Everyone’s talking about it – prices on the C market have surged to levels not seen since the 1970s, driven in part by Brazil’s historic frost and its ripple effects on supply chains. For the vast majority of the industry, this presents an unfamiliar challenge, as the industry has evolved significantly in the 50 years since such conditions last prevailed.
Turning to the past is often the best tool we have to navigate the future. Doug Bachman is a veteran of the coffee industry who entered the business during what many deemed the “worst” possible moment – the economic turbulence of the 1970s coffee market.
With pricing weighing heavily on all our minds today, his experience – how the industry struggled and adapted amidst the high prices and uncertainty of that time – offers guidance and reassurance as we collectively search for a way forward.
First wave coffee before the frost
Kosta Kallivrousis (K.K.): You joined the coffee industry in the 1970s. Can you describe what your experience of coffee was like before the historic frost in Brazil in 1977?
“I had my first cup of coffee in 1973, and it was good – I couldn't wait to have my second”
Doug Bachman (D.B.): I had my first cup of coffee in 1973, when I worked at a country club. In 1975, I was hired by Wallingford Coffee – one of the dominant roasters in Cincinnati, Ohio. It was my first job in the business. They gave free coffee to Wallingford employees at the local country club. It was good, and I couldn't wait to have my second. I really enjoyed it – it gave me that little kick you need to keep you going, because back then there was a fair amount of caffeine. And then it all changed.
Quality goes cold as prices go high
K.K.: What happened?
D.B.: After the frost in Brazil and leading up to the market skyrocketing like it’s doing now, our prices went up every other week. Roasters had to do what they had to do. You couldn't always get the coffee that you needed because of supply issues. You had to get whatever coffee you could in your building, and roast it regardless of what it was because customers were expecting you to deliver coffee.
Robustas started to increasingly enter the market as well in a bid to save margins. When I started in the industry, a cup of coffee in Cincinnati was 10 cents a cup, after which it went up to 25, 45, and 50 cents consecutively – like boom, it was so sudden.
“Because of the frost, there was no coffee. The blends were inconsistent because you were buying whatever coffee you could get your hands on.”
A few things were taking place back at the time that led us to increase our prices. Procter and Gamble owned Folgers, and leveraged their ties to the media to announce prices going up once a month. This meant that our customer base understood coffee price increases well.
“It was all over the media. There were constant articles in The Wall Street Journal and in local papers about what was going on with coffee.”
We would clip articles and make copies that Folgers and Maxwell House were raising prices to the delivery drivers and show that to customers. Especially in Cincinnati where there was a large population that worked for Procter and Gamble.
High-yield extractions
K.K.: Other than price increases, were there other ways roasters tried to save money?
D.B.: Yes, back then, every coffee roaster said “we have a high yield product, and our 1.75 ounce ground coffee is comparable to what it used to be.” And if you looked at the brews side by side in a glass coffee cup, color-wise they looked the same. To give you an idea, before that coffee shops used 3.25 ounces of coffee beans to make the same amount of coffee – a massive difference.
Folgers had a research center in Cincinnati where they developed Folger Flaked coffee, and Maxwell House launched their Master Blend – both of which were high-yield. If you look at a Mrs. Olson’s 1978 commercial, you’ll see that they were telling people they could use 20% less coffee for the same results.
Brew times on a pot of coffee in a restaurant went from approximately three and a half minutes to five minutes with finely ground coffee, because that's what the market called for. It was dark and smelled like coffee, but tasted like crap.
The consumer shift: from coffee to soft drinks
K.K.: How did roasters feel about making a shift to lesser quality coffees and focusing on high-yield extractions? I'm thinking of specialty coffee roasters who have a specific cup score, flavor profile, and producing region in mind, but have to then suddenly contend with a new economic reality.
D.B.: Those guys in 1979 who had that ideology didn’t survive. It was crunch time, survival, and because they failed to adapt their businesses, they fell off the industry map. Everyone at the time had to figure out what they were going to do to survive – much like now.
K.K.: You mentioned that we lost a generation of coffee drinkers. Who were the people that stuck to drinking coffee, and what products did those who stopped turn to?
D.B.: The ones that left went to soft drinks, which became the number one beverage sometime around 1970, toppling coffee. That's where the younger group went. There was a lot of advertising for soda. Mountain Dew was just starting out, and Coke and Pepsi were rolling out their famous marketing campaigns.
Meanwhile, the coffee business was doing their best to keep up – trying to be cool to appeal to younger generations – and they were extremely unsuccessful at it! They tried to replicate what soda brands were doing by launching a national TV campaign called The Coffee Achievers, but it was a flop.
People were so upset with the price of coffee during that time period that we started seeing industry boycotts happening left and right. Coffee drinkers were kind of desperate. Home consumers would do things like brew a pot of coffee in the morning, then add grounds to it to brew another pot by just adding 50% of the grounds that they would normally use to the already wet grounds.
Survive!
K.K.: How did roasters pivot to survive? I think this is the question we all want to hear the answer to right now.
D.B.: On the production side, Wallingford went from producing a wide range of different blends to substantially streamlining operations with way fewer options.
Around 1980 when I became Plant Manager, I realized that it was too expensive to bring in eight different types of green coffee, because some coffees will sit there for 30 days, which we’re paying for in 7. What we needed to do was make one blend for our operations to remain sustainable.
And so that's what we did. We made that blend with three different types of green coffee – Brazil, washed Mexicans, and Indonesian Robustas. We cranked out that same blend all day long. Our cash flow situation got much better because we could get coffee out of New York and New Orleans in a day or two back in those days, just in time.
But at the same time, a big reason why we were surviving was because other people who had failed to adapt their business models were closing their doors.
We made a good cup of coffee. The term that was used a lot back in those days was “acceptable,” and it's not something that I'm overly proud of. But for a good four or five years of my career, I was really good at making “acceptable” cups of coffee.
Spot purchases versus forward contracts
K.K.: What did green purchases look like at the time – did you contract more spot purchases and avoid forward contracts?
D.B.: Actually, it wasn't that way. I would have to say other companies might have been buying spot where they could and how they could, but by the time 1980 hit, we were mainly buying Brazils, Mexicans, and some Robustas to manage cash flow.
K.K.: How about working with green coffee suppliers, did you shop around more often for better deals during the 70s and 80s – or did you stick with those you were already working with?
D.B.: We stuck with the same guys to a point. We were always shopping price of course, and looking at how far green coffee suppliers would be willing to book out into the future. I know the owner would shop terms because we had paid 7 days and all of a sudden coffee companies were allowed to pay in 10 days. Of course, now I hear that there are companies out there getting 90 days.
“We pretty much stuck with who we were working with because some of those houses risked going out of business, and we valued our relationships above all back then.”
Advice for roasters: Confront the brutal facts
K.K.: Finally, what advice would you give roasters now, as they navigate tough times?
D.B.: I highly recommend reading Jim Collins’ book Good to Great. It talks about confronting the brutal facts – which is something you have to do with regard to your business and its world context. And then you move on from there.
It underscores the importance of knowing what drives your economic engine. How do you ultimately make money? A lot of coffee companies out there do all these other things that they think are cool, but they don't actually make any money.
“You need to decide what market price you can live with. Quit chasing that dime when the market's at a standard level, and don't ever leave yourself short in this market – especially during seasons susceptible to drought or floods.”
It also highlights being disciplined as a crucial requirement for success. People in this business need to ask themselves the hard questions. What market price can you live with, for example? Currently we're kind of past that – companies should have made that decision six or eight months ago. Anybody who's short on coffee right now is in trouble – unless they can raise their prices.
—
What lessons can we learn from all this?
The roasting and retail industry was on fire.
When tough economic times kicked in, consumers were subsidising the industry and were the ones paying for it by getting lower quantity and quality for more money – worse than “skimpflation,” it was a case of being robbed in broad daylight with an increase of 500% on a cup of coffee.
Consumer distrust was growing to all-time highs as roasters and retailers grappled with sparse green coffee supplies and higher prices due to the frost. As the industry attempted to keep their margins intact, roasters told consumers to use 54% (!) less coffee to make the same brew. The impact on consumer trust lasted decades, but the crisis itself didn’t last long.
When we examine the data from the C market, what insights can we draw from this period that could benefit roasters? While most data focuses on changes in pricing, there’s very little data that focuses on the duration of pricing.
Historically, price spikes have been rare.
During the 1970s, when the coffee market was regulated, the C price spiked above $1.40 per pound – a level regarded as the upper limit for consuming countries, as set by the International Coffee Organization (ICO). The market exceeded this threshold in May 1976 and remained above it for a total of 26 months, briefly dipping in July 1978. A similar spike occurred from March 1979 to July 1980, lasting 16 months. In real terms, during the C market’s peak in 1977, the percentage of value added for roasters and retailers dipped to 42%.
In 1989, the market was deregulated, ending the quota system. For the purpose of this discussion, I’ll define a price spike as coffee prices exceeding $2 per pound. I’ll focus on the period from 1990 to the present, during which the market has operated without the constraints of a quota system, a time when producing and consuming countries agreed on how many bags would be exported and imported to stabilize pricing.
Using monthly average price data from 1990 onward - 408 months in total - we see prices exceeding $2 per pound during 45 months – in other words, just over 11% of the time.
These price spikes happened over the following periods:
- April 2024 - December 2024 (9 months)
- October 2021 - September 2022 (12 months)
- April 2014 (1 month)
- October 2010 - February 2012 (17 months)
- April 1997 - May 1997 (2 months)
-
July 1994 - September 1994 (3 months)
What history tells us is that price spikes seldom happen, and when they do, unusually only for very short times. The price spike in the 70s lasted more than 3 years.
On the flip side for coffee producers, I’ll define a price crisis as any period when prices fall below $1.40, aligning with Fairtrade's introduction of a minimum pricing structure to cover producers' cost of production. Out of the 408 months, the C market spent 292 months below $1.40 – nearly 72% of the time. And parallel that with 1994, and value added for roasters and retailers was at 81% of every coffee dollar.
The 1970s should teach us about the dangers of compromising quality and consumer trust to navigate economic turbulence. As Doug Bachman pointed out, the roasters who failed to adapt quickly didn’t survive long.
While today’s price surge feels unprecedented, the data on price duration tells a sobering story. The patterns of the past remind us that such spikes are rare and fleeting, while price crises stretch for decades. The threat experienced by rising prices for coffee buyers is very real – that 11% can put a company out of business. The current situation is undoubtedly disruptive, but history suggests it will pass.
For coffee producers, the story is different. While price spikes place a heavy strain on buyers, the overwhelming reality has been long periods of low prices that jeopardize producers’ livelihoods. This imbalance, which sees roasters and retailers adding value during the lows but struggling during the highs, highlights the need for a more equitable system.
With roasters and retailers facing historically high prices, it’s extremely important to confront the brutal facts, understand your benchmarks and focus on long-term sustainability.