the fluctuating price of green coffee.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Reducing retail&nbsp;prices<\/h3>\n\n\n\n<p>As pointed out in <a href=\"https:\/\/blog.unitedbaristas.com\/the-true-cost-of-espresso-937da0860aba\" target=\"_blank\" rel=\"noreferrer noopener\">The True Cost of Espresso<\/a> much of the price of a cup of coffee is driven by staffing costs.<\/p>\n\n\n\n<p>There is little prospect of specialty cup prices falling as there is a floor to staffing costs legislated by the <a href=\"https:\/\/www.gov.uk\/national-minimum-wage-rates\" target=\"_blank\" rel=\"noreferrer noopener\">minimum wage<\/a> and increases in productivity through automation are still some way off.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"800\" src=\"https:\/\/unitedbaristas.com\/wp-content\/uploads\/2017\/09\/Association-Coffee-800x800.jpeg\" alt=\"Association Coffee benefits from a central London location near St. Paul\u2019s and staff work on a Victoria Arduino Black Eagle Gravimetric.\" class=\"wp-image-3807\"\/><figcaption>Association Coffee benefits from a central London location near St. Paul\u2019s and staff work on a Victoria Arduino Black Eagle Gravimetric.<\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">The markets constraints of the iron triangle in&nbsp;practice<\/h3>\n\n\n\n<p>For businesses who have reached, or are approaching, operational constraints to volume growth or their maximum market share, the key remaining option is to lift prices and recalibrate the proposition to give their customers some kind of perceived greater value.<\/p>\n\n\n\n<p>We have presented this option last, not because it is the only available option to the industry, nor it is the least desirable option; but in order to walk those who don\u2019t wish to raise prices through the other options and constraints first.<\/p>\n\n\n\n<p>Obviously, rules of thumb don\u2019t fit everyone or every situation, but the current structure of the market makes widespread price increases (yes, we\u2019re going to put our necks on the line and say it) inevitable.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Other reasons to think that prices will go&nbsp;up<\/h3>\n\n\n\n<p>Putting aside the rationale of the iron triangle, there are a variety of other reasons to think that cost increases are already in the pipeline:<\/p>\n\n\n\n<ul><li>Following the Brexit vote, the GBP has depreciated significantly against the USD, and shows little sign of strengthening<\/li><li>Green prices are currently relatively low, with most brokers agreeing that prices will rise<\/li><li>The key costs of staffing, rent and rates have also recently increased or are increasing, whether set by parliament or the market<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Be proactive<\/h3>\n\n\n\n<p>This being the case, we think that for a good number of specialty coffee businesses the best thing to do is to crack on and raise prices strategically and pro-actively; rather than reluctantly and with excuses. And the first step to doing that is to recognise that we need to link the price of a cup of coffee to factors <a href=\"https:\/\/unitedbaristas.com\/blog\/insights\/2017\/06\/the-true-cost-of-espresso\/\" target=\"_blank\" rel=\"noreferrer noopener\">other than the price of a machine and the beans<\/a> in the minds of our customers.<\/p>\n\n\n\n<p>There are many examples of how prices can successfully be raised, and we\u2019ll return for another post with some thoughts on this in the autumn. In the interim, your questions, comments and criticisms are welcome. We\u2019re on all the normal channels.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Here\u2019s why specialty coffee cup prices are going to rise \u2013 and why you should act\u00a0now.<\/p>\n","protected":false},"author":2,"featured_media":3804,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[80,194],"tags":[298,82,100,121,154],"false":[],"ppma_author":[1926],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Predictions on the Near-Future Price of Coffee - Insights - United Baristas<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/unitedbaristas.com\/articles\/insights\/predictions-on-the-near-future-price-of-coffee\/\" \/>\n<meta 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