Jun 2006
Enough to keep you awake
Chris White
The next time you buy a cup of coffee, pause for a moment to contemplate “the coffee paradox” and to ponder its relevance to our own business in fresh fruits and vegetables.
According to a recent meeting of the International Coffee Organisation, global demand for coffee has doubled over the last 30 years. Demand continues to grow strongly, reaching a new high of some 119m sacks of the stuff in 2006.
Meanwhile, global supplies of coffee beans have kept pace with market demand, with a small surplus of some 120m sacks expected this year from the world’s major coffee producing countries including Brazil, Costa Rica, Mexico, Ivory Coast and Vietnam.
Yet inspite of this relatively narrow imbalance in supply and demand in the global coffee market, coffee prices have fallen through the floor, down by around a quarter since the start of this year alone.
As the author of a weekly commodities column in France’s Le Monde newspaper explains, the exclusiveness of the coffee bean is part of its problem. You see, the beans are good for making a cup of coffee and not for much else, not a problem for the world’s other big commodities, such as sugar cane or corn maize, both of which are now tipped as an alternative fuel source for our motor cars in the years to come as oil reserves dry up.
Indeed, coffee’s price position has got so bad that they failed to show signs of life on news that global coffee stocks have dropped to record lows in exporting and importing countries alike.
This disparity, which is the title of a new book that explains this so-called “coffee paradox” is most keenly felt when you look at the price you pay for your mocha or some other concoction whipped up at your local Starbucks or equivalent which characterises the coffee experience for consumers in places on the planet as different as Boston, Beijing and Bombay.
It seems that the money in the coffee business is being made at only one end of the supply chain. The people who have most to do with the consumers are the ones who are coining it in.
On the other hand, the coffee producers, those who merely pick the beans and pack them into sacks for sale, are beset by miserable returns that barely cover the production costs.
“The coffee that’s sold by the grower in Rwanda and enjoyed by the broker in Manhattan or Paris is not the same thing,” explains Le Monde. “They’re now paying for all sorts of extras, such as the comfortable cushions you sit on, the TV screens with the latest World Cup match to watch and the hi-speed internet connection you’re now provided with.”
So value in today’s coffee business is being created and enjoyed almost exclusively by the people who retail the bitter, black drink. What’s more, they’re also the ones setting the prices which, according to our coffee paradox, do not obey the laws of supply and demand. And growers just don’t get a look in.
Coffee aside, the paradox should be enough to keep fresh fruit and vegetable suppliers awake in their beds at night. They’re convinced that global oversupply is the real cause for the low market prices. Correct this and the rest falls into place.
The consequences on price of supply and demand in the coffee business suggests otherwise. Indeed, there are clear parallels for our business, especially for those growers who operate at the commodity end of the business. Apple, citrus and table grape growers will know what we mean.
If there is money to be made in coffee nowadays, it’s in those areas of the business supplying something different. So next time go for a large, organic, fair trade latte with extra cream.
The next time you buy a cup of coffee, pause for a moment to contemplate “the coffee paradox” and to ponder its relevance to our own business in fresh fruits and vegetables.
According to a recent meeting of the International Coffee Organisation, global demand for coffee has doubled over the last 30 years. Demand continues to grow strongly, reaching a new high of some 119m sacks of the stuff in 2006.
Meanwhile, global supplies of coffee beans have kept pace with market demand, with a small surplus of some 120m sacks expected this year from the world’s major coffee producing countries including Brazil, Costa Rica, Mexico, Ivory Coast and Vietnam.
Yet inspite of this relatively narrow imbalance in supply and demand in the global coffee market, coffee prices have fallen through the floor, down by around a quarter since the start of this year alone.
As the author of a weekly commodities column in France’s Le Monde newspaper explains, the exclusiveness of the coffee bean is part of its problem. You see, the beans are good for making a cup of coffee and not for much else, not a problem for the world’s other big commodities, such as sugar cane or corn maize, both of which are now tipped as an alternative fuel source for our motor cars in the years to come as oil reserves dry up.
Indeed, coffee’s price position has got so bad that they failed to show signs of life on news that global coffee stocks have dropped to record lows in exporting and importing countries alike.
This disparity, which is the title of a new book that explains this so-called “coffee paradox” is most keenly felt when you look at the price you pay for your mocha or some other concoction whipped up at your local Starbucks or equivalent which characterises the coffee experience for consumers in places on the planet as different as Boston, Beijing and Bombay.
It seems that the money in the coffee business is being made at only one end of the supply chain. The people who have most to do with the consumers are the ones who are coining it in.
On the other hand, the coffee producers, those who merely pick the beans and pack them into sacks for sale, are beset by miserable returns that barely cover the production costs.
“The coffee that’s sold by the grower in Rwanda and enjoyed by the broker in Manhattan or Paris is not the same thing,” explains Le Monde. “They’re now paying for all sorts of extras, such as the comfortable cushions you sit on, the TV screens with the latest World Cup match to watch and the hi-speed internet connection you’re now provided with.”
So value in today’s coffee business is being created and enjoyed almost exclusively by the people who retail the bitter, black drink. What’s more, they’re also the ones setting the prices which, according to our coffee paradox, do not obey the laws of supply and demand. And growers just don’t get a look in.
Coffee aside, the paradox should be enough to keep fresh fruit and vegetable suppliers awake in their beds at night. They’re convinced that global oversupply is the real cause for the low market prices. Correct this and the rest falls into place.
The consequences on price of supply and demand in the coffee business suggests otherwise. Indeed, there are clear parallels for our business, especially for those growers who operate at the commodity end of the business. Apple, citrus and table grape growers will know what we mean.
If there is money to be made in coffee nowadays, it’s in those areas of the business supplying something different. So next time go for a large, organic, fair trade latte with extra cream.
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Hard to avoid the World Cup waistline
trap
Caroline Pike
By the time this issue of Eurofruit Magazine lands on your desk (as eagerly awaited as the first snowdrops of spring, no doubt), the World Cup may well be over. As I write this, however, I find myself in exactly the same position as I do every four years – wondering who the hell I’m going to support for the next two weeks.
This is usually because my beloved Scotland have snatched defeat from the jaws of victory in a nail-biting thriller against Latvia and failed, once again, to progress past the group stages. This year, however, we did not even manage to qualify and, having drawn Italy and France in the qualifying stages of Euro2008, I fear it may be a long time until the Tartan Army will be seen, lifting their kilts and flashing their crown jewels, in a town near you.
But enough of my woes. For many, the World Cup is proving to be something of a cash cow and the fruit industry is just one sector that appears to be benefiting. UK supermarket chain Waitrose has reported a 50 per cent increase in sales of strawberries, cherries and peaches compared to the same week last year, a phenomenon the retailer is attributing to the desire of female footie fans to snack healthily during games. I have to say, I am a little dubious about such claims. I mean, how often do you hear the immortal words: “Let’s get the jackfruit in - the football’s about to start!”?
According to Italian farmers’ association Coldiretti, the average armchair supporter will pile on around 5kg during the World Cup, thanks to a diet of beer, crisps, chocolate and more beer. But weight-gain is not the only hazard that can be avoided if you reach for a plum instead of a pint. Coldiretti claims that melons and lettuce can help combat high blood pressure and nerves. However, the body also points out that melons contain “modest laxative properties” which could prove troublesome to say the least if you’ve extra time and penalties to sit through.
For those of you with teams left in the competition, I wish you every success (except England of course). And if your team doesn’t quite manage to get its hands on the coveted trophy, remember there are many ways you can console yourselves. After Scotland lost 3-0 to Morocco in Saint-Etienne during World Cup 1998, around 8,000 Scottish fans drowned their sorrows with approximately 125,000 litres of beer. Bars ran dry, and fresh supplies had to be shipped in to quench the thirst of the disappointed Scots. It makes you proud.
By the time this issue of Eurofruit Magazine lands on your desk (as eagerly awaited as the first snowdrops of spring, no doubt), the World Cup may well be over. As I write this, however, I find myself in exactly the same position as I do every four years – wondering who the hell I’m going to support for the next two weeks.
This is usually because my beloved Scotland have snatched defeat from the jaws of victory in a nail-biting thriller against Latvia and failed, once again, to progress past the group stages. This year, however, we did not even manage to qualify and, having drawn Italy and France in the qualifying stages of Euro2008, I fear it may be a long time until the Tartan Army will be seen, lifting their kilts and flashing their crown jewels, in a town near you.
But enough of my woes. For many, the World Cup is proving to be something of a cash cow and the fruit industry is just one sector that appears to be benefiting. UK supermarket chain Waitrose has reported a 50 per cent increase in sales of strawberries, cherries and peaches compared to the same week last year, a phenomenon the retailer is attributing to the desire of female footie fans to snack healthily during games. I have to say, I am a little dubious about such claims. I mean, how often do you hear the immortal words: “Let’s get the jackfruit in - the football’s about to start!”?
According to Italian farmers’ association Coldiretti, the average armchair supporter will pile on around 5kg during the World Cup, thanks to a diet of beer, crisps, chocolate and more beer. But weight-gain is not the only hazard that can be avoided if you reach for a plum instead of a pint. Coldiretti claims that melons and lettuce can help combat high blood pressure and nerves. However, the body also points out that melons contain “modest laxative properties” which could prove troublesome to say the least if you’ve extra time and penalties to sit through.
For those of you with teams left in the competition, I wish you every success (except England of course). And if your team doesn’t quite manage to get its hands on the coveted trophy, remember there are many ways you can console yourselves. After Scotland lost 3-0 to Morocco in Saint-Etienne during World Cup 1998, around 8,000 Scottish fans drowned their sorrows with approximately 125,000 litres of beer. Bars ran dry, and fresh supplies had to be shipped in to quench the thirst of the disappointed Scots. It makes you proud.
Basket Case: online grocery
shopping
Laura Gould
If the thought of a spotty teenager unable to differentiate between an unripe avocado and a downright mouldy one choosing your shopping fills you with fear, then perhaps online grocery deliveries are not for you.
On the other hand, for those of us from the school of “what we don’t know can’t hurt us”, this latest intrusion of the internet into the humdrum routine of daily life is somewhat of a godsend.
Stranded in a dingy corner of North London with no car and the nearest supermarket a 10-15-minute walk away, I apprehensively made my first foray into the world of online grocery shopping a few weeks ago. Imagine my delight when not only did the delivery arrive on time, but I had not been palmed off with the oldest fruits and vegetables in the warehouse.
Of course, there are drawbacks to the system – you’re tied to the house during the delivery time slot (which varies between one or two hours, depending on the retailer); sometimes products are substituted if what you requested is not available; there is the ubiquitous delivery charge; and of course you cannot choose your own fresh produce or meat.
Nevertheless, the impulse to buy junk food on a whim is removed, there is no contending with long check-out queues or surly assistants, and heavy shopping bags become a thing of the past.
The online shopping concept is well underway in the UK, where cash-rich, time-poor consumers are eagerly latching on to the system. The question remains as to whether shoppers in the rest of the world will embrace the idea with the same enthusaism?
If the thought of a spotty teenager unable to differentiate between an unripe avocado and a downright mouldy one choosing your shopping fills you with fear, then perhaps online grocery deliveries are not for you.
On the other hand, for those of us from the school of “what we don’t know can’t hurt us”, this latest intrusion of the internet into the humdrum routine of daily life is somewhat of a godsend.
Stranded in a dingy corner of North London with no car and the nearest supermarket a 10-15-minute walk away, I apprehensively made my first foray into the world of online grocery shopping a few weeks ago. Imagine my delight when not only did the delivery arrive on time, but I had not been palmed off with the oldest fruits and vegetables in the warehouse.
Of course, there are drawbacks to the system – you’re tied to the house during the delivery time slot (which varies between one or two hours, depending on the retailer); sometimes products are substituted if what you requested is not available; there is the ubiquitous delivery charge; and of course you cannot choose your own fresh produce or meat.
Nevertheless, the impulse to buy junk food on a whim is removed, there is no contending with long check-out queues or surly assistants, and heavy shopping bags become a thing of the past.
The online shopping concept is well underway in the UK, where cash-rich, time-poor consumers are eagerly latching on to the system. The question remains as to whether shoppers in the rest of the world will embrace the idea with the same enthusaism?