There was one lecture at the 2012 SCAA convention that encapsulated the entire worldwide coffee industry in a broad sweep. Ric Rhinehart, a stately presence in the coffee world, represents a bit of the old guard, a man who oversees the all-encompassing Specialty Coffee Association of America as its Executive Director. He has to juggle the demands of a global industry, the second-most imported commodity into the United States after petroleum.
Though the name “specialty” coffee is sometimes a nebulous one for consumers, it’s nevertheless indicative of the event’s main thrust – to improve, connect, educate, and propagate ideas and people involved in the world of coffee. Farmers, producers, roasters, importers, baristas, and others, a medley of incredible international scope, all listened in on this talk by Rhinehart. Rhinehart began by defining specialty coffee as something where consumers have a “special experience,” with a top-quality product.
The biggest issue that specialty coffee experienced in the past few years is price volatility, especially a period of very high prices in the worldwide market. Rhinehart argued that high prices in the worldwide market were actually bad for quality, because it moves the emphasis from quality to quantity. As he calls it, the “price differential versus yield differential.” At the end of the day, the coffee farmer is a businessperson and needs to do what’s best for the business. He also stated that increased prices doesn’t just mean more profits for farmers, as the increased value of product has result in higher security and production costs.
Looking at the demand side of specialty coffee, roasters have raised prices across the board while demand in all segments are flat. Roasters were reluctant at first to raise prices but we’ve since seen that coffee is a price inelastic product. Despite this, what Rhinehart calls “super premium” specialty coffee, or what we might otherwise call “Third Wave” coffee, only had modest increases in demand. Perhaps the most important driver is the so-called Single Delivery system, or the likes of K-cups and Nespresso, that drives demand for specialty coffee.
Right now, there’s a shift in demographics in coffee consumption. Older Baby Boomers tend to brew coffee at home with products like Starbucks VIA, capsules, and other single-serve devices, seeking convenience, whereas younger demographics often consume coffee outside the home. Credit the improving job market and willingness to spend their salaries rather than putting it into savings or retirement.
Rhinehart sees things like price volatility, climate change, and economic issues that will continue to affect the overall market. He’s pushing for things like certification to educate consumers and provide stamps of quality. As an overall industry it makes sense, but the onus is really on roasters to market the product they find on the green coffee level and push it to consumers as a great product.