Latest / Best of Business / Richard Corney: managing director of Flight Coffee issues warning about the future of the coffee industry

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

• 0:09
  Speaker 1: You're listening to a podcast from News Talk ZEDB. Follow
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• 0:17
  Speaker 2: We are being warned about something that's quite serious, coffee
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  Speaker 2: and the price that it might cost you soon. Very
• 0:23
  Speaker 2: scary was in the headline for this story. Global supply
• 0:27
  Speaker 2: chain disruptions climate conditions have affected production and they've been
• 0:31
  Speaker 2: driving up costs. So the average green coffee price has
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  Speaker 2: gone from three dollars seventy six in twenty twenty to
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  Speaker 2: just shy of fourteen dollars in January this year. Flight
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  Speaker 2: Coffee Company Managing director Richard Corney is with me this afternoon.
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  Speaker 3: Richard, good afternoon, kiddo. How are we doing well?
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  Speaker 2: I'm anxious about this story. Actually, how much is how
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  Speaker 2: much is the coffee going to? Are we going to
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  Speaker 2: get to ten dollars this year?
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  Speaker 3: It looks it's very possible, But at the end of
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  Speaker 3: the day, the burn on passing on these costs is
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  Speaker 3: ultimately going to fall on a FA owners and operators,
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  Speaker 3: and I just I just have to clarify. The price
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  Speaker 3: that you referenced there is the is the in country
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  Speaker 3: commodity reference price in New Zealand dollars before any other
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  Speaker 3: costs that coffee roaster here in New Zealand might receive,
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  Speaker 3: so that when that price moves as much as it
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  Speaker 3: has in the last sort of well on average five years,
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  Speaker 3: it's increased year on year because it's traded as a
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  Speaker 3: soft commodity and New zeal And traded in US dollars,
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  Speaker 3: when things like the New Zealand dollar and other factors
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  Speaker 3: such as that really ramp up the price for roasters
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  Speaker 3: here and importers here in New Zealand. And what we're
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  Speaker 3: seeing is an extended period of time in the market
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  Speaker 3: where it's been growing months and months aggressively since August
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  Speaker 3: last year, and coffee contracts that have been booked by
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  Speaker 3: roasters and importers throughout twenty twenty four are essentially they're
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  Speaker 3: going to be materializing this year on a week dollar
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  Speaker 3: and we're looking at some pretty significant reduction and growth
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  Speaker 3: margin or operating profit for coffee roasters. And the fact
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  Speaker 3: of the matter is they cannot afford to wear those
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  Speaker 3: costs and they will need to pass them on, and
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  Speaker 3: when they do, they'll pass them on to their wholesale business.
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  Speaker 3: You'll set it on the supermarket shelf, bags of coffee
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  Speaker 3: getting a bit more expensive. But essentially, you know, consumers
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  Speaker 3: are the ones that are going to have to pay,
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  Speaker 3: and they really, you know, should be prepared to do so.
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  Speaker 2: How much extra are we going to have to pay?
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  Speaker 2: I guess that depends on you know, who's got the
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  Speaker 2: contracts and how much they're going to change by etc.
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  Speaker 2: What is there a huge margin on coffee?
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  Speaker 3: You know, to begin with, well importers when they bring
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  Speaker 3: in their coffee, bringing coffee on behalf of clients. It
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  Speaker 3: looked because of the scale the margin is tiny relatively speaking.
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  Speaker 3: But coffee roasters and manufacturers they're operating margins at a
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  Speaker 3: healthy level are no different to any other sort of
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  Speaker 3: manufacturing food manufacturer in New Zealand. And I think the
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  Speaker 3: point is that that is the frightening part of this
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  Speaker 3: is that you know, anywhere between potentially twenty five up
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  Speaker 3: to thirty five percent of that margin is looking to
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  Speaker 3: be eroded. It's the market continues to proceed the way
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  Speaker 3: that it is. I mean, yesterday it breached its December
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  Speaker 3: record for the highest price since nineteen seventy seven, and
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  Speaker 3: it jumped twelve points and hit three dollars fifty seven
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  Speaker 3: US dollars two pound. That makes and if it gets
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  Speaker 3: to four dollars a pound, that reference price I was
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  Speaker 3: talking about would be almost sixteen dollars with the car
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  Speaker 3: New Zealand exchange rate. And you know for reference that
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  Speaker 3: was three dollars sixty three or seventy five years ago.
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  Speaker 2: Yeah, so it's I mean, the price is creeping up,
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  Speaker 2: and it's I can hear it in your voice. It
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  Speaker 2: is a very scary prospect, especially when you say when
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  Speaker 2: you talk about the exchange rate at the moment with
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  Speaker 2: the with the United States. Richard, thank you for that.
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  Speaker 2: Richard Corney, the Flight Coffee Company managing director, talking about
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  Speaker 2: the very scary prospect, particularly I mean if you're in
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  Speaker 2: the business, but also if you're buying coffee, the very
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  Speaker 2: scary prospect of those increases coming through.
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