Coffee Roasters Rethink the Blend

Coffee roasters are caught in a grind.

There is a lull in supplies of arabica beans, the most widely consumed variety of coffee, after rain damaged output in Colombia and Central America. Meanwhile, Brazil's harvest, expected to be large, is months away. Prices still are at historically high levels, even though they have come down considerably from the near-14-year settlement high of $3.0490 a pound hit by the front-month futures contract in May.

Last year's surge in arabica prices prompted some roasters to substitute robusta beans in certain blends. Robusta is an easier-to-grow variety that is less expensive because its taste is considered to be more bitter than that of arabica.

But now coffee roasters appear to be near the limit of how much robusta they can add before consumers turn up their noses. With arabica supplies tight, the competition for beans could drive arabica futures higher.

Arabica for March delivery rose 1% to settle at $2.2175 a pound Friday on the ICE Futures U.S. exchange.

"Arabica futures still have to deal with a tight supply situation for the short term, and the possibility of less-than-expected arabica coffee production over the coming year," Price Futures Group Vice President Jack Scoville said in a note.

Rachel Hamburger, chief executive of one of Israel's largest coffee roasters, Portofino Coffee Ltd., said it is common practice for roasters dealing with less high-end coffee to add more robusta to blends at times when arabica prices are high, although she said Portofino wouldn't do that because it caters to a gourmet market.

"Because the arabica-robusta [price] disparity is so wide, it naturally makes sense to use as much robusta as possible," said an executive who works with major U.S. coffee brands. Robusta "is like a coffee filler," he added.

Since hitting a one-year low in mid-December, the price gap between arabica and robusta has widened by 14%, to $1.4446 a pound, due to the continued scarcity of arabica supply coupled with a strong harvest of robusta from Vietnam, the variety's top grower. The trend is seen continuing until the bulk of Brazil's arabica beans is harvested in mid-2012.

José Sette, head of operations at the London-based International Coffee Organization, said roasters are now close to the ceiling in terms of how much additional robusta can be used in coffee blends.

"Too much robusta can impact the quality and taste of coffee," Mr. Sette said. "There are, of course, consequences to altering coffee mixes."

One of those consequences is losing market share.

Companies can turn off customers if they add more robusta to their blends, said Christian Wolthers, president of Wolthers America, a Fort Lauderdale, Fla.-based coffee brokerage that sells coffee from Brazil, Colombia and Central America to major roasters.

"There is only so much magic you can do in terms of blending," he said.

One alternative is to create a new product with more robusta, he said. "They can choose to present another product to their customers and market that—but the difference is dramatic," he added.

The other option is to simply pay up for the beans, a cost that could be passed on to consumers at the grocery store.

"If they want to stay with the clients they have and the flavor profile they've had historically, they'll have to raise prices," Mr. Wolthers said.

From: online.wsj.com