In this article, we will take a look at the issues plaguing the global coffee market as well as the 10 best coffee stocks to buy according to hedge funds.
The Global Coffee Market Continues to Struggle
According to a report by Mordor Intelligence, the global coffee market size is estimated at $132.13 billion in 2024 and is expected to grow to $166.39 billion by 2029, growing at a compound annual growth rate of 4.72% during the forecast period. Over the last 2 years, coffee prices have hit multi-year peaks. Reuters reports that global coffee prices have risen to their highest in nearly 50 years. This has been the result of poor weather in Brazil and Vietnam.
Brazil produces almost half the world’s high-end beans used primarily in roast and ground blends. The country has been the victim of one of its worst droughts on record this year. While rains did come in the month of October, they might have been too late. According to farmers and agronomists, the coffee trees are unable to recover for the 2025 crop. The next crop is not expected to be big. It is believed that coffee trees that have suffered from the dryness would be using energy to produce leaves, instead of fruits, after the rain. This means that there will be barely enough energy in the crops to develop fruits after flowering.
The other major coffee producer Vietnam produces roughly 40% of the robusta beans used to make instant coffee. The country was subjected to a severe drought earlier in 2024 which was followed by excess rains since October, with the current harvest following 3 years of supply deficits.
How’s the End Market Likely to Suffer?
The soaring coffee prices are casting their impact across the value chain as they hurt roasters and cafes and eventually the customers. Consumers are expected to see the price spike in 6 to 12 months since roasters tend to buy coffee months in advance. The Nescafe and Nespresso maker Nestlé has decided to raise prices and make bags smaller with beans getting expensive. Especially for the American coffee enthusiast, imported goods such as coffee beans are likely to witness markups if the new administration decides to impose tariffs on coffee-producing countries. Before the potential price hikes from tariffs hit, many Americans are already stockpiling various goods including coffee.
With that being said, let’s move to the 10 best coffee stocks to buy according to hedge funds.
Our Methodology:
In order to compile a list of the 10 best coffee stocks to buy according to hedge funds, we went through stock screeners, relevant ETFs, and media reports to make a list of coffee stocks. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best coffee stocks to buy according to hedge funds have been arranged in ascending order of their hedge fund holders as of Q3.
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10. Farmer Bros. Co. (NASDAQ:FARM)
Number of Hedge Fund Holders: 5
Farmer Bros. Co. (NASDAQ:FARM) is a coffee roaster, wholesaler, and service provider, specializing in regular and specialty coffee, and allied products, such as tea and food items in the US. The brand has remained dedicated to perfecting roasting techniques and sourcing practices to bring forward the finest coffee since 1912. The firm delivers traditional, premium, and specialty coffee products to businesses across America.
Farmer Bros has set the benchmark for quality coffee, tea, and culinary products for more than a century. The firm boasts one of the largest independent networks, serving approximately 30,000 establishments across 49 states. The large, established direct store delivery (DSD) network also allows for scaled rollout of new on-trend products and services.
Farmer Bros. Co. (NASDAQ:FARM) efficiently cleared the path for profitable growth through the sale of its direct ship business in June 2023 thereby creating a streamlined focus on its higher-margin business, direct store delivery. This strategic move eliminated lower gross margin business and improved roasting efficiency.
Lastly, the industry dynamics poise Farmer Bros. Co. (NASDAQ:FARM) for growth. The coffee market outlook is improving and the industry is expected to reach $83.24 billion in 2027, growing at a compound annual growth rate of 5.9%. Especially in America, coffee consumption is at a two-decade high, with 66% of Americans drinking coffee every day.
9. Westrock Coffee Company (NASDAQ:WEST)
Number of Hedge Fund Holders: 6
Westrock Coffee Company (NASDAQ:WEST) is a leading integrated coffee, tea, flavors, extracts, and ingredients solutions provider in the United States. The firm provides coffee sourcing, supply chain management, product development, roasting, packaging, and distribution services to retail, food service and restaurant, convenience store and travel center, non-commercial, and hospitality industries around the world. The firm sources coffee and tea from 35 origin countries.
Coffee is the foundation of the firm as it exceeds expectations with a catalog of coffees. The firm serves leading brands with coffee solutions that drive customer satisfaction and business growth. Westrock’s decades of global experience in creating tailored beverage solutions, its insight-driven innovation, extensive production capacity, and global sourcing network are some of its notable strengths. Westrock Coffee thereby serves as a true beverage partner to its customers, delivering unparalleled expertise and innovation across the entire beverage value chain.
Back in June, Westrock Coffee Company (NASDAQ:WEST) launched the largest roast to ready-to-drink manufacturing facility in North America, located in Conway. The Conway facility, the largest integrated beverage facility of its kind, marked a major milestone for the firm as it uniquely positioned WEST as a leading force in beverage production across any channel and beverage format.
Although the macro environment has been recently challenging for the consumer, Westrock Coffee Company (NASDAQ:WEST) had a strong third quarter of 2024, with quarterly segment adjusted EBITDA for Beverage Solutions up 19% year-over-year. Simultaneously, the Sustainable Sourcing & Traceability segment was up 45% year-over-year for the quarter.
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