Uh, Oh Starbucks – Consumers Shift To Cheaper Coffee Beans Amid Recession 

An unintended consequence of the virus-induced recession, lockdowns, and people working from home is a massive demand shift from expensive coffee beans, commonly found at Starbucks, and called arabica, to cheap beans, found in instant coffee, called robusta. 

The chart below, a ratio between arabica/robusta prices, shows how robusta demand surged at the start of the lockdowns. And this makes perfect sense, mainly because Starbucks, the world’s largest coffeehouse chain, uses only “high-quality arabica coffee grown at high altitudes.” So when tens of millions of people were locked down, and many coffeehouses closed, people were forced to buy instant robusta coffee from grocery stores. 

But even after the lockdowns ease, the economy is stuck in a deep recession where millions of jobs have been eliminated, people are working at home, and millions of vehicles are off the road. 

The shift in coffee demand is bad news for Starbucks, that’s why it announced, last month, over 400 stores will be closing in the next 18 months. The world’s largest coffeehouse must shrink its corporate footprint as the economy evolves to where workers are staying home and are reducing costs to weather the economic storm. 

The shift in demand is being seen in surging Robusta coffee prices on ICE. In the last 19 sessions, September contracts have gone parabolic, up 19%, hitting 1,363 on Thursday morning, or a six month high. 

The latest upswing in prices is because the virus-induced recession is “prompting a shift in consumption toward cheaper, instant coffee blends,” reported Reuters.

​”I’m hearing demand is quite strong; there’s been a switch in consumption from arabica to robusta. Home consumption is more robusta intensive,” one coffee trader told Reuters.

Another coffee trader said despite the switch, arabica prices were rising too, mainly because of sharp gains in the Brazilian currency.

​The virus is having profound changes in the economy – one major shift are consumers gravitating towards cheap coffee beans. This is bad news for Starbucks and a reflection of consumers who can no longer afford an expensive cup of Joe.