- As UK coffee shops and importers look to a rosier post-pandemic future, their view is being clouded by uncertainty over whether new tariffs will add to their costs.
- The value of the coffee market in the UK is expected to fall 37.5% this year, and won't get back to pre-pandemic levels until 2025, says Paul Rooke, executive director of the British Coffee Association.
- With a no-deal Brexit, the cost of importing roasted coffee beans to the UK would increase about 7%, according to the BCA.
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At Pact Coffee, a London-based subscription company, the pandemic has been mostly good for business, which partly relies on customers staying home to brew their own coffee, but now the uncertainty of Brexit looms on the horizon.
Pact subscribers hit 60,000 this month, up from just 40,000 in March, said Paul Turton, chief executive, on Friday. It had taken years to hit 40,000.
But as the UK prepares to leave the European Union at the end of the year, Pact has doubled its usual stockpile of coffee beans to an about six-months supply.
"Essentially, because our revenue was up 50% this year, we've had to accelerate our importing of coffee. And the biggest concern around Brexit is going to be the disruption of the ports. The big unknown at the moment. That's the big fear we have at the moment, because we can't control that," Turton said.
Around the world, the challenges of doing business during a pandemic has led coffee shops to rethink store layouts and customer outreach. Local mask regulations. Stocking up on hand sanitizer. Keeping staff socially distanced. Overall, it's been a rough year for foot traffic.
But for coffee sellers and importers the UK, those challenges have been overlaid by the uncertainty of Brexit. The UK is leaving, with or without a new trade deal in place.
"A no-deal situation will introduce tariffs for trade between the UK and EU which, of course, do not exist at present. They will all be removed if a deal is reached," said Paul Rooke, executive director of the British Coffee Association.
Without a deal, those tariffs would start at 7.5% for roasted beans and 9% for instant coffee, in line with the World Trade Organization rules that would be put in place as the default, according to the BCA.
Any extra tariffs could have a big effect on shops that bring already-roasted beans into the UK, especially as retail sales dry up. Most coffee shops depend on foot-traffic. Overall, the market value of UK coffee shops is expected to shrink by 37.5% this year, and isn't likely recover to pre-pandemic levels until 2025, said Rooke.
At Climpson & Sons, an East London coffee importer and roaster, reassuring messages from the UK government and private couriers have been steadily arriving for about six months, each with basically the same message: after Brexit, all will be fine.
"All the courier companies have been in touch recently about it. They've been preparing for a no-deal situation, so we're all geared up, and ready to go," said Danny Davies, commercial director at Climpson, which also runs a coffee shop, this week.
New tariffs won't be a problem for bigger importers like Climpson, which brings in about 200 tons or so of un-roasted "green" beans each year from Brazil and Ethiopia. About 190,000 tons of fresh beans were imported to the UK in 2019. This placed it among the world's top importers, according to the BCA. Annual shipments have been growing by about 2.2% each year.
As of now, those unroasted beans mostly aren't subject to import duties, but in the event of a no-deal Brexit, where the UK would depart without new guidelines, there's some uncertainty about their future, said Rooke.
"There are still some countries which the UK has not achieved a continuity agreement with, which will mean tariffs where they do not exist at present," Rooke said.
Davies sounded less concerned: "It's all speculation" until the country leaves the EU, he said.
But importers are worried about how Brexit – deal or no-deal – will affect the physical movement of beans into the country. They could be delayed at bottlenecked ports, even if they're not coming directly from the EU, said Turton.
Pact imports about 500 tons of coffee, worth about £2 million, each year, sourcing directly from farms in mostly tropical countries, including Colombia, Brazil, Peru, Honduras, Guatemala, Kenya, and Ethiopia.
One of the biggest concerns in the UK coffee industry is decaf, which is expected to get more expensive. It's well-known that almost all of the decaf beans in all of Europe are from roasteries in Germany, said Rooke.
"It remains unclear as to whether reliefs from the import duties will be available but, if they are not, this is another example of a cost which will exist post January 1 which is not there at present," said Rooke.
At Pact, for example, beans that are imported from elsewhere are exported to Germany, decaffeinated, then imported back into the UK. Decaf only accounts for about 4% of Pact's business, but it has the potential to raise costs if there's a no-deal Brexit.
So Turton's company has been exploring whether it can import decaf bean directly from outside the EU.
"I would suspect, until such time as some sort of trade deal settles down, if one does, we will chose to source our decaffeinated coffee direct instead of sending coffee to Germany and back," he said.
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