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Is The Coffee Industry In Trouble?

Jan 20, 2008
Coffee is one of the world's most widely traded commodities, second only to oil in production numbers. So it comes as quite a shock that many coffee growers around the world are beginning to lose money and go broke. Why is this? Because the price of coffee is currently at a 30-year low, maintaining the vicious cycle of surplus production, falling demand, and falling prices that has plagued the coffee industry for the last few years. After the high demand for coffee of the 1990's, many retailers are losing their customers to high caffeine energy drinks and healthier beverages.

For a few lucky members of the coffee industry, they can afford to invest the time and technology to specialize in a select few highly prized varieties of gourmet coffee. Coffee producers who can choose this option are ensuring the survival of their business and, in some cases, are thriving in their new niche. But a vast majority of the individuals in the coffee industry are not faring as well.

The Problem For The Coffee Industry

There are close to 25 million coffee growers in the coffee industry, with many of them located in the poorest countries of Central America and Africa. It is estimated that close to 600,000 coffee workers have lost their jobs in recent months, fueling a flight to find jobs for many able-bodied men and women. In some countries, such as Columbia, many in the coffee industry have chosen to switch to a more profitable crop like cocoa to save their businesses.

In Brazil, many of the largest producers for the coffee industry have cut their workforces by as much as 90%, mainly due to automating their production. Although this saves the average consumer a small amount of money when the product is purchased, it costs the region thousands, if not millions of jobs. Out of the $3.00 on average that a consumer pays for a canister of coffee, the coffee farmers earn an average of $0.35.

The biggest danger to the coffee industry is oversupply. While the supply is growing worldwide at an annual average of 3%, demand has grown at a paltry 1% in the same time frame. Many countries have increased their coffee production to gain a larger slice of the coffee industry, flooding the market with cheaper and cheaper products. Many retailers are also replacing the coffee beans in their blends with cheaper coffee beans to improve their profits. This proves to be a double edged sword as many consumers are turned off on the harsh quality of these new blends.

To revive the coffee industry, the supply must be reduced to meet the demand and higher quality products need to be the focus of the retailers, as this is the product that consumers want. There is no one fix that can immediately bring the industry back to the glory of the 1990's, but with vision and focus, the major players can make a start at bringing back the coffee business. And everyone enjoys a good cup of coffee.
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