The World’s Coffee Crisis: Overdependence on Brazil and Vietnam in a Warming World
Coffee has long been more than just a drink—it’s a global ritual that fuels millions of people daily. But the industry is facing a significant challenge: its overreliance on Brazil and Vietnam for the majority of global coffee production. In a rapidly warming world, this concentration poses severe risks, prompting a shift toward smaller, more diverse producers in regions like Cuba, Peru, and Thailand.
Despite the fact that approximately 40 countries produce coffee, more than half of the world’s supply comes from just two nations. This heavy dependence creates a precarious situation where any disruption—such as the severe droughts that recently hit both Brazil and Vietnam—can send global coffee prices soaring. The impact is immediate and felt by consumers, with the price of a latte reaching $9 this year due to these climate-induced challenges.
The vulnerability of the coffee industry to climate change has sparked a wave of investments in smaller, emerging coffee-producing regions. From Cuba to Rwanda, there’s a growing recognition that diversifying the global coffee supply chain is not just desirable, but essential. Consumers are increasingly seeking out coffee from unique origins, and the industry is responding to this demand by exploring new sources of high-quality beans.
Andrea Illy, CEO of Illycaffe SpA, emphasizes the urgency of this diversification, stating, “This year proves that the impact of climate change cannot be underestimated. It is starting to change the market itself.”
Brazil, the world’s largest coffee producer, accounts for 39.7% of the global supply, with Vietnam contributing another 16.5%. The rest of the world’s coffee comes from a mix of smaller producers, including Colombia, Indonesia, Ethiopia, Uganda, India, and Honduras, among others. These smaller origins are becoming increasingly important in maintaining a stable and resilient global supply chain.
In response to these challenges, companies like Illycaffe are expanding their sourcing beyond Brazil and Vietnam, re-entering markets in eastern and southern Africa where they once purchased beans. Similarly, coffee trader Volcafe Ltd. has secured $60 million in financing to boost its operations in East Africa, while Starbucks Corp. has been investing in tree distribution and loans to producers in Peru, Rwanda, and Tanzania.
Efforts to revive coffee production in historically significant regions are also underway. European coffee roaster Lavazza SpA is involved in a 20-year project to rejuvenate Cuba’s coffee industry, which has struggled since the Cuban Revolution. Nestle SA’s Nespresso has committed $20 million to develop the coffee sector in the Democratic Republic of the Congo, part of its broader $71 million Reviving Origins program that aims to restore coffee production in conflict- and disaster-affected regions like Uganda, Zimbabwe, and Cuba.
“Preserving exquisite coffees from adverse circumstances such as conflict, economic or environmental disaster, and ensuring a future for the farmers who produce them is a critical part of our business,” said a Nespresso spokesperson.
However, the road ahead is not without challenges. Smaller producers often lack the economies of scale that Brazil and Vietnam enjoy, relying instead on labor-intensive family farms. These inefficiencies keep production costs high, making it unlikely that consumers will see lower prices at their local cafes anytime soon.
Yet, there is a silver lining. Since the COVID-19 pandemic, coffee consumption has shifted dramatically, with consumers becoming more discerning and willing to pay a premium for quality, variety, and traceability. This trend has driven the growth of specialty coffee, which now surpasses mass-market options in popularity. Nearly half of American adults drink specialty coffee daily, according to a June report by the National Coffee Association.
This shift in consumer preferences benefits smaller producers, who are traditionally associated with high-quality, specialty beans. Countries like Honduras and Thailand have seen a steady increase in coffee production as a result. For example, Honduras has boosted its output significantly, though rising production costs have squeezed margins for farmers.
In places like Colombia, Indonesia, Ethiopia, Uganda, India, and Honduras, coffee production has seen a consistent upward trend over the decades. These countries have capitalized on the growing demand for diverse coffee origins, offering consumers a richer, more varied experience.
To sustain this momentum, coffee companies must continue to prioritize direct sourcing and sustainability while also emphasizing the unique, personalized experience that traditional coffee shops provide. As Matthew Barry, an insight manager at Euromonitor International, warns, failing to do so could lead to a shift toward more affordable, convenient options like canned coffee.
Higher prices are likely to persist across the supply chain. Should they decrease, small farmers might find it less profitable to grow coffee, leading to tighter supplies and, eventually, another spike in prices. Jay Kling, director of coffee at Irving Farm New York, expressed hope that prices remain high in the long term, stating, “That’s what the industry needs right now.”
The global coffee industry is at a pivotal moment. Overdependence on Brazil and Vietnam, coupled with the growing impact of climate change, underscores the urgent need for diversification. Investing in smaller producers is not just a strategy for growth but a necessity for the industry’s resilience. Maintaining high prices, supporting small farmers, and embracing new origins are essential steps in securing the future of coffee for generations to come.
