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Inside Beverages – Coffee in crisis

11 February 2011
Inside Beverages – Coffee in crisis

Spiralling prices are widening the gulf between cost and quality in the coffee market. Ian Boughton examines the options for caterers.
The mainstream catering trade is facing a coffee crisis. The days of cheap coffee are over. There have been crop failures on top of existing world shortages and speculators have muddied the waters, so coffee prices went up twice last year, are going up again about now, and will rise again in the summer.

At the same time there is a paradox - a great number of hotels and restaurants are still expecting to pay unrealistically low prices per kilo. By contrast, the independent high street coffee shops who drove the coffee revolution, have ridden the price problem - they are used to paying double figures for a bag of coffee and expecting a top-selling price as a result.

The inevitable consequence is almost upon us. Many hotels and restaurants are already behind the game in serving quality coffee, and as prices go up, they will fall further behind.

The price difference between coffee qualities has never been wider, explains Stephen Hurst, who, as "the coffee hunter" at Mercanta, is one of Britain's major importers of top-quality raw beans.

Commodity-grade Arabica, used in everyday half-decent coffee, now leaves the farm gate at about £3 per kilo for the unroasted green bean, and better-quality speciality Arabica at about £4 per kilo. The really good beans, which craft roasters supply to top coffee houses, leave the farm at about £12 per kilo, and the most superb coffee at Cup of Excellence auctions can reach £25 per kilo.

It follows that catering buyers who have always expected to hammer suppliers down to £3 or £5 per kilo for roasted coffee have had the last of the good times. Further, that old line which the giant brands used to trot out, "we use only the finest beans", is likely to be less true than it ever was.

The cheaper Robusta bean, the rougher bottom-edge ingredient in espresso, and the greater part of many instant coffees, is now astonishingly cheap. The consequence for the mainstream coffee trade, says Hurst, is obvious. "There will be recipe alterations! We can expect massive substitution, I expect to the degree of absurdity, by the giant brands.

"So, for those caterers who have no appreciation of coffee quality and want to continue to buy at any price, utter rubbish will be available. The catering market will be able to choose from rubbish at a get-in price of around £4 a kilo, to the speciality coffee at £20 a kilo and upwards."


SHOP AROUND
It is the £9-£12 per kilo market, hitherto the mark where hotels and restaurants could expect respectable grades, that will be exceptionally sensitive to price rises.

"This is where the caterer is going to shop around and switch, and find that two minutes later the guy they switch to will have put his prices up as well! The truth is that buyers who are going out of their heads over rises of 50p a kilo are just going to have to wake up to reality.

"If a hotelier thinks all coffees are the same, and that the customer won't know the difference OK, buy what you like, but get ready for the consequence!"

The coffee suppliers are in a curious position. They don't want to be seen as holding trade customers over a barrel, and many of them have held back from passing on the full price rises, but now they find it impossible to avoid saying "we always told you that buying quality coffee is the key to profit".

Although Kenco commissioned a "Trends in Catering" survey which confirmed that managing costs is the most important factor for caterers, it also found that 69% of caterers believe customers will pay more for better coffee. Nestlé Professional's party line is that "the emotional intent of hoteliers to serve good coffee is absolutely genuine". Go on then, says the coffee trade - do it.

"The preference for speciality coffee has actually overtaken price-consciousness as a consumer trend," says Elaine Higginson, managing director of United Coffee. "We can see it in the increase of sales of our Grand Cru, at £18 per kilo. So don't look for cheaper alternatives - sacrificing quality is a false economy and you will end up losing sales and customer loyalty."

Complaints over price increases will actually coincide with a general move upwards in quality, predicts Marco Olmi, managing director at Drury. "The psychological barrier has long been £10 a kilo, but now caterers realise what difference the extra pound can make and, as they're faced with paying more anyway, they reckon they may as well go all-out for quality!"

That respectable mid-range coffee still exists, remarks Angus McKenzie, managing director at Kimbo. It just needs endorsing.

"You can still source fantastic coffees at a cost of under 10p per espresso, so a quick reality check says margins are still OK. So, plan a price increase, but offer loyalty rewards and also make sure you also have a low-entry-point coffee - Starbucks are pushing a £1 filter coffee because it's better to get customers to downgrade than to lose them. Finally, tell your customer why your coffee is better - ask your supplier for five bullet points on why it is special. If they can't tell you, find another supplier!"

Roaster Ian Balmforth, of Bollings in Huddersfield, recently introduced his highest-quality retail range, Grumpy Mule, into food service. He is not worried about being priced out of the contest.

"The key is, charge more for it, and ‘sell' it. Fifty per cent of customers in restaurants will not have a coffee and the reason is that it isn't ‘sold' to them so go and look at the way the high street coffee chains work to sell more coffee."

The principle of "sell more" has already been proved by no less than JD Wetherspoon, says Barry Kither, marketing director at Lavazza. "Hotels and restaurants have a problem and they know it. I have been having many discussions with venues where the food and beverage manager is wrestling with the accountant over coffee prices. But the increase is not that big a problem - we're not talking 200% on the price of a cup!

"Hold your nerve - buy good coffee, increase your prices by 5p a cup and say to your accountant, ‘I give you my word, I'm going to sell more to make it up'. It won't be a big deal for you, because customers are used to paying £2.40-£4 in a hotel and won't bat an eyelid.

DON'T PANIC

"Don't panic. I can give you an absolute guarantee that you can double your coffee sales, if you only put your mind to it. The Wetherspoon philosophy of ‘sell more of things' is a great policy to work on!"

It is an old message, but it works, agrees Rob Briggs, managing director at Rombouts. "Hoteliers' eyes glaze over when we say ‘increase quality and you increase sales', because every coffee company says that. But in the trade we all know it can be done. So, when we say ‘good coffee will improve your sales', you can say, ‘prove it'.

"A very important hotel in central London recently came to us under enormous pressure on this finance-led argument. Almost uniquely, the hotel manager let four staff away for training days and we put them through the City and Guilds barista course, because we are accredited trainers. The staff went back and said, ‘now, we get it!', and now they want to serve good coffee, and so they sell more.

"They don't mind if we say, ‘we told you so'"

CONTACTS

http://www.unitedcoffeeuk.com" target="_blank" rel="noreferrer">Bolling ](http://www.bollingcoffee.co.uk)01484 852601

[Drury ](http://www.drury.uk.com)0207 740 1100

[Kimbo](http://www.kimbo.co.uk) 0208 743 8959

[Lavazza](http://www.lavazza-coffee.co.uk) 01895 209 750

[Mercanta](http://www.coffeehunter.com) 0208 439 7778

[Rombouts](http://www.rombouts.co.uk) 0845 604 0188

[United Coffee01908 275 520

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