From Caffeine To Cocoa, Indulgences Are Back On The Menu

Image Credit: iStock, amenic181

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

A few sips of caffeine or nibbles of chocolate can provide a nice breather during a hectic workday. But the latest figures out of these indulgent industries suggest there is a lot more gulping and gobbling going on than sipping and nibbling.

Prices for arabica coffee beans recently hit their highest level since 2016, PepsiCo just raised its full-year earnings forecast on a nice pop in sales, and Q2 cocoa processing jumped 14% from a year earlier.

Vice City

As people are giving their Keurig and SodaStream machines a rest and heading back to coffee shops, restaurants, and sporting events, the thirst for caffeinated beverages is real:

  • PepsiCo’s North American beverage sales jumped 24% in the recent quarter, and the company saw organic revenue increase double digits in emerging markets like Mexico, Brazil, and India. According to data from Refinitiv, net revenue rose 20.5% to $19.2 billion in the quarter, easily outdoing expectations of $18 billion
  • Meanwhile, global coffee consumption in 2021 is expected to exceed production for the first time since 2017, according to the USDA. The department projects 165 million bags of beans will be consumed this year, a 1.8 million increase from a year ago.

But demand isn’t the only factor here — Brazil’s once-in-a-century drought is expected to drop the country’s 2021 coffee harvest by the biggest year-over-year amount since 2003. Its arabica crop is forecast to be smaller than last year by 15 million 132-lb. bags (more than a few espressos). The anticipated supply crunch has pushed New York-traded arabica futures up over 18% in the past three months.

$7 Latte, $7 Milk: Those shopping in the java aisle aren’t the only ones feeling sticker shock. Overall prices paid by U.S. consumers last month surged by the most since 2008.

Cocoa Oh No: While prices have been pressured this year by oversupply concerns, cocoa processing hit its highest second-quarter volume in a decade, suggesting chocolate consumption is ramping back up in shops and restaurants. Chocolate mogul Hershey reports Q2 earnings at the end of the month.