- Russia’s coffee sector was hit by the falling value of the rouble and limits on coffee imports
- Despite rallying for a short period, specialty coffee companies were affected by mass emigration
- Coffee shops and roasters have had to become more efficient and incorporate online sales
WHEN TROOPS first entered Ukraine on February 24, 2022, Russia’s coffee businesses braced themselves for the worse.
The rouble had plummeted in value, making everything, including a cup of coffee, more expensive almost overnight. Many importers started limiting the amount of credit they offered to roasters, making it difficult to source certain coffees. And big coffee companies, such as Nestlé, Lavazza, and Starbucks, all withdrew after several years in the market.
In the days and weeks following the invasion, the future of Russia’s specialty coffee industry looked bleak. Still reeling from the impact of Covid-19, most predicted a full-scale collapse. At best, it was expected to continue at a much smaller level, as consumers shunned luxury goods to insulate themselves from what lay ahead.
But then, things began to stabilise.
“Most of the coffee shops survived that summer,” says Artem Temirov, who works for Chernyi Cooperative, a specialty roastery and coffee shop in Moscow. He is speaking from a new base in Athens. “Sure, some closed. But it wasn’t 50%, like some thought it might be.
“Then, the currency was more stable. Importers found out a way to import coffees. The whole summer, everyone felt like they were recovering. Our coffee shop started recovering and we thought we would do the same number of sales as before.”
It wasn’t to last. Seven months into the conflict, Russian President Vladimir Putin announced the partial mobilisation of military reservists. It triggered a mass exodus of the country’s population, with hundreds of thousands fleeing to neighbouring countries. Although there are no concrete figures, it’s believed around 700,000 Russians fled the country following the announcement.
“After the invasion, many people left and came back,” Artem says. “But after Putin announced mobilisation, the impact was a lot worse. The exile was bigger and people didn’t return. The average drop in sales since September 21 is around 20-25% for coffee businesses.”
Import problems prevail
For green coffee importers, Russian businesses have become a risky bet. Where before importers would be happy to pay for the coffee themselves before selling it onto roasters as and when they needed it, now, they are behaving more cautiously.
Only if roasters are prepared to stump up 100% of the cash upfront are importers prepared to do business. Otherwise, they are limited to purchasing coffee for contracts of three to six months – rather than ten to 12 months like before.
Artem explains that while his company has managed to find alternatives, smaller roasters have suffered from the new system.
“For most roasters, the period of planning is a bit different now and it is quite complicated to build long-term relationships with farmers,” he says. “We’ve found some importers who are continuing to provide the same service that we used to have where you can buy it month by month. But for a lot of small roasters, paying 100% in advance is just not possible.”
That said, as of yet, no coffee-producing country has said it will cease trade with Russia. Chernyi Cooperative continues to buy from a wide range of farms, including a recent micro lot from Ethiopia. However, they, and others with a focus on high-end specialty coffees, have had to adapt the way they operate to cater to Russia’s changing demographic.
“We have switched the strategy to become a very niche coffee shop,” he says. “Last March we planned to sell coffees in an expensive gourmet chain of supermarkets. But we decided not to because we didn’t want to become a massive, popular brand.
“We are very progressive and we have made campaigns to support NGOs, some of which work with LGBTQ+ groups. So we don’t feel we have a future to be a popular massive brand. We decided to switch the strategy and sell more expensive coffees. It is more stable and lower risk.”
The future of Russia’s coffee sector
One year on from the invasion, Artem and his team are looking at life outside of Russia.
Although they are committed to keeping their flagship store in Moscow, they have set their sights on new spots in Georgia and Serbia, where they hope to tap into the burgeoning ultra-specialty coffee markets.
As for those who continue to rely solely on Russia’s coffee sector, there are mixed outlooks. For those who have been able to pivot online, sales have generally been stable. Consumption at coffee shops may have dipped slightly, particularly in the specialty sector, but people still need to drink coffee.
Many of those who have fled are from Russia’s educated middle class, which means coffee shops, like Artem’s, which originally catered to them have had to change tact, whether that means going for the upper classes or lowering price and becoming more mainstream.
One aspect that is common for all businesses, however, is a focus on efficiency.
“For the Russian specialty coffee market, it is a moment to be efficient with your business model,” Artem says. “If you are planning to become more efficient over the next three years, it is too late. You must do it now.
“The market in Russia is still huge. There was mass migration, but it’s not big numbers compared to the overall population. Until millions leave, then the impact is still relatively small. So I am sure in one year, there will be lots of roasters and coffee shops still on the market. But only if they are profitable and efficient. It is a new reality.”