Craving coffee - the coffee market
The news
What is a market?
Coffee is the second largest US import after oil, and the US consumes one-fifth of the entire world's coffee, making it the largest consumer in the world. This means that coffee growers across the world fight for a slice of this huge market. They have to compete on both price and the quality of their beans. The power of the big producers of instant coffees means that the growers have to accept what they offer. A evening spent watching commercial television will show any of us just how much money firms such as Nescafe spend on building and cementing their market share. Different types of coffee e.g. Costa Rica Rich Roasted, cater for the different segments within the overall market. But in recent years a growing number of consumers have become aware that some farmers receive a low price for their crop.
A new wave of coffee is emerging to cater to our cravings for justice as much as it does our cravings for caffeine. The Fair Trade certification mark has been developed to assure consumers that the coffee we drink was purchased under Fair Trade conditions. To become Fair Trade certified, an importer must meet stringent international criteria; paying a minimum price per pound, providing much needed credit to farmers, and providing technical assistance such as help making the transition to organic farming. Fair Trade for coffee farmers means community development, health, education, and environmental stewardship.
Oxfam, the British charity has asked the four largest buyers of coffee, which includes Nescafe, to buy up 5 million surplus tons that exists in global markets. This will allow the price to drift upward, so increasing incomes of the poorest farmers. In an interesting and related change of policy Nescafe are now producing sachets of coffee in the Ivory Coast and then importing these to the European Union. They are using the 'special' relationship France has with its former colonial territories to import coffee to the EU.
The theory
To those of you who are new to business studies you may not realise just where markets exist and the complexities that lie within them. You might not have given any thought to coffee and how it reaches your breakfast table. Well, as you can see it's a complicated process and one, which causes concern for certain pressure groups. Follow the links below to look at theoretical topics related to 'markets'.
What is a market?
Market size
Questions
- Identify two ways in which companies such as Nescafe segment the coffee market.
- Explain why the writer of the article feels that it is interesting to note that Nescafe is now producing instant coffee in the Ivory Coast, West Africa.
- Outline some of the ways in which the main coffee manufacturers could expand the size of their market.
Evaluate the probable consequences for coffee manufacturers of the growing awareness amongst consumers of the need for coffee growers to receive a 'fair' price for their output.
