Soaring coffee bean prices grind local business owners’ profits

FILE PHOTO: A worker selects coffee beans during harvest on a farm in the municipality of Espírito Santo do Pinhal on May 18, 2012 REUTERS/Nacho Doce/File Photo

JAKARTA: Coffee roasteries and cafe owners are grousing as bean prices reach record highs amid falling harvest outputs and strong demand from consumers, with some local businesses feeling the grind in their profits.

The average price for robusta beans stood at 41,013 rupiah per kg in February, rising over 34% compared with the same period last year, according to Agriculture Ministry data acquired by The Jakarta Post.

The average price of arabica beans surged much earlier, peaking at 78,174 rupiah per kg in July last year, marking a 30% year-on-year (y-o-y) increase, before going down to 71,065 rupiah per kg in February, the same data also show.

Similarly, the price of global benchmark London robusta coffee futures peaked at US$3,812 per tonne in early April, following a 68.97% increase from the same period last year, according to data.

Muhammad Eka Pramudita, cofounder of Kemenady, a roastery in Bogor, West Java, said robusta green bean prices had been “constantly going up” in recent months, driven by failing harvests amid the El Nino weather phenomenon.

Meanwhile, demand had continued to increase.

In the case of robusta beans, increased demand has also been driven by a shift in the consumption of arabica beans, which saw a significant price increase throughout last year, he said last Thursday.

“Because the price of arabica increased, many shifted to robusta,” said Eka.

Indonesia’s coffee exports nosedived to 11,688 tonnes in 2022, dropping over 97% from the previous year, according to Statistics Indonesia data.

Last year, they dropped again by 42% yoy to 6,730 tonnes.

Meanwhile, the total national production has stagnated at around 700,000 to 790,000 tonnes per year since 2017, according to Agriculture Ministry data, which suggests the drop in exports is due to meeting rising domestic demand.

The Financial Times wrote last Monday that coffee consumption in South-East Asia has soared, with demand in Indonesia alone doubling over the past decade.

Hari Khairunuzula, one founder of Penalama Coffee, a cafe in Bogor, told the Post last Wednesday that coffee bean prices had been going through the roof lately, so much so that he was forced to change his coffee bean procurement from roasteries to sourcing his own green beans from a plantation belonging to his colleague.

For now, he has been able to maintain revenue despite rising bean prices and more and more coffee shops springing up in the city.

“There are many more coffee shops today, more choices, but that does not affect the demand. Demand is still increasing,” said Hari.

Meanwhile, founder of Bogor-based Hagu Coffee & Space Farhan Adrinanto told the Post that the price of beans from roasteries had shot up and this was eating into his profit margin.

Both Hari and Farhan said they were reluctant to transfer the increasing production costs to customers and would maintain current prices as long as possible.

Both said they would resort to other strategies before raising their prices, such as finding cheaper beans or pressing down the portion of coffee per serving.

Farhan said he had done the latter when arabica prices went up last year but realised it risked “damaging the taste”.

Eventually, he was forced to raise prices. — The Jakarta Post/ANN

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