Inflation to Impact Coffee Consumption Globally

By: Alexis Rubinstein, Managing Editor - Coffee Network

Tue, 23 May 2023, 13:53

Alexis Rubinstein

Managing Editor

CoffeeNetwork (New York) – As the USDA releases their attache reports for the world’s major coffee producers, the market is focusing in on consumption forecasts amid market-wide challenges with a lack of data and transparency.

One common theme found throughout many of the reports is how inflation is expected to impact internal consumption for the 2023-2024 coffee year.

Mexico’s coffee consumption is forecast at 2.9 million 60 kg/bags. Soluble coffee accounts for approximately 60 percent of consumption, and ground coffee around 40 percent. According to SADER and industry data, the average annual coffee consumption is between 1.3 kg and 1.5 kg/per capita in Mexico. This slight increase is due to population growth, but the rate of increase is lower than the population growth due to Mexico’s higher-than-normal food inflation.

The USDA has forecast an increase in MY 2023/24 domestic consumption from 47,000 to 55,000 bags driven by growth in Kenya’s tourism sector. The depreciation of the Kenya shilling against major currencies is expected to make Kenya a relatively cheaper tourism destination, increasing international visitors. Coffee uptake by local consumers is expected to remain flat as growth observed in previous years is restrained due to high inflation and an erosion of purchasing power. While most Kenya consumers prefer tea to coffee, coffee consumption has increased in urban areas, facilitated by the expansion of cafes. However, this trend has slowed as inflation is reducing purchasing power and Kenya consumers reconsider spending available income on ground coffee, which is more expensive than tea or soluble coffee. According to the IMF, Kenya’s inflation increased from 6.1 percent in 2021 to 7.7 percent in 2022 and will reach 7.8 percent in 2023. Post anticipates domestic Kenya consumers may switch from ground coffee to soluble coffee as a more affordable option. Changes to MY 2022/23 MY 2022/23 consumption is estimated to remain flat from MY 2021/22 as high inflation restricts demand growth by local consumers.

In MY 2023/24, Colombian coffee consumption is forecast to remain unchanged from Post’s revised figure from the previous marketing year at 2.2 million bags GBE. According to the Organization for Economic Cooperation and Development (OECD), Colombia’s economy is projected to grow 1.2 percent in 2023 and 1.7 percent in 2024. This, combined with Colombia’s high inflation rates and the Colombian peso devaluation, is likely to hinder consumption growth in the near future.

Costa Rica’s coffee consumption is pegged at 385,000 60-kg bags as higher local production, lower inflation rates, and continued economic recovery support higher consumption than MY 2022/23. Assuming most imported coffee is consumed locally, FAS/San José estimates MY 2022/23 consumption at 365,000 bags, lower than previously expected. ICAFE believes the decline in consumption over the last few years was related to the sharp economic contraction in 2020 and 2021 caused by the COVID-19 pandemic. Also, inflationary pressures and higher international coffee prices, caused domestic prices to increase almost 40 percent in 2022, resulting in lower sales. Changing habits, especially among the younger generations who are less likely to invest the time needed to brew coffee at home, are also negatively affecting the long-term domestic per capita consumption outlook

As CoffeeNetwork has previously reported, inflation has also impacted consumption in the major consumers of the world; the US, Europe and Brazil.

CoffeeNetwork will release their first official forecast for global supply and demand in the coming weeks, followed by the release of the USDA World Coffee Report on June 22^nd.

Alexis Rubinstein

Coffee

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