Trouble brewing: Tariffs hit Spokane coffee roasters already facing higher prices

Crop conditions already made a cup of Joe more expensive in Spokane, but the announcement this week of new tariffs on the countries that produce coffee beans will bring even more uncertainty, and, mostly likely, higher prices.

“Essentially, the whole system of buying coffee has broken,” Simon Thompson, founder of Spokane-based Cravens Coffee Co., said. “The tariffs are just another break in that mechanism.”

Cravens sources coffee beans from 11 countries for its variety of blends that includes Mission Mountain, Montana Jacks and Spokane Express.

Bobby Enslow, owner of Indaba Coffee, said he’s already had to raise wholesale prices that he charges restaurants and stores as a result of a poor crop in Brazil, which leads the world in coffee production.

He noted that he may be insulated, somewhat, from the decision this week by President Donald Trump to hit U.S. trading partners with new tariffs, because he paid for contracts a year ago for the coffee beans he’s using today.

“So, all the coffee we will be serving for the next year, that price has been locked for the majority of our coffee,” he said.

Asked if those deliveries will face tariffs even though they’ve already been paid, Enslow said he didn’t know.

“I haven’t dealt with that,” he said. “I’m still figuring this out. We are only a couple days into this. They may choose to pass that cost to us. I don’t know how it’s going to play out.”

As of Friday, Thompson said he had coffee beans, which are shipped unroasted and green, on transport ships headed to Spokane when the tariffs hit. He believes he’ll have to pay higher duties to get that already-purchased coffee to the Lilac City.

“If it has not left the country of origin, it will be tariffed,” Thompson said. “Even if the coffee is on the water, the chances are it’s going to be tariffed.”

Tariffs are charged by the importing country. If a 250 -pound bag of coffee costs $100, for example, a 10% tariff would force the roaster to pay $110 to get those beans into the U.S.

“We buy coffee directly from Costa Rica,” Thompson said. “We’ve been doing it for 18 years with the same guy. That coffee hasn’t left yet. They said they are not going to tariff us. They will absorb it. But going forward, they will have to tariff future coffee.”

Growing conditions

Even before the announcement this week, coffee prices had risen to a 47-year high, Thompson said.

He explained that both Brazil, which produces arabica beans, and Vietnam, which produces the robusta beans mostly used in commercial-grade coffee, had crop failures last year.

In addition, demand for beans has increased because of more coffee drinkers in Saudi Arabia, United Arab Emirates and China.

“All those things happened, which caused coffee to rise in price,” Thompson said. “That has already meant that any roaster who wants to stay in business has had to raise their prices.”

Aaron Jordan, owner of Roast House Coffee, said it’s not an exact science, but a spike in coffee prices hits by a multiplier of four.

“If you face a 50-cent cost hike, it might mean a $2 raise in prices to the customer,” Jordan said. “It’s only pennies per cup. But if a pound of coffee goes from $15 or $16 to $18, that seems like a lot to the consumer.”

Like Enslow, Jordan still doesn’t know what the tariffs will mean to his business.

“We haven’t heard anything from our suppliers, but I wouldn’t be surprised to see a 10-to-20% increase,” he said.

Much of the uncertainty comes from different rules. For instance, coffee from Brazil will likely face a 10% tariff. Vietnam, however, will face a staggering 46% tariff.

Thompson said he uses Sumatra beans, which are only grown in Indonesia, in every blend he makes. That country was hit with a 32% tariff.

“The hits just keep on coming,” he said. “There will be tariffs on every coffee that we buy, except Mexico, because Mexico cut a deal. We’ve seen swings before, but nothing ever like this in 30 years. This is as volatile as we’ve ever seen it.”

Coffee is particularly vulnerable to price pressures because there are only so many places where it can be grown. Most coffee is produced in countries located along the equator.

Jordan, of Roast House, said he sources organic beans from Colombia, Brazil and Ethiopia.

“Essentially, the supply chain for coffee is the farmer, the mill that processes it as a product, then an exporter to legally export it and then an importer. Then it comes to us,” he said. “So, you have two governments you have to navigate. We are waiting to see how the other countries respond.”

Thompson said the only coffee grown in the U.S. is in Hawaii and a little in California, but he said both regions only have what he called a “hobby farm” level of production.

Technically, coffee could be grown in Brownsville, Texas, but only if it somehow rose about 5,000 feet above sea level and started to have about 70 inches of rainfall a year, he said.

“We can’t grow coffee in the U.S. The conditions just aren’t there,” Thompson said.

That leaves the dozen or so roasters in Spokane at the end of a long supply chain full of uncertainty.

“Everything is moving so quickly. If it doesn’t even itself out, pricing will be impacted,” Thompson said. “There is only so much the consumer can afford when it comes to coffee. Roasters need to be cognizant of that.”