Presentation on the Coffee Commodity

Presentation on the Coffee Commodity

Coffee production:

The world's top coffee exporters are Brazil, Vietnam, Columbia, and Ethiopia. Coffee production is generally centered around the equator, as the weather there is best for its production. The countries who drink the most coffee, however, are Finland, Norway, Iceland, Canada, the USA and Germany.Thus, discussing local production and community consumption doesn’t make much sense because coffee producing areas don’t drink much coffee. If you are drinking coffee in the Western World, you can be pretty certain that it’s coming from a ways away.

Fair trade practices are important. Indeed, coffee is the fair trade poster child.

Sabrina – Slow food in the form of its international organization puts effort into thinking about Fair Trade. 1.7% of the European coffee consumed is fair trade, and Europe is the best market for these products.

Amanda –Let's talk about climates and growing strategies. Coffee usually comes from biodiversity rich shade climates. Originally, coffee growers used a lot of compost, and coffee pulps with crop rotation. When the Green Revolution occurred in the 50's and 60's, the US agency for International Development gave much money to coffee plantations for the purchase GMOS. Today, people are changing back to shade areas, and are using more bio diverse means of cultivation. When looking at climate conditions, global warming’s increase in temperatures means areas producing coffee are moving North and away from the equator. High coffee consumption countries are further north as well, so it will be interesting to see how consumption patterns change.

The Roasting Process:

When coffee is raw, it is called cherries. In wet processing, cherries are put in water, fermented overnight, and the outer skin falls off. The cherries are then are laid out to dry. Areas with little water use dry processing and just peel off the skin. There are light, medium, dark, and darkest roasts. Light is cheap American coffee (think the diner stuff), darkest is espresso.

Supply Chain:



Old school and small producers grow coffee and sell it to middlemen, who sell it to exporters/importers, who sell it to roasters, who finally sell it to retailers. Producers were often ripped off and got less then market price due to these coffee "coyotes".

Coffee for a while was a fair trade product. Importers and roasters and retailers would get together, and fair trade retailers would only buy from fair trade roasters, who would buy from the producers. Producers were interviewed and went through the fair trade process. That’s how the middlemen or "coyotes" were cut out in recent years.

Recently, companies like Green Mountain Coffee and Starbucks (only 1 or 2 percent fair trade) have entered the sustainable coffee business. Starbucks pays more then 3 times the market price to their producers. As Starbucks buys so much coffee, the production chain is essentially all driven by Starbucks.

Starbucks does all the coffee production steps themselves. The 5 or 6 step process of the past has switched to a three step process. Because Starbucks goes via their own producers, they find their own people, and don’t use the old fair trade system. Thus, coffee is no longer considered a “fair trade” product, although Starbuck's process is still more then fair to the producers. They just can’t register their products as "fair trade". It's like organic farmers who aren’t officially registered organic. Perhaps we should call it “generous trade” coffee. Before this time, Starbucks got a lot of heat about their coffee buying practices. It was because of this that the anti-globalization organization CorporateWatch began. Small producers often do get shut out by Starbucks, which wants control of the entire market.

Folgers and Maxwell House are coffee companies, which means that Folgers/Maxwell coordinate with retailer roasters. The only thing Folgers and Maxwell House do is bag the product and sell it to you – that’s it! Their marketing gets you to think they do more then that.

In the original system, through all these steps, coffee sellers would work with tons of small producers – hundreds or thousands. They would then work with a few importers and exporters (five or six). They would then sell the coffee to hundreds and thousands of roasters, who would sell to a few different retailers. It was a very convoluted process.



Coffee is not considered a food commodity. Like other commodities, the producer does not have a means to market the raw product and is at an automatic disadvantage. Coffee producers don’t really have marketing abilities. There’s a huge oversupply of coffee, so the market is totally buyer driven, and keeps prices artificially low. 70% of the world’s coffee is made by small farmers with less then 10 hectares in 80 countries. In Ethiopia, coffee is 67% of the foreign exchange earnings for that country.

Ad agencies usually try to find an emotional connection between you and the product. With coffee, the link between producer and consumer is totally lost. Marketers from an advertising perspective find it almost perfect since they begin with a clean slate. The average American consumer doesn’t have any knowledge or background in coffee production. In regards to basic American coffee, advertising is still geared to older Americans. A whole generation of young people drink coffee, which is marketed strictly by image, image cultivated by companies. Coffee drinking is associated with intellectualism, is considered “cool”. However, people are becoming more educated and aware of the global environment, thus the rise of free trade. It is becoming more desirable to buy these products.

McDonalds has begun to compete with Starbucks with McCafe. A whole set of ads that they are coming out with is creating that anti-cool persona. They're basically saying,"When you go into a coffee shop, you have to be a geek, or an intellectual, or pretentious. But you can go into McDonalds and be a regular Joe." And get a cup of joe.

In the USA, the instant products are owned by Nestle. But "roast” is owned by Philip Morris!