Predictions for 2018

Predictions for 2018

For a few years, I ran an annual predictions post. I was often wrong, or right a year too early (which is still wrong, despite my urges to claim otherwise). You can see previous predictions here: 2008, 2009, 2010, 2011 and 2012 – they are entertaining little time capsules.

What led to their return this year? I don’t really know – I think I just enjoy having a bit of a guess about where things are going.

Here are my five predictions for 2018

1 – High prices drive down quality

A few years ago, when the C-market price for coffee spiked above $3/lb, there was some concern that higher prices were working against quality focused efforts in certain origins. The rationale was pretty simple – why work harder as a producer to raise your quality, when the market will pay very well regardless.

We’re in a similar sort of place if you take the world of speciality. There has been a dramatic rise in the number of companies looking to source better quality coffee. In challenging economic times budgets for green coffee buyers are going to be tested – and this is compounded by high levels of competition for speciality coffee, and I think a lot of companies will accept a lower threshold of quality, that they might describe as “good enough”. It will likely be grown at a decent altitude, of reputable varieties, but I suspect the quality of sorting and picking may decrease as producers may find it more cost effective to cut back in those areas as buyers will still pay pretty good prices owing to competition. (This isn’t a criticism of producers or millers, I think the market will simply pay more for a lower quality product).

2 – Amazon listing the Whole Foods catalogue causes challenges

Lots of great coffee companies have worked hard to get their product listed by Whole Foods. They move real volume in the US, though less so in the UK. Some of those same companies wouldn’t choose to sell on Amazon’s platform (though many do), for a variety of reasons. Now that Amazon owns Whole Foods I expect more of their product catalogue to appear on the site. If you sell to both Amazon and Whole Foods then I’m curious how that will work – I suspect whichever options gives Amazon a greater margin, and encourage a greater average spend, will be the one that tops the search ranking. (Also, I’ve no idea how funnelling things through Whole Foods/Amazon CDCs will work…)

3 – People start taking coffee grown in China seriously

China has been producing coffee for quite a while now, but it hasn’t really been bought and sold by speciality companies. However, there’s been a real uptick in quality from Yunnan and I think more is going to be exported and sold around the world. There’s some surprisingly good and interesting coffee being produced there, and I think this is the year we start to see it appearing more and more.

4 – Some very quality focused, acclaimed businesses in the UK disappear

I use the word disappear on purpose. They might fail, or they might just choose to shut up shop instead. Brexit only looks to make life harder for speciality coffee – currency weakening, coupled with ever higher prices for speciality and more competition than ever… It’s a tough marketplace and a difficult place to make money. This might be the year that some choose to walk away…

5 – Costa Coffee Makes Its Speciality Move

Starbucks has obviously pushed into speciality coffee quite aggressively, and very successfully, with their Reserve brand and roasteries. No other company could have built the insanity that is the new Starbucks Reserve in Shanghai. In the UK Caffe Nero did try and make a move into speciality by buying Harris & Hoole, though I think it is fair to say that this hasn’t been a huge success for them. Costa Coffee is reporting an increasingly challenging market, and may well be losing enough market share to trigger action. It might be a new brand for them (i.e. the Starbucks Reserve model), though I think several speciality coffee companies who have raised money through equity crowdfunding are going to hope that Costa makes an acquisition instead… I’d probably bet on the latter. (This prediction might fall under the “1 year too early” category, but I’m going with it anyway!)

Let’s check back in a year to see how I did!