By M. Marin
TSX:SWP.TO | OTC:SWSSF
READ THE FULL SWP.TO RESEARCH REPORT
Coffee prices spiked in 2025; now appear to be moderating in multiple international markets
Swiss Water Decaffeinated Coffee Inc. (TSX:SWP.TO) (OTC:SWSSF), a leading specialty coffee company and premium green coffee decaffeinator producing chemical-free decaffeinated coffee, saw strong demand through the first nine months of 2025, despite the backdrop of volatile coffee and coffee futures prices. The volatility reflects, among other factors, weak crop harvests, recession concerns, and the geopolitical climate, including the potential threat and/or imposition of tariffs and disrupted trade patterns.
Coffee prices rose throughout 2025, primarily reflecting tariffs (notably, Swiss Water’s decaffeination process is classified as “non-transformational” and so coffee retains country-of-origin status for tariff purposes) and crop conditions. Futures contract prices reached their highest levels since the early 1970s. Upward pressure on prices continued into January 2026.
Coffee prices now appear to be moderating
Subsequently, prices appear to have declined, according to Trading Economics, which notes that over the month of February 2026, coffee prices have fallen by double-digit percentages compared to the same period in 2025. In fact, Arabica coffee futures approached their lowest level since November 2024. The supply outlook has improved, with a strong crop expected in the next (2026-2027) season. The National Supply Company (Conab) anticipates a significant increase in Brazilian supply, forecasting a 17+% increase in 2026 compared to 2025, with Arabica production up an anticipated 23+%.
Expect long-term demand to rise even if short-term demand fluctuates when prices uncertain
Higher prices and coffee price uncertainty arguably result in short-term changes in demand from consumers, importers, and roasters. However, given the growing popularity of coffee beverages – particularly decaffeinated and specialty coffees, which are each gaining share within the overall coffee category – potential pullbacks in demand are likely to be short-term, in our view. Coffee ranks among the top beverages consumed. According to the National Coffee Association’s (NCA's) Spring 2024 National Coffee Data Trends (NCDT) report, daily coffee consumption in the U.S. reached a 20-year high in 2024.
Decaf consumption rising, as decaf segment gains market share of overall coffee consumption
Even if some of the expected price improvement is muted in the U.S. by tariffs or tariff uncertainties 1) decaf coffee consumption is growing, a trend we expect will continue, 2) SWP’s 100% chemical-free decaffeination process is expected to remain highly attractive, given consumers rising health consciousness, and 3) SWP’s global focus continues to drive growth in multiple international markets where prices are expected to benefit from supply increases. Revenue in all key markets was higher in 3Q25, with international market sales volume up 14% as SWP continues to expand its global customer base.
The decaf segment is growing, and that trend is expected to continue, which we view as a growth driver for Swiss Water. According to consumer research from StudyLogic, the amount of decaffeinated coffee consumed has grown annually since 2017 in both the U.S. and Western Europe. Moreover, there is significant upside opportunity for the decaf category to gain market share, as decaf currently comprises only roughly 15% of coffee consumed in the U.S. and about 12% of coffee consumed in Western Europe, according to the NCA, but is gaining market share.
Research notes potential health benefits of decaf coffee; SWP process is natural & organic
We believe that as the overall market for decaffeinated coffee expands, the market for chemical-free decaffeination will continue to grow, particularly given people’s continued trend towards health consciousness. According to beverage industry consultancy Ripples, “Health and wellness trends will influence coffee consumption. As people become more health-conscious, they will seek healthier options.” A 2025 outlook report from food conglomerate Nestle points out that about “82% of U.S. consumers currently view wellness as a top or important priority in their lives.”
We continue to believe that over time, Swiss Water is poised to benefit from several factors, including rising consumption of decaffeinated coffee and – reflecting its 100% chemical-free decaffeination process – the growing consumer trend towards natural and more healthful beverages, particularly given research on potential health benefits of coffee consumption combined with SWP’s natural process.
Recent research from the Harvard School of Public Health cites coffee consumption – of both caffeinated and decaffeinated beverages - has been linked to long-term reduction in risk of heart disease, certain cancers, and other chronic conditions. Moreover, both caffeinated and decaffeinated coffee contain polyphenols, which are linked to improved metabolism and gut health.
Importantly, Swiss Water‘s proprietary Swiss Water® Process is a chemical-free way to decaffeinate coffee. The process is certified organic by the Organic Crop Improvement Association. Decaffeination is the process of removing caffeine from coffee beans. The process is regulated to ensure that all but trace amounts of the chemical solvents are removed before the coffee is roasted, and the caffeine has been largely removed. While the U.S. Food and Drug Administration (FDA) has deemed the use of methylene chloride safe in the decaffeination process, indicating that only trace amounts remain in the beverage, it is considered a possible carcinogen, and many countries do not allow the importation of coffee that has been decaffeinated with it.
SWP volumes up in first nine months of 2025 despite volatile market conditions
The company’s strategy is to maintain flexibility to meet demand amid shifting timing of customer purchases in an uncertain pricing environment, with measures including potentially sourcing coffee from markets with low or no tariffs, inventory management to optimize inventories and remain positioned to respond to customer demand, controlling costs to optimize operating performance, and hedging actions. Through September 30, 2025, the company’s processed volumes increased 4% year-over-year, and revenue increased 56%, despite volatile market conditions, as the company manages risk and also focuses on expanding its global footprint.
Expected Benefits of SWP Expanding Its Customer Base
Given the size of the population, the U.S. is the largest market for coffee consumption in the world and for SWP. However, coffee consumption is rising in many international markets, and tariffs are not exerting the pressures seen domestically. We also believe SWP is benefiting from its strategy to expand its geographic reach and customer base. Demand in Europe has been strong, and the company is also focused on growing its presence in new markets in Asia and elsewhere. In fact, Swiss Water has indicated that it is seeing growing demand from new and existing customers in Asia and the Middle East, among other markets.
The company recorded higher revenue from all of its key markets in 3Q25. Sales volume in North America increased by 1%, and sales volume in international markets increased by 14%. The company continues to pursue growth in international markets and to expand its customer base, particularly development efforts in the Asian market and early development efforts in the Middle East. According to Food & Hospitality Asia (FHA), “[t]he Asia-Pacific region is estimated to be the fastest-growing specialty coffee market in the world.”
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