A tale of 2 coffees: Prices are at all-time highs, yet growers continue to struggle

Discussion in 'Wall St. News' started by dealmaker, Jul 15, 2019.

  1. dealmaker

    dealmaker

    A tale of 2 coffees: Prices are at all-time highs, yet growers continue to struggle
    The coffee biz is worth over $100B globally. Baristas are considered artists, Starbucks is so influential it breeds quasi-presidential candidates, and consumer coffee prices are at all-time highs ($5 Joe, babayyy). It practically fuels the universe.

    But, for the talent behind this whole java frenzy -- the bean growers -- realities are less flashy, more desperate, and a whole latté more expensive to make than what they sell for.

    A different side of the coffee coin
    For decades, coffee growers, arguably serving across the broadest range of consumers in all of the food and beverage industry, have suffered from low prices -- mainly due to overproduction from the world’s top producers like Brazil and Vietnam.

    In the ’60s, growers from around the world tried to police their production addiction by forming the International Coffee Agreement (inspired by OPEC 2 years earlier), in hopes that it would better control prices.

    And, for nearly 30 years, it helped...
    Until the late ’80s, when the US withdrew from the coffee club.

    And ever since, the price balance of consumption and production has been almost nonexistent. Earlier this year, some farmers in Ethiopia were earning less than a cent per cup as global consumption continued to grow.

    Now, the coffee police are back
    In May, the price of beans dropped to 87 cents a pound -- 33 cents less than the average $1.20 it cost to produce. It has since risen to $1.06, but, to growers, it’s still a matter of caffeine or death for the industry.

    Growers met in Brazil last week to try to brew up a plan to climb their way out of their financial black hole, but historians and officials believe the roast is still lookin’ a little dark.

    Coffee growers could use some cream
     
  2. Handle123

    Handle123

    I have Sarcoidosis disease chronic, so get fatigued as soon as I wake up, I drink 2-3 pots of coffee a day. When out and about stop for coffee, believe it or not McDonalds has best deal around for us old farts over 55yo, 50 cents a cup and easily competes with Starbucks with taste before 10:30am.

    Starbucks greatly increases the size of people with their fancier drinks, high high calories, and watching the obese customers drive thru lane is continual.
     
  3. zdreg

    zdreg

    Thanks for the best tip you ever posted on ET.:)
     
    Nobert likes this.
  4. d08

    d08

    Same here. McDonalds is the go-to place for coffee in any country, I like the reliability and affordability. Dunkin Donuts is pretty good too. That said, McD in some countries where coffee is not consumed daytime will give you a watery black drink that tastes like 3 day old coffee, has happened a few times.
     
    LewisJas and GregorySG9 like this.
  5. LewisJas

    LewisJas

    Mcdonalds is one of my favorite places to go
     
  6. d08

    d08

    Not for food in Asia though. McDonalds' burgers in the Philippines for example are really bad - tasteless, dry and poor value for money. And it's completely their fault as Burger King can sell great burgers at a very reasonable price.
     
  7. ironchef

    ironchef

    In my Economic 101 course, the professor talked about supply and demand. He also talked about pricing power when the barrier of entry is low: None. That about sums up the situation of coffee growers' challenge. The coffee shops on the other hand have pricing power, often are located in desirable locations and can charge high price because folks are willing to pay for convenience and status.

    Any subsistent farmer in any third world country can grow coffee and undercut their competitors if it makes sense for them to grow coffee instead of something else. There is no good solution for growers until all cultivable lands are exhausted or growers find something more profitable to grow. The joy of market economy.
     
  8. zdreg

    zdreg

    Did your professor explain why a market economy is the best outcome for society as a whole or why the advent of cars and the disappearance of buggy manufacturers was a good thing?
     
  9. ironchef

    ironchef

    You can ask him: Professor Peter Navarro of UCI, also Trump's Economic Advisor.
     
  10. dealmaker

    dealmaker

    HOT STUFF
    La Colombe wants to crack open the market for self-heating coffee cans
    Don’t be alarmed if the Wegmans superfans in your life start bragging about how hot their coffee is.

    The Philadelphia-based chain La Colombe is brewing up a storm with a new line of self-heating coffee cans, which it plans to take to Wegmans.

    The cans are seemingly simple devices: With 1 twist and 2 minutes of time, the coffee inside spikes to 130 F. But the underlying technology is more retro -- and more complicated -- than you might think.

    Self-heating cans have a bitter history
    Turns out, the original Thermos enthusiasts were czarist Russians. In 1897, the engineer Yevgeny Fedorov introduced devices for heating meat stews, but self-heated cans didn’t catch sparks until World War II.

    During the Battle of Normandy, the US military slipped self-heated soup mugs into ration packs for its soldiers. Those mugs, however, had an unfortunate propensity for spontaneous combustion.

    Caution: Coffee may be lukewarm
    Since then, many of the biggest names in coffee have tried and failed to break the seal on the self-heating market.

    In the early 2000s, Nestlé UK experimented with its own product, called Hot When You Want. But the coffee underwhelmed in cold weather -- inspiring customers to nickname it “warm when you want.”

    That hasn’t stopped a handful of startups -- like the 42 Degrees Company and HeatGen-- from betting that they can beat the self-heating curse.

    But they might once again get the cold shoulder: As any market analyst can tell you, young coffee guzzlers have the hots for iced coffee right now.
     
    #10     Mar 11, 2020