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Cause and effect

Amelie Rey-Giraud and Javier Letamendi explain how climate change is rippling down the value chain and why all is not lost

Words: Ameilie Rey-Giraud & Javier Letamendi
Illustration: Ophelia Yang

The Big Idea:

The impacts of climate change are increasingly hard to ignore within the beverage industry.

This makes building climate resilience an urgent commercial priority.

For years, climate change was framed as an environmental challenge. For the effects are being felt from farm level through to global consumers. This article looks at the chain reaction caused by climate change and how it’s rippling down the value chain.

THE WORLD IS HEATING UP

The past 11 years have been the warmest on record

Source: World Meteorological Organization

The starting point is brutally simple: the world is getting warmer. 2024 was confirmed as the warmest year on record, at around 1.55°C above the 1850–1900 average, and the past eleven years all ranked among the warmest on record. Climate Action Tracker and the United Nations Environment Programme (UNEP) state that, with current policies, the world is heading for 2.3°C to 2.9°C of warming by the end of the century. A 3°C warmer world is not like turning up the thermostat. It means moving the planet into a different climate regime, changing rainfall, soil moisture, pest pressure, flowering cycles and harvest reliability. The World Resources Institute notes that, under a near 3°C trajectory, food production could drop by as much as half in some regions.

EXTREME WEATHER EVENTS ARE THE OPERATING ENVIRONMENT

Extreme weather, climate, and water-related hazards caused nearly 12,000 disasters between 1970 and 2021

Source: World Meteorological Organization

The issue isn’t just heat – it’s volatility. The World Meteorological Organization (WMO) has highlighted the upheaval caused by floods, droughts, cyclones, wildfires and heatwaves, alongside record ocean heat and sea-level rise. Extreme weather, climate and water-related hazards caused nearly 12,000 disasters between 1970 and 2021, with US$4.3 trillion in reported economic losses. Beverage supply chains are built on consistency; climate change is creating the opposite.

COFFEE IS ON THE FRONT LINE

By 2050, half of today’s Arabica-suitable land may no longer be suitable

Source: World Coffee Research

Coffee is highly climate sensitive. Arabica, especially, depends on narrow temperature ranges and growing conditions. The National Oceanic and Atmospheric Administration (NOAA) notes that Arabica’s optimal range is around 18°C-21°C, with tolerance only up to roughly 24°C mean annual temperature. Push beyond those limits and the result is lower yields, more disease, quality degradation and pressure to move production uphill, where land may be limited or already used. The result? By 2050, half of today’s Arabica-suitable land may no longer be usable.

TEA GROWING REGIONS ARE UNDER PRESSURE TOO

By 2050, optimal tea growing areas could decline by 26.2% in Kenya, 14% in Sri Lanka and 4.7% in China

Source: Ethical Tea Partnership

Tea faces a similar squeeze. The Ethical Tea Partnership estimates that, by 2050, optimal tea-growing areas could decline by 26.2% in Kenya, 14% in Sri Lanka and 4.7% in China. Even under the most optimistic scenario, climate disruption is coming. For an industry where flavor, quality and consistency are deeply tied to origin, shrinking suitability is not just an agricultural concern. It’s a product-development concern.

FRUIT, BOTANICALS, AND FLAVOR-BEARING CROPS FACE THE SAME CLIMATE LOGIC

2.8 billion tonnes of fruit and vegetables were lost to disasters between 1991 and 2023

Source: United Nations Food and Agriculture Organization

For beverage brands, climate risk extends well beyond tea and coffee. The Food and Agriculture Organization (FAO) estimates that disasters caused USD 3.26 trillion in agricultural losses between 1991 and 2023, including 2.8 billion tonnes of fruit and vegetables. Crucially, losses are rising: Annual agricultural losses averaged USD 64 billion in the 1990s, but more than doubled to USD 144 billion after 2010. For natural ingredients dependent on stable growing conditions, extreme weather is becoming a direct threat to supply, cost, quality and the natural flavors consumers increasingly expect.

SUPPLY BUFFERS
ARE THINNING

Ending stocks are expected to drop for a fifth consecutive year to just 20.1m bags

Source: United States Department of Agriculture

The global coffee market illustrates the risk. The United States Department of Agriculture (USDA) has forecast global coffee consumption rising to a record 173.9 million bags, while ending stocks were expected to fall for a fifth consecutive year to 20.1 million bags — roughly 42 days of global consumption. When demand rises and buffers fall, every drought, frost or shipping disruption lands harder, turning climate shocks into price shocks faster.

WEATHER SHOCKS
= PRICE SHOCKS

Robusta prices rose 259% between February 2021 and February 2025

Source: World Bank

Climate volatility is already showing up in markets. Between early 2021 and early 2025, coffee saw sharp price increases as supply-side shocks hit key origins: drought and frost in Brazil; prolonged dry weather in Vietnam; excessive rains in Indonesia; and renewed dry/hot conditions in Brazil in 2023/24. Over that period, Arabica prices rose 147% and Robusta prices rose 259%. Tea is feeling the same pressure: In India, heat and poor rainfall cut May 2024 tea output by more than 30% year-on-year, the lowest May harvest in over a decade, while subsequent flooding in Assam helped push average tea prices nearly 20% higher by late June [Reuters]. Price volatility is a signal from the climate system, and an early warning for value chains built around stable seasons and reliable supply.

PRICE INCREASES IMPACT CONSUMER BUYING BEHAVIORS

Key stat: The elasticity of coffee demand is about -0.3

Source: The Pennsylvania State University

Demand for tea and coffee is relatively inelastic, with price elasticity of -0.14 and -0.3 respectively. In other words, demand is not highly sensitive to price fluctuation. The Tea & Coffee Trading Journal highlights that, in a rising price environment, inelastic demand can polarize consumer behavior. Some opt for premium and sustainable credentials, while others shift towards value brands. Price volatility can therefore reinforce demand for products that demonstrate clear ethical and sustainable value.

ALL IS NOT LOST

Key stat: 55% of warming can be avoided through improved production practices, healthy diets, and reduced food waste

Source: Nature

The good news is that the future is not fixed. Climate-smart agriculture, regenerative practices, shade trees, improved soil and water management, resilient cultivars, diversified sourcing and long-term supplier partnerships can all strengthen resilience. The scale of climate-resilience initiatives continues to grow: the Rainforest Alliance has expanded from certifying a single farm in 1992 to over 8.7 million hectares of certified farmland today. FAO and United Nations Development Programme (UNDP) frame climate-resilient supply chains as a business issue, linking them to disruption, cost, investment risk, Scope 3 decarbonization and new opportunities. Across beverages, adaptation is moving from a “sustainability programme” to procurement, CAPEX and risk-management.

WATCH: Megan Canceicao on the evolution of the Energy Drink Category

The beverage industry needs to move from climate awareness to climate readiness”

DELIVERING A SUSTAINABLE FUTURE

The evidence points to a clear chain of cause and effect. Temperature becomes volatility. Volatility becomes constrained supply. Constrained supply becomes higher cost, quality risk, and commercial uncertainty. But the conclusion isn’t foregone - it can be a choice.

The task now is clear: the beverage industry needs to move from climate awareness to climate readiness. That means investing in resilience at origin, building longer-term partnerships with producers, diversifying and mapping supply chains, joining up adaptation with decarbonization, and collaborating across the sector to scale solutions faster.

Doing so is not just about protecting crops, but protecting flavor, quality, affordability, farmer livelihoods, and consumer trust as well. Businesses treating climate resilience as a commercial priority today will be the best placed to serve the beverages of tomorrow.

For Finlays, this is why Sustainable Future 2030, our sustainability strategy, matters. It is not a side programme. It is a business strategy for a more volatile world, connecting climate, people and supply chains under the principle of acting today for the beverages of tomorrow.

Ameilie Rey-Giraud
Climate & Nature
Manager Finlays

Javier Letamendi
Climate & Nature
Manager Finlays