Talking points

The changing culture of coffee…

Fortnum & Mason look into the evolution of the omnipresent coffee industry

10/04/2016

Florence Holzapfel

Tea and Coffee Buyer, Fortnum & Mason

There is a well-known half-truth about coffee that continues to endure: after oil, it is apparently the world’s most-traded commodity. Apparently being the operative word: coffee, though undoubtedly popular, is not the world’s second-most trading commodity. It is, however, one of the more evocative of the soft commodities and a hugely important part of the economy of numerous countries – particularly developing countries, where coffee may indeed take second place behind oil in the most-traded commodity rankings.

But regardless of its standing, the notion of coffee as a commodity is being challenged. A small but vocal band of professionals, operators, retailers and consumers are pushing back against such a definition.

The guiding principles of this group – which take their inspiration from forbearers such as Erna Knutsen who coined the term ‘specialty coffee’ in 1974 – are those of a desire to share and appreciate the origin characteristics of a coffee. To this group, single origin means more than the country – it means a single farm, or even a single lot of coffee within an estate. Their aim is to elevate the concept of ‘specialty coffee’ to a new and exciting level.

In order to objectively assess a coffee’s quality, an international grading system is in place. Qualified graders (known as ‘Q’ graders) mark the coffee out of 100 points, with a score above 80 allowing a coffee to be termed as ‘speciality’.

This system is also a useful feedback vehicle for progressive producers, allowing them to measure quality and improve upon it, season by season. Another overarching principle of this group is to recognise the people growing, harvesting and producing the coffee, like those cooperative members who invest in equipment and incentivise best practices by growers. The cooperative members invest in equipment and incentivise best practices by growers. That may, for example, take the form of rewarding a single estate farmer who has embraced the move to unusual and innovative processing methods.

We have been fortunate enough to see the results first-hand. On a visit to a small coffee estate in Costa Rica last year, we saw the farm in question develop a number of different processing methods, each of which allowed the estate to create new flavour profiles from the same beans.

The entrepreneurial spirit of the couple who owned the estate, Oscar and Francesca Chacon, has spurred the creation of something unique and noteworthy. The level of authenticity and creativity involved in the coffee’s production is inspiring. Without doubt, the growth in speciality coffee has led to a diversification of the type of coffee, and an increase in the levels of expected quality from consumers. Whether in market countries or the countries of origin, the increased ability for producers, roasters and consumers to interact has driven greater understanding and appreciation for the art of coffee-making.


Speciality impact in the home and the high streets

  • Allegra Strategies, a research consultancy focusing on food, retail and hospitality, offers the following perspectives in its 2015 coffee shop market report:
  • Branded chains will continue to invest in broadening their artisan credentials.
  • A new breed of exciting and aspirational coffee concepts, primarily led by artisanal independents, will continue to grow into medium-sized chains, engage coffee connoisseurs and threaten the Top 3 hold on the market.
  • Traditionally low-end and low-value coffee offers will have to increase quality to meet rising expectations.
  • Furthermore, UK consumers will become even more informed about the subtleties of coffee preparation and delivery from bean to cup, in particular origin and roast, as well as the importance of milk texture and water quality.

Essentially, once the consumer discovers the in-cup qualities of a well-prepared coffee of superior quality, they are unlikely to return to generic and bland cups. Even capsule machines involve the consumer at home in making an active decision around the quality and provenance of their cup.

Within Fortnum & Mason, the rise in popularity of speciality coffee is indeed changing our consumer choices. We are seeing a move towards smaller, less milky coffees in our restaurants, as consumers do not want to mask the character of the coffees on offer. As the consumer is exposed to higher-quality coffee, they are becoming less accepting of poorer quality ingredients or preparation, and are unlikely to return to something they once considered satisfactory.

As James Hoffmann observes in his 2014 World Coffee Atlas:

“Many industries claim a golden age in the past, but I firmly believe that coffee is yet to peak in its quality, so this is an exciting time.”

Opportunities for all in a growing market

It is perhaps no surprise that the coffee market as a whole is growing, with record demand of more than 150 million bags in 2014 outstripping the 141 million bag world production for that year (statistics from the International Coffee Organisation).

Challenges will be ever present, especially in producing countries hit by coffee leaf rust, or producers caught in the vagaries of commodity markets, and the potentially savage implications of climate change. However, where possible, more stable growth is being built on quality, provenance and the ability and desire to increase the dialogue at every stage of the supply chain, from the first people to touch your coffee – the farmers – to the last – the baristas. For evidence of this look no further than the various National and World Barista Championships, a cauldron of concentrated development, learning and exhibitionism.

To some, coffee will always be ‘just coffee’. For these drinkers, any grade of coffee will do. But for an increasing number of coffee drinkers, the growing influence of speciality coffee is seeing an increase in progressive producers’ ability to find representative value for their coffees and disassociate their pricing from the markets, and in doing so, move from a macro to a micro supply/demand.

In short, if their coffee is sought-after enough, they can command the selling price and the buyers will come. Coffee consumption may be going up, and the numbers involved may be growing, but on the most important level - that of the individual engagement, interaction and service - the distance between farm to cup has never been so small.

This article is issued by Cazenove Capital Management which is a trading name of Schroder & Co. Limited, 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Issued in the Channel Islands by Cazenove Capital Management which is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission.

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All data contained within this document is sourced from Cazenove Capital Management unless otherwise stated