Richard Corney: managing director of Flight Coffee issues warning about the future of the coffee industry

Experts are warning things are set to get 'very scary' for New Zealand's coffee and café industry.

Global supply chain disruptions and worsening climate conditions have been driving up production costs - and one leading presence in the coffee world warns that these costs will be passed on to businesses.

New reports show the average green coffee price had lifted from $3.76 a kilogram in 2020 to $10.18 a kilogram in 2024 and was at $13.97 so far in January.

Richard Corney, the managing director of Flight Coffee, says consumers will need to be prepared to cover these costs.

"We're looking at some pretty significant reductions in growth margins or operating profit for coffee roasters, and the fact of the matter is - they cannot afford to wear those costs and they will need to pass them on." 

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
We are being warned about something that's quite serious. Coffee
and the price that it might cost you soon very scary,
was in the headline for this story. Global supply chain disruptions,
climate conditions have affected production and they've been driving up costs.
So the average green coffee price has gone from three
dollars seventy six in twenty twenty to just shy of

(00:22):
fourteen dollars in January this year. Flight Coffee Company Managing
director Richard Corney is with me this afternoon. Richard, Good afternoon, Kyodo.

Speaker 2 (00:31):
How are we doing well?

Speaker 1 (00:33):
I'm anxious about this story. Actually, how much is how
much is the coffee going to? Are we going to
get to ten dollars this year?

Speaker 2 (00:41):
It looks it's very possible. But at the end of
the day, the burn on passing on these costs I
was ultimately going to fall on the cafe owners and
operators and I I just have to clarify the price
that you referenced there is the in country commodity reference
price in New Zealand dollars before any other costs that

(01:05):
coffee roaster here in New Zealand might receive. So that
when that price moves as much as it has in
the last sort of well on average five years, it's
increased year on year because it's traded as a soft
commodity and New zeal And traded in US dollars when

(01:26):
it seems like the New Zealand dollar and other factors
such as that really ramp up the price for roasters
here and importers here in New Zealand. And what we're
seeing is an extended period of time in the market
where it's been growing months or months aggressively since August

(01:47):
last year, and coffee contracts that have been booked by
roasters and importers throughout twenty twenty four are essentially they're
going to be materializing this year on a week and
we're looking at some pretty significant reduction and growth margin
or operating profit for coffee roasters. And the fact of

(02:08):
the matter is they cannot afford to wear those costs
and they will need to pass them on, and when
they do, they'll pass them on to their wholesale business.
You'll set on the supermarket shelf bags of coffee getting
a bit more expensive. But essentially, you know, consumers are
the ones that are going to have to pay, and

(02:30):
they really, you know, should be prepared to do so.

Speaker 1 (02:35):
How much extra are we going to have to pay?
I guess that depends on you know, who's got the
contracts and how much they're going to change by etc.
What is there a huge margin on coffee?

Speaker 2 (02:45):
You know, to begin with well importers when they bring
in their coffee, bringing coffee on behalf of clients. Look,
because of the scale of the margin is tiny relatively speaking.
But coffee roasters and manufacture they're operating margins at a
healthy level are no different to any other sort of
manufacturing food manufacturer in New Zealand. And I think the

(03:10):
point is that that is the frightening part of this
is that you know, anywhere between presentially twenty five up
to thirty five percent of that margin is looking to
be eroded. It's the market continues to proceed the way
that it is. I mean, yesterday it breached its December
record for the highest price since nineteen seventy seven, and

(03:31):
it jumped twelve points and hit three dollars fifty seven
US dollars two pounds. That makes and if it gets
to four dollars a pound, that reference price I was
talking about would be almost sixteen dollars with the current
New Zealand exchange rate, and you know, for reference, that
was three dollars sixty or three dollars seventy five years ago.

Speaker 1 (03:54):
So it's I mean, the price is creeping up, and
I can hear it in your voice. It is a
very scary prospect, especially when you say when you talk
about the exchange rate at the moment with the with
the United States. Richard, thank you for that. Richard Corney,
the Flight Coffee Company managing director, talking about the very
scary prospect, particularly I mean if you're in the business,

(04:15):
but also if you're buying coffee, the very scary prospect
of those increases coming through.

Speaker 2 (04:21):
For more from Hither Duplessy Allen Drive, listen live to
news talks. It'd be from four pm weekdays, or follow
the podcast on iHeartRadio.