Author Archives: Cafe Hound

Buzz: Say Goodbye to Your Local Coffee Shop in America’s Cafe Shakeup

  • Starbucks and other chains gain ground as independents falter
  • Number of cafes shrink in U.S. and Canada in pandemic year

Starbucks Corp. and other coffee chains are expanding their grip on America’s coffee culture as independent cafes struggle to survive a pandemic-fueled industry shakeup.

A worker wearing a protective mask stands behind a plastic barrier inside a cafe in Hudson, New York.Photographer: Angus Mordant/Bloomberg

The number of coffee shops in the U.S. is shrinking for the first time in nine years as sales plunge and Covid-19 forces the industry to rethink its business. That’s helping coffee-serving chains such as Starbucks, Dunkin’ Donuts and even McDonald’s Corp. gain ground at the expense of independent outlets fighting to keep their doors open.

“Closures have happened already and we believe the winter could bring another wave, especially for coffee shops depending on outdoor seating or even walk-up foot traffic,” Rabobank’s senior beverage analyst James Watson said in an interview from New York.

Fewer coffee shops means thousands of lost jobs, adding to an unemployment surge since the start of the pandemic. The shift may also curb demand from specialty coffee producers around the world, since cafe patrons tend to drink more premium beverages made from higher-grade beans.

The U.S. will have 25,307 outlets specializing in coffee or tea by the end of 2020, down 7.3% from a year earlier in the first decline since 2011, according to estimates by research firm Euromonitor International. Annual sales will plunge 12% to $24.7 billion.

“Coffee shops that succeed in this new climate will need try to recreate as many of their popular pre-Covid-19 attributes as before while being in line with the new realities of social distancing,” said Matthew Barry, a beverages consultant for Euromonitor. “This will include moving many aspects online, where personal engagement is still possible without physical proximity.”

Still, Barry sees no scenario in which U.S. food-service coffee consumption returns to its former growth trajectory — though it’ll remain a core part of the industry.

Overall volumes and sales in the coffee food-service industry are expected to fall for the five years ending 2024 while retail coffee sales at grocery stores gain.

Challenging Situations

Larger chains have the resources to handle short- and medium-term losses while also pivoting with conveniences such as online ordering and drive-thru service, Rabobank’s Watson said. Starbucks is planning on a net increase in U.S. stores this year and market gains could be just as significant in 2021, he said.

Starbucks didn’t immediately respond to an email and call seeking comment.

The Seattle-based coffee giant accelerated a rollout of its “pickup” concept — smaller-format stores without tables and chairs — and is enhancing service at its expanding drive-thru locations to cut waiting times. Starbucks also negotiated better leases to prepare for the prospects of future crises that could bring lockdowns, affecting customer traffic.

“We are rapidly innovating in order to capture new demand, new occasions that we didn’t have before that are tied to how customers are currently living their lives,” Chief Financial Officer Patrick J. Grismer said in a presentation last month. “We have moved quickly to open up new channels of distribution at our existing stores, primarily in the suburbs, because there is significant latent demand and there is unmet demand.”

While many independents have proven nimble by adapting their businesses to digital and to-go offerings, they’re still more at risk, Rabobank’s Watson said.

“The most challenging situations have often been based on location, with residential coffee shops far outperforming office/travel based locations,” he said. “Much of survival also comes down to rent negotiations with landlords and the potential for further government assistance –- factors that are hard to control and highly variable.”

Canada has also seen a shrinking number of coffee shops due to the pandemic and the contraction is expected for two more years, according to Allegra World Coffee Portal, a research and consultancy firm. Though 90% of Canadian cafes reopened by September, they face “a long road to recovery in a significantly altered market landscape,” Allegra said in a report.

Canadian coffee-shop sales are expected to plunge 22% to C$9.5 billion ($7.2 billion) this year from 2019 before rebounding to C$10.5 billion next year if the pandemic is largely resolved, according to Allegra estimates.

A return to pre-pandemic levels isn’t expected until 2023, when the industry is anticipated to resume growth. Tim Hortons, owned by Restaurant Brands International Inc., and Starbucks account for three-quarters of Canada’s coffee-shop branded segment.

Canada appears set to buck the U.S. trend favoring Starbucks and other big coffee purveyors.

“With the market currently dominated by branded chains, we expect to see local independents taking a greater share of suburban trade as Canadian consumers seek to diversify their coffee tastes,” Allegra said.

— With assistance by Marcy Nicholson, and Isis Almeida

By Marvin G Perez
October 8, 2020, 3:22 PM EDT Updated on October 9, 2020, 6:00 AM EDT

Source: https://www.bloomberg.com/news/articles/2020-10-08/say-goodbye-to-your-local-coffee-shop-in-america-s-cafe-shakeup?fbclid=IwAR28hg6pqvvxmkQL-FkGF0jfdrKnQoqjLevv0a5zLBZi8lGapyIbUI3cDJw

Buzz: Coffee Caps Worst Week in 22 Years on Overflowing Bean Glut

The world is overflowing with coffee beans, sending futures for the arabica variety to the worst weekly slump since 1998.

The glut is so bad that warehouses in Brazil, the world’s biggest grower and exporter, have never been this full. Trucks in the country’s coffee heartland are waiting days to unload cargo collected from a record crop. Prices in New York, the global benchmark, tumbled 14% this week.

Supplies are piling up just as demand remains weak. Arabica coffee is the smoother variety preferred by roasters like Starbucks Corp. With consumers still proving reluctant to head back to cafes and restaurants in droves, consumption for the premium beans is tepid. By contrast, robusta beans, used in instant coffee and at-home blends, are holding up a bit better.

Robusta futures in London are down less than 2% this year, while arabica has tumbled 12%.

The arabica collapse comes after prices rose in the previous three months. Dry weather in Brazil had sparked concerns over the next harvest, but since then the coffee belt has seen some showers, alleviating the threat.

“Prices fell owing to forecasts of rain in key growing regions” in the South American nation, which should boost yields, Caroline Bain, chief commodities economist at Capital Economics in London, said in a report.

Meanwhile, there are have been some rare deliveries of Brazilian beans to warehouses approved by ICE Futures U.S. That could signal that suppliers in the nation are still holding a big chunk of the 2020 crop.

On Friday, arabica futures for December delivery dropped 3.8% to $1.135 a pound in New York. Prices fell for a fifth straight day.

Coffee settled below the 50-day moving average and approached the 200-day measure, typically seen as bearish signals by some traders.

By Marvin G Perez
September 18, 2020, 4:56 PM EDT

Source: https://www.bloomberg.com/news/articles/2020-09-18/coffee-caps-worst-week-in-22-years-on-overflowing-bean-glut?fbclid=IwAR3oEM61V1TRUeSVEkTGeCKyxXg4n9Cw7AQV58n37-kYuTEKY_N9HDDjZ4A

Find Your Coffee

At cafehound.com, we endeavor to locate the best coffee in the world. Over the last eight years we’ve happily watched as globally, the options available to the public have exponentially increased and the public’s general awareness of specialty coffee has deepened. Although we still believe that tracking down the best coffee in the world is central to our mission, we recently decided to dip our toes into the area of recommending specific coffee(s) to coffee lovers based on a mixture of qualitative and empirical analysis.

espresso_2017

In two posts (1 and 2) from 2015, we took verbal reviews of specialty coffees from the site coffeereview.com,  and we employed various clustering algorithms to discover groupings of coffee (based on words used to describe them and other factors). This served as our initial foray into using Data Science on expert coffee reviews to improve our understanding of specialty coffee.

Over the past month, we’ve set out to improve upon that original work in order to empower java lovers to discover the perfect brew. Our years of cupping coffee and talking with experts have shown that – after a certain point – what constitutes a “good cup of coffee” is subjective and specific to the palette of the beholder.

With that in mind, cafehound.com chose to use a large, multiyear list of coffee reviews from Kenneth David’s coffeereview.com site to explore the relationship between the descriptions used to rate coffee aroma, flavor, aftertaste, body, acidity and finish. We hypothesized that there are distinct groupings of coffee based on their roast profile, body, and flavors that are relevant to informing consumer preferences in the overall marketplace. To clarify, a market segmentation based on a representative sample of surveyed consumer preferences may be more useful to marketing professionals, but that is outside of the scope of this post. Instead, we’re using the structure inferred from math and reviews of specific coffees to estimate categories of the potential “coffee experience.” These categories may provide coffee consumers with guideposts for exploring new specialty coffees.

Our results led to six broad categories of coffee that we’ve ordered from lightest to darkest roast (based on average Agtron ratings). Agtron ratings are a numerical representation of the consistency of the roast color (lower numbers indicate a darker roast <45, higher numbers indicate a lighter roast 50+). More than the roast determines the flavor profile and overall body of the coffee, which is why some of these segments may appear similar.

Initially, we bring this content to you via occasionally updated web pages. Depending on demand, we may scale our service to provide daily or weekly recommendation updates.

For now, follow the link below to Find Your Coffee.

cafehoundlogos01

For code share:

Shiny Segmentation and Prediction

Data Science: Exploring CoffeeReview.com Top Coffees (Cntd.)

In the last post we began exploring the relationship between the language describing coffee (“cupping notes”) and price/brand/roaster. Our objective is to provide coffee consumers with a general understanding of particular groupings of coffee they can choose based on flavor profiles and mouthfeel characteristics. An example of the type of properties coffee professionals use to describe their craft is illustrated in the below flavor wheel from Counter Culture:

CC_FlavorWheel

After evaluating the segments that our initial k-means clustering (with a k of 5) produced, I was unsatisfied with the results. My decision to haphazardly throw the price variable (unscaled) into the model was wrong-headed and drove the algorithm to essentially classify segment membership solely based upon that. In some cases such an exercise may be useful, but for our objective of discerning whether specific language could be used to segment particular specialty coffees, this segmentation wasn’t going to do it for us.

Also, this initial segmentation helped me narrow my “business objective”. Now I wanted to segment by flavor profile, something that might actually help inform a potential consumer’s purchasing decisions.

In order to develop the cupping note variables that would inform our segmentation, I explored the text data from Kenneth Davids’ site and selected the most common and/or most distinguishing words to test. The list of words is below.

wordlist

A quick look at these led me to believe that certain words might not yield significant information gain in the algorithm due to lack of variance. Mouthfeel, sweet and acidity were present in 96%, 80% and 90% of reviews respectively. Their power as differentiating variables would be constrained by their existence in nearly all observations (with the possible exception of acidity).

However, in my initial quick cluster using SPSS, I included the three variables mentioned above and I still liked the results enough to move forward.

Segment 1: 16.9% of reviews

Segment 1: 16.9% of reviews

This segment was the most expensive (average $42.31 USD per pound) and highest rated (94.6). The segment was the highest indexed on floral, honey, complex, silk, delicate, intense, and peach cupping notes. It also indexed highly on nib, lemon and acidity. The most common producer countries in this mix were geisha panama and Colombia, Ethiopian, Kenyan and El Salvadoran coffees.

List of Segment One Coffees 

Seg1_L1 Seg1_L2

Segment 2: 27.8% of reviews

Segment 2: 27.8% of reviews

This segment was the least expensive (average $26.72 USD per pound) and moderately rated (94.45) while coming from the most diverse sampling of producer countries. It indexed highest on rich, deep, resonant and pungent cupping notes. Whereas the other segments did not include any coffees from Bolivia, Brazil, Mexico or Papa New Guinea, this segment did.

List of Segment Two Coffees 

Seg2_L1Seg2_L2Seg2_L3

Segment 3: 13.9% of reviews

Segment 3: 13.9% of reviews

This segment was middle of the road in terms of cost and ratings (average $37.09 USD per pound and rated 94.52 on average). It indexed highest as juicy, tart, acidity, nib, bright, sweet, and was also well above average in complexity and floral notes. The range of producing countries varied quite a bit in this segment, with several bourbon varietals from Guatemala, Costa Rica, Hawaii – still other Geishas from Panama, Colombia and Guatemala – several Ethiopian Yirgacheffe coffees and a few honey processed coffees from El Salvador (Pacamara) and Hawaii (Maragogype ($75/lb)).

List of Segment Three Coffees 

Seg3_L1 Seg3_L2

Segment 4: 20.3% of reviews

Segment 4: 20.3% of reviews

This segment was the least expensive ($28.46 USD per pound) and lowest rated (94.33) – all things relative to a very highly rated group of coffees. It indexed highest for fruit, sweet, lemon and light while also coming in pretty strong in the tart department as well. This segment is composed of a mixture of coffees from Ethiopia, Kenya, Burundi, Indonesia and Honduras. A few peaberry coffees are included, the red caturra from Rusty’s Hawaiian, a few stray Geisha coffees, and a decently heavy sampling of Sumatra, Yirgacheffe, Sidamo, and various Kenyan single-origins. For the value, this is a very attractive and diverse segment of coffees. See our site visit to Rusty’s in Hawai’i in 2011.

List of Segment Four Coffees 

Seg4_L1 Seg4_L2

Cupping With Miguel At Lorie's Home

Cupping With Miguel At Lorie’s Home

Segment 5: 21.1% of reviews

Segment 5: 21.1% of reviews

Segment five is highly rated (94.58) and quite expensive ($37.73 USD per pound on average). This segment indexes the highest for tart, rich, acidity, syrup, pungent, and mouthfeel, while also scoring highly for honey and bright notes. Panama, Colombia, Hawaii and Ethiopia are the most heavily represented producer countries in this grouping. This segment is probably the most populated by Geishas followed by exotic Ethiopian and Kenyan coffees.

List of Segment Five Coffees 

Seg5_L1Seg5_L2

 

 

For more information on the roasters evaluated in this data from the coffeereview.com website, see the links and data below:

ML_1ML_2ML_3ML_4

And I’ll leave you with a bit of a refresher on the Cup of Excellence Scoring Categories for thinking about and communicating coffee quality/taste.

Cup of Excellence® Scoring Categories

DEFECTS

Phenolic, rio, riado automatic disqualification Ferment
Oniony, sweaty

CLEAN CUP
+ purity | free from measurable faults | clarity – dirty | earthy | moldy | off-fruity

SWEETNESS (prevalence of…)
+ ripeness | sweet
– green | undeveloped | closed | tart

ACIDITY
+ lively | refined | firm | soft | having spine | crisp | structure | racy – sharp | hard | thin | dull | acetic | sour | flabby | biting

MOUTHFEEL (texture, viscosity, sediment, weight, astringency)
+ buttery | creamy | round | smooth | cradling | rich | velvety | tightly knit – astringent | rough | watery | thin | light | gritty

FLAVOR (nose + taste)
+ character | intensity | distinctiveness | pleasure | simple-complex | depth

(possible notations: nutty, chocolate, berry, fruit, caramel, floral, beefy, spicy, honey, smokey…)

– insipid | potato | peas | grassy | woody | bitter-salty-sour | gamey | baggy

AFTERTASTE
+ sweet | cleanly disappearing | pleasantly lingering
– bitter | harsh | astringent | cloying | dirty | unpleasant | metallic

BALANCE
+ harmony | equilibrium | stable-consistent (from hot to cold) | structure | tuning | acidity-body – hollow | excessive | aggressive | inconsistent change in character

OVERALL (not a correction!)
+ complexity | dimension | uniformity | richness | (transformation from hot to cold…) – simplistic | boring | do not like!

New Year, New Content

Happy New Year Café Hound! In 2015 we are going to try to add some new content on the site for the first time in a while.

One element of the new content is going to explore various data sources and statistical techniques regarding aspects of the coffee industry. A quick and dirty preview to this exploration follows below.

Cafe Hound developed a way to download daily price data for Arabica and Robusta coffee taken from daily settling prices (in New York and London respectively) for futures contracts. The unit of measurement is U.S. dollars per pound. We use a website called Quandl.com  for the data. We use R as our data analysis software.

Prices for Arabica and Robusta Coffee

Prices for Arabica and Robusta Coffee

The overall trend line shows coffee becoming more expensive over the last fifteen years on average, although with a significant drop in price occurring after prices peaked in late August 2011.

Price Range: Arabica vs. Robusta

Price Range: Arabica vs. Robusta

Arabica coffee (starting in 2000) is three times more volatile than Robusta coffee in terms of price variance.

Now we will look at combined annual production of Arabica and Robusta coffee. This data was compiled with International Coffee Organization data that was manually inputted into a .csv file http://www.ico.org/new_historical.asp

Coffee Total Production by Year

Coffee Total Production by Year

Coffee Production by Type

Coffee Production by Type

International Coffee Organization data isn’t as precise as it could be but it allows us to understand that the increased global coffee production is being produced in countries that are capable of growing millions of bags Arabica AND Robusta coffee in any given year.

Coffee Production by Type and Country

Coffee Production by Type and Country

Increases in total production over the last few years appear to be driven by an increase in production from countries that are classified as producers of Arabica/Robusta and Robusta/Arabica coffee. In short, this means that countries that are producing both Arabica and Robusta coffee are responsible for driving the growth in global coffee supply. Specifically Brazil, Indonesia, and Vietnam appear to be increasing their share of global coffee production—likely focusing said production on the lower quality Robusta coffee.

That’s enough of a preview for now, but the basic takeaway from this information leads us to the conclusion that we should pay particular attention to the variables  affecting production from Brazil, Vietnam and Indonesia if we want to forecast annual coffee production. However, at this point we haven’t explored the factors driving price enough to fully understand what we should be observing. More questions than answers at this point –meaning MORE analysis and exploration to come! Enjoy the New Year and keep checking in for more here at cafehound.com