The Cost Of Coffee: Why That Cup Costs As Much As It Does

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A lot of us enjoy a cup of coffee every now and then. Okay, maybe more than that. The point is, coffee is more popular now than ever, with more cups being drank more than ever.  You’d think that it’d be a great time to be a grower, with all the coffee that the world needs?

Well, no. Arabica beans currently trade for just above $1/lb on New York’s ICE, more than half of its value half a decade ago thanks to Brazil, the world’s leading producer, overdoing it. As a result of the drop in pricing, many growers across the world are abandoning their farms or turning to illegal crops. Of course, if you enjoy your cup of coffee, this could reach you.

Why the struggle?

Consumers think that any price hike in their cup of coffee goes to the farmer, but that’s not the case. In an everyday £2.50/US$3 cup of coffee, growers only get 4% of the cost (~10p), while three-quarters of the price goes to rent, labour, and tax, according to Allegra Strategies.

The long value chain, which includes growers, roasters, and logistics companies like Rhenus Lupprians means that only a small about of money spent on coffee grounds goes to the farmers.

The value chain

After getting picked from the tree, a lot happens to the berries.

Processors wash and prepare them for export, then passes them on to middlemen; logistics companies like Rhenus Lupprians that handle importation, and exportation, then traders, and only then do they end up with the roasters.

According to a 2012 test case cited in the Coffee Exporter’s Guide, roasters take up a whopping 80% of the wholesale price of coffee, with growers taking less than 10%.

On top of that, the middleman are getting squeezed out of their profits. Raf Roggerman, a Commercial Manager at the commodity logistics group, Pacorini, says that their margins have only gotten tighter thanks to the fees they’ve been force to charge tanking.

Why do roasters make so much?

Well, while growers definitely need to get more out of their beans, roasters have to bank a lot on them too. Experts says that roasters do a lot of R&D to create the flavours that’ll sell to customers, which include buying different kinds of coffees, and going to farms. On top of all of that, roasters carry a lot of the risk, as the only time they get money back is when the beans are ready for sale.

Why is my cup so expensive?

There’s a lot of things that go into the price of a cup of coffee, and it varies wildly by country.

Global Lead of Food and Beverages Michael Schaefer, Euromonitor International, says that most of what people pay for their coffee cup comes from the space they’re in, the expertise of the staff that’s marketing the cup, as well as the weight of the brand itself. On top of that, a strong local currency make products seem more expensive when looked at in terms of the dollar.

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