The Coffee River
How disasters affect the OCS
By Brian Martell
Almost 8 years ago, Hurricane Isaac, a category one storm, made landfall in the State of Louisiana. The Mighty Mississippi River with a flow rate of over 5,000 cubic meters per second, changed direction and started flowing upstream… at the same rate it normally does downstream. For this to happen, the force of Isaac on the Mississippi had to be twice that of the normal force of the river. This phenomenon does not happen very often (the last time the Mississippi changed direction was in 2005 with Katrina) but it does occur, albeit temporarily, coincidental to the other devastating effects of the hurricane.
The World has met its Isaac and Katrina, wrapped up into one far less windy but oh so more deadly event – COVID-19. The global impact of the current crisis will be felt for years to come with most of the consequences being negative (for those of you that are “glass half-full” types, I’m sure there will be some positives). From loss of life to loss of employment to mental health issues, some of which have yet to be manifested, the pandemic has changed the way we live, interact with each other and do business. Perhaps the hardest hit businesses around the world are those that deal with hospitality. With borders closed, there is very little travel and hotel accommodations needed. As non-essential business closed, no restaurant dining rooms open; and with public gatherings highly restricted, there are few street vendors or cafés frequented. Government programmes to support business and citizens alike have helped to ease the shock of our new reality, but they cannot continue forever. We will need to get to a level of social homeostasis and that will mean either weathering the storm or pivoting to a new way of doing business.
For those in the coffee business, some have been terribly affected by the measures taken to reduce the impact of the virus while others have seen a marked increase in business. Overall, consumption has not abated, it just changed channels. Pre-covid, the split between the “away-from-home” market, more commonly referred to as foodservice, and the “at-home” market, knows as retail, was a 60/40 proposition respectively. Anecdotally, that split now seems to be a 30/70 split in favour of retail. With many who are still gainfully employed working from home, the rise in demand at the grocery level has seen such retailers as Loblaws, Sobeys and Métro Richelieu, experience sales increases by well over 10 per cent for the same quarter of the previous year; in the grocery business, a 2 per cent increase is a big deal. The flip side of that coin has been the grinding effect on sales for those that sell into foodservice. During the beginning of the shut-down, OCS operators have seen declines in the magnitude of 80 per cent, foodservice distributors have felt an equal loss and Vending operators have seen their revenues all but dry up completely. Roasters that were diversified between the two segments of the industry faired well enough, while those who were focused primarily on the foodservice side suffered the same fate as their customers. This, of course, influenced the brokers who supplied the roasters with their coffees.
The logistical theatre required to get coffee from cherry to cup is complex and moderately rigid, with little deviational tolerance. Imagine, if you will, what happens when 60 per cent of the roasters for green coffee coming into North America experience a virtual hard stop. In conversation with a New York Coffee Broker with decades of experience in the business, he mentioned that for the last week of March, and the first 2 and a half weeks of April, the main source of supply for ALL American coffee brokers (importers) was American foodservice roasters and not the producer countries of origin. In effect, the flow of coffee had changed direction for the first time in the history of the industry.
With the cautious re-opening of the economy as we enter the 3rd Phase and the relaxing of social restrictions, our new reality will start to take form. If we can continue with the metaphor of the hurricane, there will be re-construction, displacement and new ways of doing business in our post Covid world. We will adapt, as we have adapted for thousands of years previous, and continue to use our ingenuity and resources to thrive in our new environment. As so eloquently stated by Francis Bacon over 400 years ago “nature, to be commanded, must be obeyed”.
Brian Martell is the VP of sales at Heritage Coffee, and has many years of industry experience. Brian has also been the recipient of three prestigious awards: the Don Storey, Stuart Daw, and the Albert DeNovelus Customer Service awards. Questions, comments, feedback, start a dialogue? Email him at Brian@heritage-coffee.com