The pleasant – and for many indispensable – habit of waking up each morning to a freshly brewed coffee, or the routine of having a cup of this beverage after meals, threatens to become an increasingly expensive habit. At least, the price paid on the raw materials market for this merchandise that’s how he reduces it.
Over the past two months, coffee has become one of the most expensive agricultural commodities, rising by more than a meter. 10% and 25% Arabica and Robusta varietiesThe bad weather in southern Brazil, one of the world’s main producers, has raised fears about its supply and production and threatened to cause a deficit in the global market that has led to its rise.
Despite the declines of recent weeks, Coffee – in both varieties – is trading in a zone of historical highs after registering gains of 30 and 85% since the beginning of 2024.in what is one of the most bullish years on record.
“Over the course of this year, commodities such as cocoa, coffee and orange juice have significantly outperformed the S&P 500 and these increases are due to climatic and supply factors,” Tressis points out. “The first, Drought and European deforestation regulations have reduced production in West AfricaThe second was affected by bad weather in Brazil and Vietnam, the main producers,” experts point out.
Therefore, even if inflation decreases, even the cheapest cups of coffee may become more expensive in the short term. It would not be surprising to recall that big brands like Starbucks or McDonald’s – two of the coffee shops that millions of people visit the most on the planet – use 100% Arabica beans.
And those who think they’ll stop going to the coffee shop to drink it at home or in the office aren’t safe either: Nespresso uses between 90% and 95% Arabica, with a little Robusta.
A dynamic that is impacting the companies whose business depends most on this beverage. The aforementioned Starbucks is one of them. In fact, it is one of the 115 companies in the S&P 500 whose shares have lost more than 3% of ground so far this year. However, in recent weeks, it has received an additional boost with the change in management imposed by the company’s most activist investors. Brian Niccol replaced Laxman Narasimhan as CEO of the company and Starbucks shares celebrated with a 25% increase, the largest single-day percentage increase since the company’s public debut in 1992.
Starbucks, the world’s largest coffee chain by sales, is facing growing challenges as its business weakens. In April, the company cut its financial outlook for the second time this year as the pace of sales at its cafes slowed, cutting into its profits.
Buy recommendations for Starbucks increased last month
The market’s consensus forecast is in this direction. According to analyst data collected by BloombergNow its revenues will increase at the lowest rate since the pandemic, barely 1%, while its net profits will decrease by 4% compared to 2023, as they are estimated to barely exceed the 4 billion dollarswhereas at the beginning of the year there were more than 4.5 billion what was predicted.
Despite this, buy recommendations on it have increased over the past month and it has a 5% upside potential for the average of investment firms covering its stock market performance.
Starbucks Contest
The declines in its Chinese counterpart’s stock market are more pronounced, Luckin Coffeewhose shares have fallen more than 25% over the year in the US market, where its ADR is listed. It was founded in Beijing in 2017 and, according to data provided by the company itself, as of March 2023 it operated 9,351 stores (6,310 stand-alone stores and 3,041 associated stores) with a number of monthly active customers that reached 500 million in June 2022.
For her, experts predict a stock market growth close to 30% for the next twelve months. And more than 8% of the analysts who follow her advise taking a position.
Komeda Holdingsits Japanese rival, has also been declining since the beginning of the year and has a potential of 18%, while Baskin-Robbins, or B-R31 Ice Cream, as it wants to be known by its slogan 31 flavorswith the idea that a customer can have a different ice cream flavor every day of the month, keeps its shares almost stable. Both are capitalized more than 150 million euros.
And the same thing happens with Retail Food Groupsimilar in size to them and passport Australian, which runs doughnut shops and cafes and whose shares have also seen a slight gain of 3% on the stock market since January, putting it at galley of the most optimistic companies on the stock market Australianbut with one of the most attractive potentials on the list, above 50%.
Doctor Nichireswhich operates a chain of restaurants and cafes and manages the production and supply of coffee beans in Japan, as well as wholesale and retail operations, has also maintained its share price since the beginning of the year and has recorded growth of more than 10% over the next twelve months.
The Spanish representation
Although smaller in size and popularity than Starbucks, Spain also has a representative among listed companies linked, in one way or another, to coffee. This is Vanadi Coffeewhich has 8 cafeterias in the province of Alicante. “Our business plan is to generate rapid growth in strategic enclaves, first in the Levante and then nationally, to achieve rapid brand generation,” they explain of the company itself, which is listed on BME Growth and records a 60% decline in 2024.
According to an analysis based on data from Circana’s CREST Commercial Foodservice panel, total coffee consumption in the “Big 5” European countries (UK, Spain, France, Italy and Germany) grew by +8% year-on-year, outpacing the +5% recorded globally (in all 12 countries tracked). This growth trend was observed in each of the five European markets tracked.
Plus, if the big brands start cutting costs by replacing sweetened Arabica with a cheaper alternative, you may literally be left with a bitter taste in your mouth.
