How coronavirus is impacting Brazil's burgeoning specialty coffee industry

Coffee drying in south Minas Gerais, Brazil | Photo: Érico Hiller/Espresso Magazine

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Millions of Brazilians wake up every morning with a cup of coffee. In fact, 98% of Brazilian households drink coffee daily according to the Brazilian Coffee Industry Association (ABIC).
Brazil is the largest producer and exporter of coffee in the world and among the largest consumers. Like many countries around the globe, it is now grappling with Covid-19.

While there has been some success in controlling the spread of the virus in rural coffee producing regions, larger cities – where many of the nation’s coffee shops are located – have been hard hit.
 
In Brazil’s vast coffee production area, the coffee harvest begins in May, which left little time for farmers to adopt Covid-19 health protocols. Nevertheless, the vast majority managed to adjust operations and reduce their labour force by implementing a new harvest schedule, meaning there was less movement between cities, which is very common in Brazil during the coffee harvest season.
 
Higher altitude regions, such as Serra do Caparaó, Matas de Minas and Mantiqueira de Minas in Brazil’s south east, commence the coffee harvest later in the year and were able to access guidance from cooperatives and coffee institutions well in advance of the picking season commencing.
 

“The specialty coffee market is composed mainly of small specialised coffee shops and micro roasters. Store closures have been devastating for these businesses and have also impacted roasteries that supply them”
– Vanusia Nogueira, Brazilian Association of Specialty Coffee (BSCA) Executive Director 

 
While Brazil’s coffee production has largely avoided major disruption due to Covid-19, the closure of many Brazilian businesses has led to a shift in domestic coffee consumption. Despite most coffee shops being closed or offering takeaway and delivery only, supermarkets open only for essential purchases, and deep uncertainty as to how long the pandemic will last, coffee sales have actually increased in Brazil.
 
ABIC data indicates a 35% rise in the purchase of retail packaged coffee in March 2020. Another survey carried out by the Brazilian Association of Specialty Coffee (BSCA) with its roasting members and coffee shops showed an average drop of 76.3% in sales during the same period, with a reduction of up to 100% among the most impacted businesses.
 
“The specialty coffee market is composed mainly of small specialised coffee shops and micro roasters. Store closures have been devastating for these businesses and have also impacted roasteries that supply them,” says Vanusia Nogueira, BSCA Executive Director.
 
Although the initial increase in coffee demand indicated by the ABIC survey is likely to be temporary, Brazilians still drink an average of 839 cups of coffee per capita every year according to data from the organisation. With such high rates of consumption, consumers are likely to switch to coffees of inferior quality before reducing consumption overall. This could provide further problems for businesses trading in premium and specialty coffee.
 

Can Brazilian specialty coffee survive?

Restricted movements in Brazil posed several major questions for Brazilian coffee shops: How can contact with consumers be maintained? How will changes in work patterns affect sales? And crucially, how many consumers will continue to drink specialty coffee during the crisis?
 
In order to analyse the impact of Covid-19 on the Brazilian coffee shop market, Espresso Magazine – a specialist publication for the Brazilian coffee sector – conducted a survey of 150 coffee shops across the country to investigate the reality of trading between March and May 2020, when many stores in Brazilian cities were still closed.
 
The first striking find was a pivot towards delivery. Pre-pandemic, 79% of coffee shops surveyed did not offer delivery services. This was due to delivery having a low average ticket and high implementation costs. Cafés also cited the unsuitability of premises and menu items for delivery, with 84% surveyed lacking access to e-commerce.
 
However, during the pandemic 71% chose to introduce delivery and adapt their products accordingly, while 37% started selling via e-commerce. Of these cafés, 86% intend to re-open with a hybrid service of local delivery and online sales.
 

Brazil’s new coffee culture

The Brazilian specialty coffee market is relatively new, having first emerged around 20 years ago. Some of the fledging industry’s most significant development occurred less than three years ago with the establishment of influential coffee shops and roasters such as True Coffee, Pato Rei Coffee and Zud Café in São Paulo; OOP, Floresça Café, Copo Café in Belo Horizonte City, and Curitiba’s Supernova Coffee Roasters.
 

“Those who respect value and partnerships, credibility over price, will survive"
– Georgia Franco de Souza, Founder, Lucca Cafés Especiais

 
Espresso Magazine research revealed most coffee shops believe recovery could be painful with customers slow to return, but that there is also an opportunity to promote specialty coffee products and look for new ways to reach customers. The research also highlighted operators’ concerns about providing safe service for employees and customers, and the challenges of delivering a quality experience amid the pandemic.
 
Georgia Franco de Souza, founder of Curitiba-based specialty café and roastery, Lucca Cafés Especiais, has 18 years’ experience working in the specialty coffee industry and employs 28 staff. She reveals several strategies that have kept her in business during the pandemic, including increasing online sales by 50%, introducing delivery and even taking courses on e-commerce.
 
“Those who respect value and partnerships, credibility over price, will survive,” she says.
Brazilian cafés can take comfort during this uncertain time that coffee is an entrenched part of the national culture. The pandemic did not lead to a drop in overall consumption but there has been temporary migration from an out-of-home (OOH) to an at-home routine.
 
With the gradual return of the OOH café businesses, coffee shop customers will slowly return, but are likely to avoid in-store environments for some time. Therefore, it is essential for businesses to seek new ways to reach customers, such as takeaway and delivery, to maintain revenues.
 
According to Fernanda Pizol, founder of Campinas-based specialty café Abigail Coffee Company, “people will need cafés to rescue themselves from isolation, socialise and meet dear friends for coffee. Coffee is a social drink, and nothing tastes better than a good coffee in a café that you like.”
 

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Mariana Proença is Director of Content and Marcos Racy Haddad is Commercial Director at Café Editora