Since early 2020, the Covid-19 pandemic has changed almost every industry around the world, and the coffee sector has not been an exception.
Now, more than 18 months on, we’re starting to see the medium and long-term impact of the pandemic on the coffee industry. So, how have things changed? And what will happen in the months and years to come?
To learn more about how the pandemic has impacted different components of the supply chain, I spoke with two members of the team at Mercon Specialty and a coffee roaster. Read on to find out what they told me.
You might also like our article on how roasters have adapted during Covid-19.
The coffee supply chain
From seed to cup, the coffee supply chain includes people all around the world, from farmers to traders, roasters, café owners and more. When the pandemic hit in early 2020, life changed radically and immediately for everyone across the coffee industry.
Jason Sawicki is the Senior Operations Manager at Mercon Specialty. “Coffee travels through a complex global supply chain from origin countries to the end customer,” he says. “The pandemic created a significant disruption in this delicate chain.”
Jason starts by giving a very simple breakdown of the supply chain.
He says: “To begin with, once green coffee has been processed at a mill, it is bagged and shipped across the ocean in large cargo containers for import.
“From there, the coffee is often sent to large warehouses for storage and sold to roasters by coffee importers. Once roasted, it makes the final journey to distributors, such as grocery stores and cafés.”
However, when the pandemic hit, everything changed almost overnight. Cafés, restaurants, offices, and hotels and a range of other businesses closed their doors, and coffee drinkers around the world were ordered to stay at home.
What were the consequences?
Jason puts it simply: “Out-of-home (OOH) coffee demand fell sharply, but in-home coffee demand rose.
“It was this out-of-home vs. in-home dynamic that became a global trend for all types of products,” he continues. “With limited access to travel, restaurants, and other services, demand for physical products increased sharply and this meant there was a historic increase in the number of cargo ships coming into ports.”
The domino effect led to many problems for green coffee suppliers and their business partners.
Felipe Cam is the Commercial Operations & Information Technology Director of Mercon Coffee Group. He says: “Before the pandemic, [global logistics] did a fairly good job handling the delivery of any commodity as scheduled.
“However, the unexpected increase in the volume of imported products created unprecedented bottlenecks and disruptions in the entire supply chain.”
Both Felipe and Jason list several challenges that have been created by this disruption. In the short term, both port and transport companies suffered from the effects of their employees being on sick leave or in quarantine. This meant more ships than spots available in ports.
In the longer term, Covid-19 has caused a shortage of shipping containers, fewer HGV drivers, warehouses at full capacity, and physical distancing restrictions – meaning limited capacity for many shipping areas.
“These days, it’s not a question of whether or not the coffee made it on time,” Felipe says. “Instead, it’s more about how many days the shipment is late.”
Closer ties between business partners
Jason explained that these shortages and disruptions have led to two major issues: increased transport costs, and shipment delays.
For suppliers, this has a number of implications. For instance, Felipe says that they have to spend a lot of time on bookings and follow-ups, and keep customers updated on new arrival times every day.
“The situation is fluid, but we continue to evaluate points along the chain to minimize impact where we can,” Jason explains. “We have also tried to be transparent and communicate more often with our customers so we can all navigate better and stay informed.
Both Jason and Felipe note that the pandemic has created a need to forge closer ties with business partners, especially when they are overseas. This, they say, ensures the coffee ends up where it needs to be, and that everyone’s needs are catered to.
“It has been important for Mercon to stay close to our producers and exporting partners and understand what pressures they are facing and where we can help,” Jason says.
“We have strived to keep costs stable for our customers, to provide a transparent dialogue on the impacts, and to lean in and understand the challenges of each one of our customers to see how we can help,” he continues.
Felipe, meanwhile, noted that transparency has been unbelievably important, adding that Mercon’s partners are “being flexible and understanding”.
Digital opportunities in the coffee sector
In response to the challenges faced by global industry during the Covid-19 pandemic, many turned their focus to the digital side of business. This meant a greater focus on virtual communication, ecommerce, and more.
Jason notes that Mercon already had a key digital component before the pandemic. “As a multinational company with origin and sales offices in more than ten countries worldwide, digital communication has always played a significant role in how we conduct business,” he says.
“We were using digital communication channels within our teams long before Covid-19 hit,” he adds. “It has allowed us to be nimble and pivot in the face of natural disasters, government upheaval, and now, a global pandemic.”
Felipe agrees. “The entire corporate world is now more connected via online channels than ever before,” he says. “This means we’ve seen businesses maximize their technological advancement in communications.” It meant also thinking outside the box with shipments, looking for other alternatives such as break bulk charters.
Both confirmed that this has made the transition to working from home smoother.
“It has certainly made it easier to adapt to an increasing virtual mode of working and the way we approach our partners during the pandemic,” Felipe adds. “ Virtual calibrations and virtual origin tours are becoming a real option.”
Meanwhile, Jason says: “The biggest impact that this current crisis has had on our supply chain is how we have extended these outside-the-box methods of communication to our roasters.
“Now, we speak to roasters through Zoom meetings, WhatsApp chats, and even virtual reality farm tours,” he adds. “We’ve really grown and diversified the way in which we communicate important information to roasters, who are our end customers.
“The pandemic has also challenged us to work on developing communication methods that help the roasters to communicate this information to their own customers.”
Jason even goes as far as noting that Mercon has some “cool projects in the works for supply chain traceability”, and that it “looks forward to unveiling them to customers soon”.
A coffee roaster’s perspective
Baronet Coffee Inc. is a coffee roaster based in Windsor, Connecticut, US. Like many others, it immediately felt the impact of the Covid-19 pandemic on their operations.
Bruce Goldsmith is the President of Baronet Coffee. He describes the company as being “primarily an OOH supplier of roasted coffee to the foodservice, convenience store and office coffee service channels”.
He adds: “These channels have been hit hard from the forced shutdowns from the pandemic, and the return from these shutdowns, which has been slower than expected.”
However, Bruce does note that the retail coffee part of their business increased, as consumers started to drink more coffee at home when OOH businesses shuttered in 2020.
“[In response], we increased our capacity to produce more retail packaged coffee for the home consumer,” he says. “We also converted to a new ERP system to be more efficient.”
However, Bruce also notes that for all roasters, support from green coffee suppliers was key during the pandemic.
“One of our top goals during the pandemic was to be able to meet our customers’ ever-changing demands while taking care of our employees and the communities we serve,” Bruce says.
“Mercon has allowed us to keep our inventory of green coffee at the proper levels, as well as meet surge demands,” he adds. “They also partnered with us to donate hundreds of pounds of roasted coffee to our frontline workers, as well as the area soup kitchens that were in need.”
Will the pandemic leave a permanent mark on the coffee supply chain?
Bruce says that he’s optimistic about the future, and that he thinks the changes brought about by the pandemic will “change the company and industry for the better”.
He also says that their perspective as a business has changed, and notes that the difficulties they met have made them stronger.
“As a fourth-generation family business, we have been through many economic recessions, but never a health pandemic of this magnitude,” Bruce explains. “Through this pandemic, we have learned that it is not the economic health, but the physical health of your employees and suppliers that matters the most.”
Jason and Felipe were also optimistic and noted that there were many positive changes to take away.
“It’s brought into full view how intertwined the global coffee supply chain is with other supply chains,” Jason says. He also thinks that the negative impact will be short-lived, and that the positive impact will end up being much more important.
“We are cautiously optimistic about this trajectory as supply and demand continue to stabilise,” he adds. “The impact of the pandemic has revealed areas of both strength and vulnerability.
“Supply chain leadership will be in a much better position moving forward to identify these areas of risk and the economic triggers that precede them.”
Felipe agrees, noting that the pandemic would have a more positive than negative impact on the supply chain, and that it has led to “important lessons that need to be taken into account”.
There’s no doubt that the world – and the coffee sector – will be irrevocably changed by the Covid-19 pandemic. However, change isn’t always negative.
More than ever, coffee businesses have shown their resilience and adaptability to cater to changes in consumer demand, operational limitations, and the global healthcare status quo. If nothing else, this is inspiring, and shows that we have good reason to remain optimistic about the future of coffee and become more creative than ever.
Enjoyed this? Then read our article on how technical assistance supports coffee farmers.
Photo credits: Mercon Specialty
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