Arabica coffee futures have surged to new record highs, driven by a supply shortage and adverse weather in key coffee-producing countries, including Brazil and Vietnam. On Tuesday, Arabica futures rose 4% to reach US$3.434 (RM15.19) per pound in New York, surpassing the previous record set in 1977. That earlier spike was caused by a devastating frost in Brazil, which severely impacted future coffee crops.
The price increase has also affected companies like Power Root, which produces popular premixed coffee beverages such as Alicafé, Per’l Café, and Ah Huat White Coffee. Power Root’s CEO, Wong Tak Keong, noted that spot prices for the raw materials used in its coffee products have been climbing every week since last month.
Power Root primarily uses spray-dried coffee powder, which accounts for 95% of its coffee supply. “Spray-dried coffee powder is derived from coffee beans, so it is also impacted by rising coffee bean prices,” Wong told The Edge. The company imports about 80 tonnes of spray-dried coffee powder every month, making up roughly 38% of its annual raw material costs.
In response to the rising prices, Power Root has implemented several strategies to manage costs. These include locking in prices for most of its spray-dried coffee powder for the next 15 months, as well as expanding its supplier base and diversifying the types of coffee powder it uses.
To further secure its coffee supply, the company plans to cultivate its own coffee beans. “For rare coffee beans that we use or plan to use, we plan to grow them on our own plantation,” Wong said.
Power Root is acquiring a 3.48-million-square-foot plot of land in Johor for RM19.99 million to establish the plantation. Wong anticipates that the plantation will begin producing coffee beans by 2028.
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