How can smaller coffee roasters mitigate risk?

The coffee market has seen significant price volatility in recent years, placing financial strain on roasters of all sizes. The C price – the benchmark price for arabica coffee – has fluctuated dramatically and even reached historic highs in February 2025, making it harder for roasters to predict costs and secure stable supply chains. 

When prices rise, roasters must pay more for coffee, whether they are purchasing spot coffee or negotiating future contracts. However, smaller roasters often have fewer resources and less capacity to manage this risk effectively. This leaves them particularly vulnerable during periods of market instability. 

Without forward planning, they risk higher costs, limited supply options, and difficulties in maintaining consistent quality. Many small roasters have already been forced to close due to poor cash flow management and rising prices, leading to fundamental shifts in the industry.

I spoke to Chris Kornman, Director of Education at Royal Coffee, and Richard Keane, Head of Sales Operations at Balzac Brothers & Company, to find out how smaller roasters can mitigate risk while still sourcing high-quality coffee.

You may also like our article on how roasters are managing cash flow with higher prices.

The impact of rising coffee prices on roasters

A rising C price affects all roasters, but its impact largely depends on their purchasing strategy. As prices rise, smaller roasters may struggle to secure contracts with favourable terms, particularly when importers prioritise larger buyers who can commit to bigger volumes. 

Unlike larger roasters that have financial mechanisms in place to hedge against price fluctuations, smaller businesses often rely on short-term purchasing strategies. This dynamic often leaves smaller businesses at a disadvantage, forcing them to purchase coffee at higher rates or settle for lower-quality options. 

“Most small roasters buy coffee in small increments to last them at most a couple of months,” explains Chris Kornman, the Director of Education at green specialty coffee importer Royal Coffee in California, US.

“When market prices go up, they need to pay more for that coffee just like everyone else. Most small roasters are already paying more per pound than large roasters who can buy in bulk.” 

Additionally, unexpected price increases can lead to cash flow constraints, making it harder for small roasters to invest in marketing, equipment upgrades, and staff training, ultimately affecting their long-term growth and stability. Roasters who purchase coffee on the spot market must adjust to price increases immediately. Those who have locked in contracts based on previous C market levels may find themselves paying above-market rates if prices drop, making their coffee more expensive than competitors who are buying at the current lower rate.

Chris explains that most small roasters buy coffee in small increments to last them at most a couple of months – and unlike larger roasters who purchase at and are somewhat protected by scale, increases in market prices may disproportionately affect smaller roasting businesses.

“Small roasters are subject to the whims of market volatility, which can be risky, but they also aren’t moving container loads of coffee every day, so the risk is mitigated by scale,” Chris adds.

This puts smaller roasters in a precarious position. Without the ability to hedge or plan forward, they are more susceptible to sudden price spikes, making it harder to maintain stable pricing for their customers.

Why smaller roasters are at greater risk

Market volatility is persistent at the moment, compounded by political instability. On 2 April, in a shocking yet predicted move, US President Trump announced sweeping tariffs on more than 180 countries. There is a universal 10% tariff on any imports coming into the US. For some countries, including major coffee-producing nations like Vietnam, Indonesia, and India, the “reciprocal” tariffs are higher.

Despite Trump’s claims that other countries pay for price hikes, it will be US importers that foot the bill, which will inevitably trickle down to consumers. Many products, including coffee, will become more expensive in the US in the coming months.

While US roasters are already feeling the effects of high coffee futures, they must now prepare to cover even pricier costs of goods as tariffs ranging from 10% to as high as 46% come into effect. 

Hedging is a financial strategy that larger coffee roasters and traders use to protect themselves against price fluctuations in the coffee market. It is a standard management tool for large businesses seeking to avoid risk.

As smaller roasters often lack the resources to engage in hedging strategies, this leaves them exposed to price fluctuations – an increasingly common occurrence in a volatile coffee market.

“Hedging for any commodity, like coffee, requires a substantial amount of capital and expertise to manage,” says Richard Keane, the Head of Sales Operations at green specialty coffee importer Balzac Brothers & Company in South Carolina, US.

Many smaller roasters have assumed that the C market would remain relatively low, making them ill-prepared for sustained high prices. When coffee prices rise unexpectedly, these businesses face cash flow issues and must make tough decisions about passing costs on to customers or absorbing losses. 

“If they don’t leverage future contracting or hedging, then roasters or coffee buyers can leave themselves extremely vulnerable to price volatility. The availability of coffee is also a huge risk if roasters do not manage future contracts and hedging properly,” Richard says.

“The current market has made it very difficult to find spot coffees that suit everyone’s needs, so working with your importer to ensure current and future coffee needs are met before it is too late can help roasters gain a competitive advantage.”

Strategies to mitigate price risk

One way for smaller roasters to manage price risk is by closely monitoring origin-specific pricing trends. Understanding upcoming harvests, supply shortages, and quality variations allows them to make more informed purchasing decisions. 

In addition, sourcing coffee from different origins can help roasters navigate market fluctuations and avoid excessive dependence on one region. Such diversification can also prove useful in garnering more interest from consumers who prefer to buy a wider variety of coffees.

Flexibility in sourcing can also help to manage cost fluctuations. When prices in one region rise, switching to another producing country with similar flavour profiles can help maintain margins.

“Flexibility and adaptation should be the norm for a small roaster’s green coffee supply,” Chris advises. “Under normal market conditions, a small roaster should have their inventory needs covered for two to three months.”

Building strong relationships with importers also provides financial and logistical benefits. Importers can also aggregate smaller hedges for multiple clients, offering smaller roasters some of the benefits of hedging without requiring them to take on large contracts themselves. 

“The advantages of good importer relationships start with honest conversations about risk, not taking on too much expensive coffee, and an assurance that everyone everywhere is dealing with the same problems,” Chris says.

Many supply chain facilitators, such as importers, are typically more willing to allow price flexibility and assumption of risk if they know that a roasting business is willing to invest in the same producer year after year. The implication is that if an importer can count on a roaster’s repeated investment, the risk for producers and importers is mitigated. 

“Repeatable and sustainable business is significantly more valuable to the farmer and the importer when compared to one-time high cost ‘impulse’ purchases from roasters,” Richard says. “As a roaster, you should think of your coffee purchases as a vote for the producer to continue to invest in their farms and to establish repeatable quality for every seasonal cycle.” 

In an attempt to circumvent potential issues with supply chain actors, some roasters turn to direct trade to secure stable pricing and supply chains. However, this approach also comes with its own risks. Regulatory compliance, contract execution, and financing are all challenges that roasters must be prepared to navigate. 

“Direct trade can be a great way for roasters to connect with the folks who are the most vulnerable to price volatility and industry changes,” Richard says. “But if roasters manage the entire importing process by themselves, they can be exposed to a plethora of obstacles.”

With ongoing market volatility, smaller roasters must take proactive steps to mitigate risk. Establishing strong importer relationships, staying informed about origin market trends, and maintaining sourcing flexibility can help ensure long-term sustainability. 

Many roasters are already shifting their strategies, focusing on alternative origins and cost-effective sourcing methods to remain competitive. While they may not have the same resources as larger companies, strategic planning and industry partnerships can provide a safety net during periods of uncertainty.

By embracing these approaches, smaller roasters can better navigate price fluctuations and continue offering high-quality coffee to their customers without compromising their financial stability.

Enjoyed this? Then read our article on why roasters have to compete on more than price alone.

Photo credits: Royal Coffee, Balzac Brothers & Company

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