The USDA on Friday released its biannual global coffee market predictions, one of the most in-depth data sets in the global industry, and one that routinely draws the attention of headline writers.
The headline this time around reads something like, “Americans Are Drinking Less Coffee for the First Time in Years,” and the subheads are also remarkably consistent, saying, “This is bad news for the coffee industry and K-cups are to blame.” You can currently see versions of this story in Time and the Eater, but those both followed Reuters, who signaled the panic with the story, “Americans Are Drinking Less Coffee, One K-Cup at a Time.”
But before any of you in the non-pod segments lose sleep over this idea, let’s break down the Reuters piece. It leads with:
Americans are spending more money on coffee than ever before, but for the first time in six years, they will be drinking less of it as the single-serve revolution transforms the brewing habits of the world’s largest coffee-drinking nation.
In an attempt to back this up, Reuters states:
The nation will be the only one of the top eight global coffee-drinking countries to see a decline in consumption, with overall global demand rising by nearly 2 million bags to 147.6 million bags.
The forecast will upset traders and roasters as arabica coffee futures prices continue to fall amid plentiful supplies.
It is true coffee prices are at a 17-month low, at least according to the latest numbers from the London-based International Coffee Organization, but commodity futures and prices remain far more cyclical in nature than do consumption trends. Green coffee prices reflect real-time factors like weather conditions in the world’s top growing country, Brazil, or current inventories, whereas consumption trends tend to either hold steady or move in one direction with some consistency over time.
The data point providing the basis for the Reuters story comes straight from a consumption chart within the USDA’s report. The prediction is that Americans will consume 23,700 bags of coffee in 2015/16, down from 23,974 in 2014/15. This is a predicted decrease of 1.01 percent. To put these 23,700 bags in perspective, it is 1.02 percent higher than the average number of bags Americans have consumed in the past five years.
With data this large, percentages like 1.01 or 1.02 are hardly blips. They more closely resemble zero than they do any meaningful variation. In technical terms, they are within the margin of error.
Despite this weak starting point, the Reuters piece repeatedly turns to k-cups as the culprit for this “upsetting” consumption trend, saying:
The report provides further evidence that the growing popularity of single-serve pods, dominated by Keurig Green Mountain’s K-Cups, is having a material impact on U.S. demand for green coffee beans, market participants said.
As Americans shift from traditional roast and ground coffee toward single-serve, they are brewing only what they intend to drink, reducing the amount thrown down the drain.
The only source Reuters identifies in the story is Pedro Gavina of the California roastery Gavina & Sons, who gives this killer quote:
“People used to make a pot of coffee, now they make a cup,” said Pedro Gavina, owner of Vernon, California-based roaster Gavina & Sons. “Right there we’re losing the sink as a consumer.”
It’s an interesting theory, and one worth exploring, but it is merely one piece of anecdotal evidence, hardly admissible as a hard fact about the market.
Reuters does point out that the estimated consumption drop — however negligible — is in time with the rise in household ownership of single-cup capsule machines, citing data from the most recent National Coffee Association consumer trends report. What Reuters fails to point out is that in increase in consumption from 2013/14 to 2014/15 also came during an exponential growth time for k-cups and other single-cup systems.