Reserve of vivacity: why coffee is becoming more expensive in Russia
According to a study commissioned by Forbes by NielsenIQ, volume coffee sales in July 2022 were down 18% year-on-year. Solute sales were less dramatic at 2%.
The decrease in sales is significant in terms of assortment in stores. “On average, from February to July 2021, the number of coffee headings per outlet remained practically unchanged, but in 2022 the value looks like this: from 151 items in the observed year to 119 in July,” the director for work with NielsenIQ clients. Saltan Nysanova. The strongest aggravation occurred in the category of grain coffee (from 77 positions to January 51), followed by instant drink (from 77 to 70) and capsules (from 19 to 13).
After the start of the “special operation”* in Ukraine, a number of Western companies suspended their work on the Russian market. Swiss Nestle announced on the consumption of the number of Nespresso and other brands, following the successive Italian Lavazza, the Finnish company Paulig Group sold its business in Russia.
“The industry is facing a slowdown due to the spring rush, during which sales almost doubled compared to the same period in previous years. Buyers of excessively sufficient coffee stocks, which may be due to a long shelf life, which means it takes several months before demand declines to recover,” says Saltan Nysanova.
But stocks are being consumed to restore that demand, and there are problems with that, says Mikhail Sharov, the founder of Tasty Coffee Roasters, one of the largest state-owned coffee roasters for food service schools. “In warehouses, importers currently had little green coffee by weight: against the backdrop of a rush forecast in March, unexpectedly, stocks were consumed, a new sample arose, which became expensive due to more complicated logistics. In addition, the sharp drop in imports of European brands of roasted coffee and the law-abiding growth of the domestic roasting market, which began to replace those who left, had an effect, ”says the entrepreneur.
Waiting for a deficit
In monetary terms, coffee sales in Russia have grown. According to NielsenIQ, in January-July, compared to the same period last year, sales of coffee in preparations and capsules increased by 27.5%, instant – by almost 20%. what happened in NielsenIQ is called inflation. The Yukassa service told Forbes that the average check for buying coffee in stores and online trade in August amounted to 390 rubles, which is 44% more than in the same period last year.
Rising prices change the cost of raw materials, logistics and packaging.
According to Olga Khramova, the creator of the School of Coffee Lovers, the price increase for green coffee on the coffee exchange continues in 2020, since then Arabica has been sorted, for example, it has risen in price by 80%.
“During the lockdown, there was a shortage of containers: there are a lot of them from near and far to America and Europe, but they returned back in a much smaller volume. Therefore, the cost of their increase has increased significantly – it is exaggerated. – Secondly, there was a situation with a container ship that ran aground and blocked the Suez Canal, it caused supply disruptions. Thirdly, there was a crop failure in Brazil, strikes in Colombia, a coup in Ethiopia.”
After February 24, prices for already roasted coffee will rise by 40-60%, Khramova estimates. On this, jumps in the dollar exchange rate, an increase in emissions prices and the appearance of an exchange commission when buying foreign currency occur. In addition, Western logistics and insurance companies have refused to work with Russia, creating new problems for importers.
“In anticipation of container carriers MSC and Maersk, special attention is paid to cooperation with the ports of St. Petersburg and Novorossiysk. At this moment, we tried to redirect our containers to Hamburg and Riga, from where they had already left by trucks to our country. Freight costs have increased exponentially. If earlier delivery from Brazil to St. Petersburg cost several thousand dollars, then by the spring of 2022 it will cost about $10,000,” says Sharov from Tasty Coffee Roasters.
Sanctions policy, crop shortages, a significant increase in logistics tariffs have increased coffee prices in wholesale trade by almost 100%, says Andrei Yemets, CEO of the wholesale company Consumer Holdings. Nevertheless, according to him, “the demand was great, they grabbed for anyone.” “In the first quarter, consumers stocked up in anticipation of a sharp deficit. Then prices increased by 70%, by another 30%, others increased prices several times by 15-30%,” says Yemets. He says that large producers in the first half of the year reduced the release of freeze-dried coffee by more than half due to a reduction in imports.
According to Mikhail Sharov from Tasty Coffee Roasters, coffee prices continue to rise in the future, because, according to his observation, “suppliers did not immediately sharply raise prices and sacrificed their margins so as not to get a shock profit and outflow of partners, but they will do it in development”.
“Most of the market participants fall into the “manufacturer’s scissors”: rising prices “from below” and at the same time a weak opportunity to get out of their price niche that is comfortable for consumers,” says Roman Shalimov, a representative of the Tochka Growth Research & Testing agency. “Somewhere the price increase will be paid by the consumer, and somewhere the distributors and coffee retailers will sacrifice the margin.”
“Price doesn’t matter”
Representatives of coffee chains remain calm, despite the high dependence on imports. According to Irina Makaleva, director of the Shokoladnitsa network development department, although coffee has grown in price, it is not critical for business. “We cooperate with large importers of export goods from Latin America and Ethiopia on the terms of contracts, that is, we fix prices and volumes immediately in a long-term contract,” she slowed down. Neither accumulation nor increase in coffee consumption was noticed in Shokoladnitsa, stable interest was added to emissions.
Stanislav Korotetsky, co-founder of Floo Family (Tine coffee shop chain, Floo coffee shop and Soyka Napela city cafe), says that for a coffee shop business, the purchase price of coffee is not the biggest part of the costs. Its share is usually 20-25%. “The cost also includes: rent of premises, wages, service standards, kitchen, back office. And while these costs are static, there is no reason for a significant increase in prices, ”Korotetsky assures.
According to the entrepreneur, since January, the purchase price for roasted coffee in Moscow for coffee houses in rubles has increased by approximately 10%. “The role of the mind is played in this situation by a large supplier and how much stock he has in warehouses, whether he knows how to search at the most affordable price, even when the dollar is at its peak,” he prevents. “Someone raised prices more as a result of lost customers. We also raised prices slightly in March, but this was partly a planned increase: prices were below the market, and the increase in purchase prices for coffee was an early reason for us to correct to the market level before the crisis.” Now in Tine black coffee costs 150-250 rubles, with milk – 200-280 rubles, author’s drinks – 200-350 rubles.
The price of a glass of coffee remains affordable despite a 30% increase in wholesale grain prices, Sergey Ri, project manager for CDEK Coffee to go. “For those who truly love coffee, the price is essentially unimportant. They will buy anyway, unless they consume it, something completely force majeure that absorbs the extra-highway impact, ”he says. According to him, the share of production of one cup of coffee is approximately 15-30%. If grain prices continue to rise, then depending on coffee growth, they can choose to either raise the price of a coffee product, or compensate for it at the expense of their own costs, in order to take into account the pool of potential customers, or use more productive varieties of coffee or blends varieties.
“Although the marginality of coffee sales in Russia is at least 100%, and in some cities it can be much higher, grain and coffee sellers will try to shift the costs to consumption,” said Nikolay Vavilov, a research specialist at Total Research. Any increase in the cost of the offer in Russia is reduced to an increase in the final price of the offer. In his opinion, several options will find “a fine line between the ability to sell at a higher price and the fear of the buyer,” but the cost of coffee is one of the last that the Russian will refuse.
“Drink delicious coffee before it runs out. There will be coffee in the country, but the quality is likely to fall, warns Olga Khramova from the School of Coffee Lovers. – Is there a variety of assortment that is on the market now? Unclear. But we are unlikely to drink chicory.”
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