A Jolt to US Consumers: Coffee prices hit an all time high in 2025 though tariffs only partially explain the recent increase. Supply concentration and natural disasters remain key risks for crop yields and ultimately consumer prices.
Brazil Dominates the Coffee Market: Brazil is the world’s largest coffee bean producer; with Vietnam, they are responsible for 55% of global sales. Over the last year, both countries have experienced unprecedented droughts which reduced supply, causing prices to surge.
Contributions to Core CPI: Food is only a 13.46% weighting in US CPI and experienced modest price appreciation relative to core goods and services, suggesting consumers have yet to feel acute pain of higher food and beverage prices. The bigger story in the cost of living crisis is in core services, causing consumers to make trade offs in spending.
Consumer Spending: The biggest weighting within US consumer spending is food and beverage stores at 20% and 85% of that basket is comprised of groceries. After a sharp recovery in post-pandemic spending in 2023, grocery spending has not normalized to pre-pandemic levels.
Tariff Relief: US-based companies like JM Smucker have absorbed the tariff impact until now, though revenue growth in coffee and margins have been stable through 3Q25 earnings. Nevertheless, the company has publicly welcomed the recent rollback on Brazilian import tariffs as margins have been projected to compress.
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Groupthink is bad, especially at investment management firms. Brandywine Global therefore takes special care to ensure our corporate culture and investment processes support the articulation of diverse viewpoints. This blog is no different. The opinions expressed by our bloggers may sometimes challenge active positioning within one or more of our strategies. Each blogger represents one market view amongst many expressed at Brandywine Global. Although individual opinions will differ, our investment process and macro outlook will remain driven by a team approach.
