Coffee Good to the last drop

Coffee Facts Over 2.25 billion cups of coffee are consumed in the world every day Globally coffee sales exceed $80 billion Approximately $5 billion goes to nations that produce coffee Over 90% of coffee production is in semi-periphery/periphery countries consumption is mainly in the core

60 varieties of coffee exist Most important for trade are Arabica (74% most widely cultivated) and Robusta (26%) Coffee is cultivated in 70 countries (out of 195 countries in the world - 36%)

Coffee and Tea In Canada Coffee was consumed in North America in With 14 billion cups consumed in Canada every year, coffee is the most popular hot beverage which was valued at $1.5 billion in In 2008, 112 establishments (plants) in the tea and coffee industry shipped $917 million worth of product and employed 2240 people.

Coffee and Tea In Canada Canadian tea and coffee exports totalled $251.2 million in 2008 Canadian Tea and Coffee imports totalled $785.2 million. Canadian companies create products for the "mainstream" market, as well as for value-added short-run (blending coffee beans from different regions).

Since 2006, with several plant closures and consolidation in the coffee industry and a tightening economy overall, employment has declined. Improvement in labour productivity has maintained production levels.

Good Coffee Growing Conditions Grown in tropical and subtropical regions (between 23°N and 25°S) Must receive considerable sunshine and excessive rainfall (2,500+ mm in a year). There is a need for good soil Ideal conditions have temperatures that rarely exceed 35°C. Minimum temperatures fall no lower than about 22 °C Ideal conditions would provide night time cloud cover which restricts heat loss. Needs direct sunlight, but only for a few hours a day

Coffee Facts best coffee grows at an altitude between 3,900 and 5,200 feet high Altitude is very important: the weather, the amount of light, the temperature, there is less oxygen, all that makes the beans ripen very slowly, and that allows the flavour to concentrate and also they are harder

Coffee Facts Higher altitudes beans are more expensive because of its labour intensive harvest and slow growing process

COFFEE STAKEHOLDERS

Growers grown mostly by small farmers as a cash crop farmers are poor, and they do not have any reserves of money to support them when their crops fail or when coffee prices are low

Growers farmers have to sell their beans when they are ready to be harvested & take whatever price the coffee buyers offer governments of many coffee- growing countries have very large external debts & need to export in order to get the hard currency to repay the debts

Growers coffee-growing countries are forced into competition with each other - each trying to get a bigger share of the market

Growers they all produce more and more coffee there is too much coffee on the world market and the price falls each country has to try to sell more coffee to make the same amount of money

Top Coffee Producing Nations

The top coffee producing nations are shown in yellow

COFFEE BUYERS Buyers provide a vital link between growers, processors & exporters Buyers - middlemen between the processors/factories and farmers who sell their coffee directly to them Sometimes governments act as buyers

processors ripened fruits of the coffee shrubs are processed to separate the coffee seeds from their covering and from the pulp Two different techniques are in use: a wet process and a dry process

exporters

Work with importers and traders Act as middlemen between the processors and roasters Sometimes governments play this role Countries who import coffee also act as exporters

Importers/traders play a vital role in getting coffee from producing countries to consuming countries 1.Purchase and store coffee from many different origins in bonded warehouses 2.Provide marketing information to roasters (developments in producing countries) and producers (developments in consuming countries and the markets),

Importers/traders 3.Provide financing to both producers and roasters 4.Take on most of the price risks involved in the coffee trade 5.Traders contribute to market liquidity by purchasing coffee when roasters are not buying and selling coffee when exporters are not shipping.

5 large companies control this trade 1.Neumann (Germany) 2.Volcafé (Germany) 3.Cargill (recently sold to ECOM – Barzil) 4.Decotrade (trading arm of Sara Lee/Douwe Egberts) 5.Taloca (owned by Philip Morris/Kraft based in Switzerland)

roasters process green coffee beans into a variety of end- products Almost 45% of the green coffee imports is purchased by the five largest roasters sell their processed coffees in the European, American and Japanese markets

CompaniesAffiliated companies and brands Philip MorrisKraft Foods, Jacob Suchard, Maxwell House, Splendid, Grand Mere, Carte Noir, Lyons, Birds, Brim, Gevalia, Maxim NestleTaster's choice, Nescafé, Hills Brothers, Lite, Sarks, MGB Sara LeeDouwe Egberts, Merrild, La Maison du Café, Café do Ponte, Caboclo, Café Pilao, Seleto, Uniao, Marcilla, Soley Proctor & GAMBLEFolgers, Millstone, Highpoint TCHIBOEduscho, Tchibo Privatkaffee

roasters NESTLE 13% KRAFT 13% TCHIBO 4% (SELLS TO GERMANY) PROCTOR & GAMBLE 4% (SELLS TO US) SARA LEE/DOUWE EGBERTS 10% (EUROPEAN AND BRAZILIAN MARKETS)

retailers supermarkets, coffee shops, fast food outlets, restaurants and others companies who sell coffee to the final consumer They secure manufactured coffee, both roast and ground and instant, as well as in prepared drinks, sweets, etc and sell to consumers

Top 10 Retailers (2008) Controls 67.19% of total market CompanySales (in millions) Folgers$419 (21.6% of market) Maxwell House$287.3 (14.63% of market) Starbucks$189.2 (9.75% of market) Folgers Coffeehouse (gourmet brands branch) $127.9 (6.59% of market) Maxwell House Master Blend $77.5 (3.99% of market) Chock full o’Nuts$44.1 (2.27% of market) Millstone$43.5 (2.24% of market) Seattle’s Best (subsidiary of Starbucks) $42.8 (2.21% of market) Eight O’Clock$38.5 (1.98% of market) Yuban$37.4 (1.93% of market)

Consumers

Fair trade coffee Coffee importers agree to purchase from the small farmers included in the International Fair Trade Coffee Register Fair trade coffee growers are guaranteed a minimum "fair trade price" of $1.26/pound FOB for their coffee (just over $2.52 per Kg) If world coffee price rises above this floor price, fair trade coffee farmers will be paid a small ($0.05/pound) premium above market price.

Fair trade coffee Coffee importers provide a certain amount of credit to farmers against future sales, helping farmers stay out of debt to local coffee "coyotes" or middlemen Coffee importers and roasters agree to develop direct, long-term trade relationships with fair trade coffee distributors, thereby cutting out middlemen and bringing greater commercial stability to an extremely unstable market.

Fair trade coffee By the time farmers pay Fair Trade cooperative fees, government taxes and farming expenses they are left with just over $1.00 per Kg.

Since March 2010 Green coffee prices have increased by nearly 90%, productivity per hectare over the last ten years has decreased by at least 20-30%, Global demand is up by 2% and still rising imbalance between supply and demand -- > to a “feeding frenzy” by speculators (buying up supplies & driving price up higher).

Since March 2010 high market prices exceed what a farmer would be paid by his coop Fair Trade small producer coops are now unable to prevent many of their members from selling their coffee to mainstream multinationals and are unable to honour existing contracts and repay debt existential crisis for the small producer coops that are the foundation of the Fair Trade system Due to those same high prices, many small Fair Trade coffee roasters will soon be facing an equivalent existential crisis.

International Coffee Agreement ( ) The ICA established a target range for the member market price (a weighted average of different types of coffee) fixed a global export quota to achieve the desired price Each exporting country received a percentage of the global export quota When prices fell below the target range ($1.20 per lb), the quota was cut If prices rose above the ceiling price ($1.40 per lb) for more than 45 days, quotas were suspended until prices returned to the target range

International Coffee Agreement ( ) In ICO failed to reach an agreement on new export quotas, causing the 1983 ICA to break down Without an agreement producing countries lost most of their influence on the international market ICO's average indicator price for the last five years fell from US$1.34 per pound, to US$0.77 per pound for the first five years after New agreement focus on promotion of consumption, quality, training and growing practices

The top coffee producing nations are shown in yellow

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