The economics of coffee
The economics of coffee
Sauce: https://instagram.com/p/CumOzlKslBb
Caffeine dreams: Giuseppe Lavazza, chairman of one of the world's leading coffee roasters, expects customers to be able to get their caffeine fix cheaper in the coming months, as consumers begin to benefit from the falling price of wholesale beans. With more than 60% of Americans drinking coffee every single day, you might expect the price of coffee to be headline news. But, even if coffee wholesale prices do tumble, your morning fix — particularly if bought from a cafe — is unlikely to change much. A study in the UK from 2019, reveals the breakdown of the costs of a typical cup of coffee, finding that just ~4% of a your morning cup is actually for the coffee itself — which worked out to about £0.10 ($0.13). The figures would undoubtedly be higher today — a £2.50 ($3.20) cup of coffee in the UK is a rare sight these days — but the proportions would be similar. Indeed, if you have a particularly fancy drink order, with lots of sweeteners or alternative milks, then the actual beans will be an even smaller share of the costs. That means, even if the wholesale cost of coffee were to plunge by 40-50%, the cost savings likely to be passed on to consumers would be unlikely to be more than a few cents, as the price of your daily caffeine fix is much more dependent on shop rent and staff wages. A bitter brew Although a few years out of date, and from just one study in the UK, the breakdown gives a good sense of just how complicated the coffee supply chain is. The coffee roaster usually accounts for most of the cost of the actual coffee, while exporters, transporters and processors take their cuts, leaving the actual grower with around just 10% of the coffee revenue. In this study, that worked to be just one penny from a typical £2.50 ($3.20) cup of coffee. #dataviz #datavisualization #coffee #lavazza
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Excellent diagram, which clearly shows the effects of Imperialism.
The majority of the labour and raw materials come from exploited and under-developed Global South countries (since of course coffee is largely produced in poor countries near the equator) while the vast majority of profits (and tax!) are claimed by Global North countries, in the example the UK.
If there was a more even balance of power, one would expect that the profits could be distributed on the basis of hours worked, acres of land needed etc. which would see much more profit in the hands of the growers.
This isn’t imperialism, the growers are selling a commodity. Redistribute the profits from the coffee shops to the growers and the whole system colapses because there would be no coffee shops.
I think you are broadly correct in that we can't snap our fingers and simply change the amount of money flowing back to the coffee bean growers. However, I'm highly skeptical there's any inherent reason why markets should spread the profits this unevenly. If no one was growing coffee beans there wouldn't be any coffee shops either.
The questions you should be thinking about is why are the profits so unevenly distributed? Market forces, of course, but how much are these forces inherent or created? If they were created, what caused it to be the way it is? Would a system born out of powerful countries trying to advance their own interests (cheaper materials) and willing to exploit power imbalances to do so be an explanation?
In commodity situations whomever is at the top of the pyramid will always reap the most profit. The commodity producers would have to band together to set prices. Problem is banding groups together is almost impossible.
Coffee growers need an OPEC. 🤔