This isn’t a political post, I’m not talking here about whether leaving the EU is the right choice or not, I’ve shared my opinion on that before. I don’t think it makes a difference now, the decision was made we just need to make the best of it. What I wanted to talk about in this post though is what has happened since Brexit in terms of strength of the pound, and how it might effect us coffee lovers when it comes to the cost of speciality coffee.
The strength of the pound is a much bigger deal than many of us might think. It effects big business, small business, and it has a direct impact on how much money consumers have in our pockets. A lot of the stuff we consume, although we pay for it in pounds, of course starts off being bought in dollars or Euros. When the pound weakens, big retailers might try to pressure the suppliers to absorb the increases, and they often will for a short period if it’s just ups and downs, but long-term, the price increase is passed on to the consumer.
I know it’s not all negative, the weaker pound could have a positive effect on exports from the UK, although economists have been quick to point out that it’s not as straight forward as that, and although it may lead to some rise in exports, it may well be a small rise if any.
There’s a stand off at the moment between Unilever and Tesco as you’ve probably heard, and this is because Unilever are raising their prices for many household name products as a result of the weakening pound, and Tesco want them to absorb it. Tesco have taken Hellmans Mayo & Marmite off their website, Ben & Jerry’s ice cream, PG Tips, Pot Noodle & other household names, I think that’s what we call throwing the toys out of the pram ;-). I’m not sure what the crack is here, why Tesco are taking the price increase so badly, they know the pound has weakened since Brexit. It could of course be that they don’t feel the scale of the price increases are justified, as issues like this can be used as a smokescreen for suppliers to increase their profit margins.
But this is big business, and for those of us that enjoy specialty coffee, most of us buy our coffee from coffee roasters or suppliers that are mainly small or medium businesses. If a coffee roaster has a cost increase for whatever reason, they can’t absorb it, they will need to up their prices by the same amount, or they’ll go out of business, simple as that.
Given that nearly all coffee is sold in dollars, I don’t think there is any escaping the inevitability of a price increase on our beloved coffee. Small businesses can’t have a strop at their suppliers and try to use their buying power to push them to absorb the increases. It’s not just the coffee that will increase in cost either, most of the cost of export will be in dollars too so that will be subject to increase.
I have first hand experience of currency effecting small businesses, it nearly made me bankrupt a few years ago! I ran a small company, wholesaling specialist equipment and accessories, and it had been going very well well up until some toss pot started scare mongering about a potential recession – then overnight, sales slowed right down, literally at the hint of the R word.
This shouldn’t have been a huge problem, I could have lasted this out, things would have got back to normal, but what also happened at the same time was that the pound dropped considerably against the Euro, and at the time I was buying nearly all of my stock from an Eu country, paying in Euros. I couldn’t negotiate with my suppliers, I just had to increase pricing, no other option. Sales had already dropped, and they continued to drop with the new pricing, to the point that I had no option but to wind up the business.
Anyway, since Brexit, the pound has been volatile of course, it’s dropped further against the Euro, and it’s now plummeting against the Dollar. Right now it’s down to about 1.2, I remember a time when I used to work for another firm that was buying equipment in dollars, when we were getting almost 2:1!
It won’t just be coffee increasing in price of course, it won’t just be pot noodles and Marmite either! Hopefully more of us will start buying more local produce, this could be a way for us to avoid the price increases and also to get better quality produce while we’re at it. We have a few farm shops around here, I’m sure most people reading this will have farms not too far away that have locally grown seasonal veg for sale, eggs & so on. Local butchers might start to do better given that the price difference between UK meat and imported meat will probably be smaller.
We have a milk man, from a local dairy farm, so our milk prices won’t be effected, and although a big percentage of the milk sold in UK supermarkets is UK produced, a lot of it is actually sold to the supermarkets from a huge EU company, so I may be wrong but I’m assuming that the price of supermarket milk will increase too.
Another thing to consider of course equipment. Other than Fracino, all espresso machines that I’m aware of are made outside of the UK, in China, the States, and other parts of Europe, which means that more than likely the cost of espresso machines and other coffee brewers will increase. Even for machines that are made in the UK though, I would imagine that at least some of the compoinents are purchased from outside of the UK, so I would think it will effect just about all equipment to some degree, commercial and domestic.
If you’re thinking of splashing out on a new espresso machine, now would probably be a good time if you can get hold of one from a supplier that hasn’t yet upped their prices, if they still have stock of machines that they bought before the exchange rate changes, you might save yourself some cash.
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