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Commodity chain for the coffee industry
The coffee industry currently has a commodity chain that involves producers,
middlemen, exporters, importers, roasters, and retailers before reaching the
consumer. Middlemen, often referred to as coffee "coyotes," purchase coffee
directly from small farmers.
They typically purchase the coffee substantially below market price, re-selling
to exporters at a substantially higher price, and keeping the margin for themselves.
Large coffee estates and plantations often export their own harvests or have direct
arrangements with a transnational coffee processing or distributing company.
Under either arrangement, large producers can sell at prices set by the
New York Coffee Exchange.
Green coffee is then purchased by importers from exporters or large plantation
owners. Importers hold inventory of container loads, which they sell gradually
through numerous small orders. They have capital resources to obtain quality
coffee from around the world, capital typical roasters do not have. Roasters'
heavy reliance on importers gives the importers great influence over the types
of coffee that are sold to consumers.
In the United States, there are around 1200 roasters. Roasters have the highest
profit margin in the commodity chain. Large roasters normally sell pre-packaged
coffee to large retailers, such as Maxwell House, Folgers, and Millstone.
Coffee also reaches consumers through cafes and specialty stores selling coffee,
of which, approximately, 30% are chains, and through supermarkets and traditional
retail chains. Supermarkets and traditional retail chains hold about 60% of market
share and are the primary channel for both specialty coffee and non-specialty coffee.
Twelve billion pounds of coffee is consumed around the globe annually, and the
United States alone has over 130 million coffee drinkers.
Coffee is also bought and sold by investors and price speculators as a tradable
commodity. Coffee futures contracts are traded on the New York Mercantile Exchange
(NYMEX) under ticker symbol KT with contract deliveries occurring every year in
March, May, July, September, and December.
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