Category: Coffee

Introduction

A large percentage of coffee that is grown in the world is in developing countries while majority of the consumers of this coffee reside in developed countries. Most coffee importers import the coffee in form of unroasted caffeinated coffee, unroasted decaffeinated coffee, roasted caffeinated coffee and roasted decaffeinated coffee.

The United States has one of the highest populations of coffee drinkers in the world. Over 65% of Americans, which accounts for more than a hundred and fifty million Americans, consume coffee as a beverage (Coyle, 1982).

Competitive situation in Importing Country

Almost all the coffee that is consumed in the United States has its origins in Brazil. Other coffee importers into the United States include; Vietnam, Latin America, East Africa and Asian countries. As an importer, the United States forms one of the largest importers of coffee in the world.

Canada follows closely then Europe and some Middle East countries. Coffees from different regions of the world have different aromas, flavors, acidity and body. The coffee that meets the best and highest standards that have been set by international bureau of standards get the highest prices. In the year 2009 alone, Brazil exported coffee worth $756 to the US and $72.7 to Canada (Office of the Federal Register, 2011).

Other major exporters of coffee to the United States include Latin America and Colombia. Statistics show that Canada and Europe were among the countries that imported the highest amount of coffee in the year 2009. While the United States imported over 1200 tons of coffee, Canada imported approximately 300 tons. This is a very large amount given that the population of Canada is lower in comparison to that of the United States.

It is very important for the importing countries and the companies in charge of the importation to ensure that they perform appropriate product mix functions and strategize according to the available market so that they get the best possible quality, quantity and pay the best prices that are reasonable to the importers and still considerate and fair to the producers so that they also continue producing the coffee. The price, product, place and promotion of coffee are conducted in various ways by the different coffee importers (Johnson & Bade, 2011).

Competitors in Importing & Domestic Producers of coffee

Canadian and United States coffee importers have the advantage that coffee from Brazil is not taxed. Therefore, Brazil coffee importers can benefit because they do not have to pay import duty for their coffee. This also offers the importers an opportunity to offer competitive prices to the coffee producers and encourage them to produce large quantities of high quality coffee (Ukers, 1935).

Different coffee importing countries have come up with tactics of securing high quality coffee and quantities that they need. International coffee importers have coffee fair trade bodies and organizations that aim to dialogue with coffee farmers or coffee farmers’ representatives.

The main objective of this dialogue is to ensure that both the exporters and importers feel that their concerns are addressed and respected. A large percentage of the coffee exporters also want to feel that the importers are transparent and that they get the best possible prices for their coffee (Stower, 2011).

Although most coffee farmers target maximum profits, not all of them get the fair prices that they demand from the importers. Therefore, there is competition to get the highest paying importers for the coffee farmers. To remain competitive, most United States coffee importers target the direct involvement with coffee farmers and they try to exclude middleman who might lead to reduction of profit margins that the coffee producers get for their coffee (Hinkleman, Nolan & Manley, 2003).

Marketing Activities & Competitive Situation

The shorter the chain from producer to the importer who processes and markets the product, the better for both parties in terms of business relationships formation and likelihood of getting profits. The disadvantage with the fair trade is that farmers have to pay membership and renewing fees which places prohibitory measures on some farmers that might have small quantities of coffee to provide but might even exceed expected coffee quality expectations.

Therefore, some importers target small size coffee farmers located in concentrated regions and ask them to form associations through which they can increase their coffee quantity and increase their chances of having issues that they might have addressed by importers such as higher and prompt payments for their produce (Johnson & Bade, 2011).

Government Regulations and Tariffs in Importing Country

Luckily for Brazil which is the largest coffee importer to the United States, coffee importers do not have to pay import duty to get the product into the country.

Trade Regulations and balance of Payment

The balance of payment between Brazil and the United States either creates a deficit or a surplus. By the end of the year 2010, the balance of payment to Brazil was $47364730697.53. Although this seems like a high figure, Brazil is one of the most prosperous countries in Latin America. Payments made for coffee imports were a major contribution to the reduction of the balance of payment (Johnson & Bade, 2011).

This shows that coffee is a great contributor to the Gross Domestic Product in Brazil. The import of coffee in the United States can be considered to be conducted in a friendly manner. The United States has a high number of coffee consumers and therefore, needs to create and maintain good relations with the importing nations such as Brazil. It is a requirement that all the coffee that is imported into the United States meets certain specified quality standards.

The importer should not leave all the details of the packaging to the importer. Instead, he or she should ensure that the products have been well packaged and that they arrive into the US in good condition. Importers should try and chose the most convenient and cost effective methods that are available for them to bring the products into the US (Hinkleman & Manley, 2003).

The US Customs and Border Protection (2012) declaration form 6059B requires that importers declare that they are importing agricultural products from another country even though coffee from countries such as Brazil has been allowed into the country. Non declaration of such coffee might result in heavy fines and confiscation of the coffee or any other imported products.

Foreign exchange and Trade regulation policy

Coffee is classified as a food product hence; it has to meet the quality standards that are required by the health body. The products have to be labeled on the content, nutritional value and expiry date of the products. Prior notices also have to be filed with the Food and Drug Administration.

No limits are imposed on the amount of coffee that can be imported into the United States. Import duty on coffee has been removed for all coffee that gets into the United States creating a point of benefit for coffee importers for Brazilian and other countries that import coffee into the United States (Hinkelman, Manley & Nolan, 2003).

Foreign exchange for Brazil and other countries that import coffee into the United States, Canada and Europe earn a high foreign exchange because of the value of the dollar in relation to most of these developing countries.

Trade with other countries especially import of products like coffee into the United States helps in the forging of good relationships between countries which helps to promote peace. Most leaders usually realize that it is important to create and maintain a good atmosphere whereby, they can conduct business with other countries that are of benefit to them. Importers of coffee into the United States should also be ready to provide the necessary conditions to get a trade license so that they can import coffee (Coyle, 1982).

Licenses and Importing Documents

Not just anyone can import coffee as licenses are necessary before the paper work for importing products such as coffee into the United States can be approved. It is only when one has the trade licenses and provides the necessary documents such as import details that one can actually be able to fully take advantage of the free import duty for the coffee importation.

Coffee importers from duty exempt countries like Brazil can claim the duty free terms by showing on the importation form that the country from where the coffee has been imported is exempt by entering letter E to the tariff column as a prefix. Evidence of the origin is usually required by personnel at the port in form of invoices or shipping papers (Banks, 1999).

All the right documentation should be presented to the government agents at the border entry points before coffee can be allowed into the country such as the type of coffee that is presented for importation for example the type of coffee beans; Robusta or Arabica, the entry of origin, the quantity of the coffee and valid documents from the food drug and administration organization to show that an applications was made and approved US authorities before entry of coffee into the United states (Stowell, 1989).

Conclusion

The paper has looked at the major competition for coffee importation from developing countries. The major competition for importation of coffee into the United States of America happens to be Canada. Even though Europe has many individuals, most of these individuals prefer tea to coffee thus lowering the position of Europe in being a highly ranked position country in the importation of coffee from growing developing nations.

In order to remain competitive in the importation of coffee, majority of the importing countries have been found to use several tactics so as to attract high quality and large quantities of coffee such as formation of coffee trade Fairs whereby, member coffee producers can have their issues such as high and prompt payment being made to their coffee supply to the developed nations.

Reference

Banks, M. (1999). The World Encyclopedia of Coffee. London: Arness Publishing Limited.

Coyle, L. (1982). World Encyclopedia of Food. New Yolk, NY: Facts of Life Publishers.

Hinkelman, G. E., Manley, M. & Nolan, J.L. (2003). Importers manual. New York, NY: World Trade Press.

Johnson, K. & Bade M. (2011). The Coffee Book Anatomy of an Industry from Crop to the Last Drop. New York, NY: Bazaar Books.

Stowell, A. M. (1989). Importing into the United States: A Guide for Commerical Importers. New York, NY: Books for Business.

Ukers, W. (1935). All About Coffee, Second Edition, The Tea & Coffee Trade Journal Company.

Introduction

Investing in a country’s economy is a step that needs a cautious and critical approach to guarantee a sustainable return on investment. Such a path should not be decided in an ‘instant coffee’ approach as there are many risks involved in making a large investment in a country’s economy, as many factors influence growth of a business.

Any company that wishes to invest in a country must conduct a thorough study of the country’s economic conditions to ensure success of the investment. Romania is one country with blurred economic, social, and political trends, which determine the risks of investing in the country.

Therefore, a clear knowledge of the economic, social, and political environment of the country is important to ensure a steady return on investment.

Assessment of the Current Economic Climate of Romania

Macroeconomic and Financial Position

The macroeconomic and financial profile of Romania has deteriorated remarkably, as its access to outside financial sources declined leading to a fall in its exports.

The quick slowing of investment inflows reflects a generalized rise in risk aversion, in part, towards mushrooming markets, simultaneous with influence from the financial disasters in other European economies.

The country had recently experienced a decrease in its international credit ratings by a larger margin than those of other European countries.

This is attributable to increased concerns on the sustainability of the country’s immense current account arrears, the position for wage and financial policies, and the fitness of foreign banks with subsidiaries in Romania.

Market Confidence

The decline in market confidence is responsible for the persistent spells of downward force on rate of exchange, upward force on rates of interests, and considerable falls in equity values. In some instances, the leu can depreciate 25% against the Euro, even with immense increases in local interest rates.

Upward forces on rates of interest indicate interplay of structural and transient factors. Transient factors encompassed augmented segregation of the bank-to-bank market leading to a loss of confidence within the banking industry.

Structural factors, on the other hand, represent the transition of the banking system to net adverse liquidity position, concurrent to the increase in liquidity demand in the context of uncertainty concerning the economic outlook.

The degenerate economic position, in conjunction with pulling out by foreign investors, resulted to a significant fall in capitalization of the stock exchange.

Strengths and Weakness

Romania has some distinct strength. The membership in the EU has improved its economic position. This condition, without doubt, favours its prominent domestic market. Romania has skilled workforce supported on a low wages.

The foreign debt and public sector has maintained at a practical level despite increasing FDI inflows and plenty of reserves of foreign exchange.

On the other hand, the weaknesses of Romania are unique. First, its economy is characterised by deficient discipline with regard to policies concerning fiscal matters and wages. The IMF has criticised this condition.

Second, macroeconomic disparities have been escalating, especially in external accounts. Third, persistent effort on reforms will delay a steady growth, fiscal market confidence, and accession into the EU.

Industry and Market Conditions

The current population of Romanian is 21,848,500. This is significantly a sufficient number of people to sustain a steady market for coffee products. The ethnic distribution of the citizens of the country differs by a large margin.

The Romanians, which is the largest ethnicity, represents 88.6 percent of the population. The Hungarians are the second largest ethnic group comprising 6.5 percent of the population. Other many small ethnic groups make up for the remaining proportion 4.9 percent.

These large ethnic groups influence the demand for coffee products. The cultural and religious orientation of these groups determines the rate of consumption of coffee products.

Industry

Romania has advanced telecommunication, aeroscope and weaponry industries. Industry combined with construction sector represents 32 percent of the GDP in the past few years. This ratio is relatively large share without related services. The industry represents 26.4 percent of the labour-force.

Romania is the twelfth major manufacturer of automobiles in Europe. In addition, it boasted of 5.3 percent global market share of machinery. Some prominent companies in Southeast Europe, including Bitedefender, Rompetrol, Petrom, and Automobile Dacia are based in Romania.

Nevertheless, small and medium-sized producing companies constitute a large share of the sector of manufacturing. Two-thirds of the total workforce in Romania works in this sector.

According to business forecasts, different economic activities have a potential for growth. The forecast projected a growth potential of 9 percent for industrial output and 12 percent growth in agricultural output as the table below indicates.

Overall consumption of the final product has a growth potential of 11 percent. In addition, domestic demand has a growth potential of 12.7 percent.

Worth of note, the expansion of the industrial sector is the primary drive for economic growth in Romania. As of 2007, manufacturing industry constituted 35% of the country’s GDP and employed 29 percent of the total workforce.

Majority of the industries are situated in the urban areas of Southeast and Northwest, while mining industries operated in rural areas. Heavy manufacturing industries are situated in South of Romania.

Importantly, Bucharest-based factories accounts for 26 percent of the total manufacturing sector in Romania. These factories employed 12% of the country’s workforce in factories.

Coffee Market Analysis

Coffee is the key beverage in Romania and its performance in the market influence the performance of all other beverages. However, it continues to be customary commodity and consumption is low relative to other members of EU. Lower consumer purchasing power in Romania than in other European country, and the high ratio of populations residing in rural centres and small cities, account for the low consumption of coffee in this country.

The quality of live in Romania deteriorated significantly in 2011 because of endeavours to alleviate the deficit in the national budget, and the development of VAT. These strategies influenced accessible disposable incomes, adversely. Prices in coffee products increased because of decline in the RON and expansion in price of green coffee beans, thereby leading to a decrease in coffee sales in terms of volume.

Competition

In Romania, key major companies dominate the coffee market share of the country. These companies are Kraft Foods Romania SA and Strauss Romania SRL. Other important players retain a relatively lesser market shares. The leadership in coffee dominance shifted in value share and volume of coffee product.

The top two companies led in value share and volume terms respectively. Strauss retained the leading position in volume terms because of a very stable network of distribution and the capacity of the company to satisfy income fragments.

Jacobs brand of Kraft Food led in 2011 in value terms as well as in volumes because of its view as a premium brand, which is affordable, and promotion through established campaigns.

Conclusion

Importing coffee into Romania is not a sound decision as the purchasing power of the general population is low to sustain a high return on investments. The low exchange rates of leu against the euro and other prominent currency in the world will make the return on investment decreases.

Because other neighbouring Europeans country consume coffee in larger amounts than Romanians do, it is practical to establish the company in another EU country with a higher consumption of coffee than Romania, and to avoid the high risks associated with unstable economy in the country.

Introduction

Global Coffee Chain (GCC) has changed considerably over the last century. This is due to the historical importance of the product in the global south. It is a major foreign exchange earner. Indeed, over 90% of coffee that is consumed across the world is produced in developing countries (Porter 2004, p. 102).

Besides, there have been major changes particularly in the deregulation of coffee trade, patterns of consumption, marketing and corporate strategies adopted by various manufacturers of coffee across the world. Consequently, there have been changes in the relations of power among various actors in the GCC. Power relations have shifted from a balanced relationship of power between the farmers (producers) and the consumers to complex relationships (Ponte 2002, p. 1099).

This paper analyzes the power relations among the producers, roasters, and consumers of coffee in the GCC. The paper will posit that various changes that have been apparent in the coffee market have led to significant changes in power relations among the stakeholders. Particularly, the discourse will focus on deregulation changes in coffee consumption as well as the current corporate strategies adopted by various companies that retail coffee. Have the dynamics in the GCC resulted into significant changes in power relations among the actors?

Power Relations among the Actors within the GCC

Coffee Regulation and Power Relations

Global coffee chain has experienced various changes in trade regimes since the early 20^th century. The changes have led to significant shifts in power-relations among different stakeholders. In fact, Ponte (2002, p. 1104) posits that coffee was among the first commodities that experienced controls as early as 1902.

The initial process of controlling GCC occurred in Brazil through valorization. In this process, the state or government was able to set and raise prices of coffee. This was the case in Brazil, which is the largest producer of coffee at the time with her production surpassing 80% of the global coffee production (Loader 1997, p. 27).

However, the process did not signify major power relations since it was abandoned after the International Coffee Agreement (ICA) of 1962. In this agreement, the producers of coffee became major stakeholders and were able to set a band price while at the same time using export quotas on coffee (Fitter & Kaplinsky 2001, p. 76).

This implied that quotas would not affect the global trade if the set ‘band prices’ were achieved. In addition, the quotas were instrumental in cushioning the producing countries when the coffee prices dropped below the target price. In this agreement, the producers had increased participation in the decision-making processes of the global coffee chain. Ponte (2002, p. 1105) articulates that the set prices would not apply to the producers when the prices of coffee was extremely high.

Despite the problems that typified this system, ICA played a significant of stabilizing the prices of coffee across the world (Strange & Newton 2006, p. 185). The rationale was that the consumers participated actively in the process of setting coffees prices and export quotas.

In addition, the producing countries began to exist as marketing units in which the governments had increased control relating to the exportation of coffee. Another important factor that led to considerable success of the ICAs was the fact that Brazil’s market share reduced significantly leading to inclusion of other coffee producing countries within the ICA framework (Loader 1997, p. 28).

While the success of ICA was clear, there were problems that the system faced especially relating to the power relations among the state actors. Particularly, the ICA experienced unprecedented problems as more and more countries began producing coffee. The rationale is that decisions about the export quotas became major sources of squabbles.

In addition, coffee importing countries that were not members or signatories to the ICA system increased in coffee trade participation resulting to lower prices than the target prices of the ICA (Taylor 2008, p. 56). This worried the roasters who were experiencing severe competition from other roasters who purchased coffee beans at low prices.

The roasters also had to contend with the changes in consumption of coffee especially in the United States. Ponte (2002, p. 1107) argues that changes in coffee consumption from soluble coffee beans to ground beans was a major cause of concern among the roasters within the ICA system.

The rationale is that the coffee producing countries were irresponsive to the changes and continued to supply Robusta coffee beans whose demand and market had reduced tremendously. It is important to highlight that importing countries who were not members of the ICA utilized unorthodox means to get the cheaper coffee beans than recommended by the ICA (Fitter & Kaplinsky 2001, p. 79).

This did not only make them more competitive than roasters within the ICA but also led to gradual abandonment of the agreement by the roasters. It is important to underscore the importance of cold war politics that characterized the GCC and the ICA. Particularly, the political relations of the USA vis a vis the Latin America changed dramatically in early 1980s leading to eventual collapse of the ICA.

The reason is that the Latin America (particularly Brazil) had became liberal in their decisions about coffee exports and perceived the US as a patronizing consumer. To that end, attempts to revive the ICA were futile as producing countries gained more power and autonomy in relation to production and sale of their coffee beans (Strange & Newton 2006, p. 188). This was the onset of deregulation of coffee trade across the world.

Deregulation of Coffee Trade and Power Relations

Although the ICA was a successful agreement that allowed various actors to participate meaningfully within the global coffee chain, its abandonment led to changes in power relations among the producers, roasters, corporations and consumers. During the ICA, many countries experienced balanced power relations but it changed dramatically upon deregulation of coffee production and exportation. Ponte (2002, p. 7) highlights that power relations changed leading to the dominance of consumers over the producers (farmers) and the exporting states. Consequently, the coffee market became more susceptible to price changes and the earnings accruing the producers decreased. Specifically, the indicator price of coffee reflected marginally against the prices of coffee prior to the abandonment of ICA in 1993. Ponte (2002, p. 1108) explicates that the indicator price was only 40% of the prices of coffee between 1985 and 1989 when the ICA failed. Despite the hike in coffee prices in the succeeding years owing to droughts and frosts in major producing and exporting countries, the price was only 20% of the coffee prices just before 1989 (Kaplinsky 2000, p. 102).

It is perceptible that the incomes accruing the producers dropped by 13% after the deregulation of coffee market because of the abandonment of the ICA (Ponte 2002, p. 7). The reason is that the ICA had been able to stabilize the coffee prices across the world. With the entrance of hugely unregulated actors in the coffee market and technological innovation, the coffee market began to post diminished earnings for the producers.

This is because of the consequent failure to control prices within the GCC. Ponte (2002, p. 1108) argues that the attempt to set up an agreement (Association of Coffee Producer Countries, ACPC) to control coffee prices was futile. Many countries including Brazil did not join the agreement.

This made the roasters and manufacturers to have increased power over coffee producers. As such, the coffee market post-ICA regulations became volatile so much so that the producers began setting prices before even harvesting their coffee beans (Loader 1997, p. 27). This did not only augment the speculative power of the manufacturers and corporations but also led to even more bargaining power of the corporations in the global markets.

Apparently, the failure of ICA trade regime reduced the ability of the exporters to impose export quotas and restrictions that could help the state actors to increase their power of monitoring the coffee prices. In addition, there was an increase in the economic perspective that marketing boards and the state ought to play marginal roles in the decision-making processes of exportation and production of coffee across the world.

Subsequently, the producers depended on the usual market forces (supply and demand) to fetch earnings (Kaplinsky 2000, p. 102). This reduced the ability of governments in exporting countries to cushion the farmers and producers leaving them vulnerable to major corporations.

For instance, Kenya abolished the Coffee Board of Kenya that was a major player in marketing Kenyan coffee. This allowed private corporations and companies to take control of the market (Busch & Juska 1997 p. 670). To that end, the consumers and corporations in the GCC acquired immense powers over Kenyan coffee producers and farmers.

Market Power of Corporations

Not only have power relations shifted significantly owing to the end of ICA but also they have more become complex than earlier. Due to the liberalization of coffee markets, the state actors do not serve as market units any longer. In addition, organizations that farmers joined have been unable to replace the government and state actors effectively.

The rationale is that the farmers have been unable to raise sufficient financial resources to compete effectively with other actors within the GCC (Busch & Juska 1997 p. 676). As such, they have become defunct and joined the international cartels in order to enjoy active participation in the decision-making processes.

This was also the scenario with other small international actors. Since they were unable to compete with large traders at the global market, they either joined them or went bankrupt. According to Ponte (2002, p. 8), the coffee market became more concentrated. By the end of 20^th century, major corporations of coffee began to emerge.

Such companies as Neumann and Volcafe were able to control about a third (32%) of the entire market share (Crane & Davies 2003, p. 86). Besides, the top five coffee corporations controlled over half (51%) of the market share in coffee market (Crane & Davies 2003, p. 86).

In addition, the roasters experienced increased concentration with such companies as Nestle and Phillip Morris dominating the market of specific types of coffee (Gerrefi et al. 2005, p. 95). This rise of multinational companies within the GCC has diminished the role of the farmers and increased the domination of corporations on the production and exportation of coffee beans.

Gerrefi et al. (2005, p. 95) assert that there has been little if any integration between international traders and roasters. This allows the major corporations to dictate the prices, type and quality of coffee produced. Since the corporations have profit making agenda, they are able to determine the minimum level of supply of coffee within a country.

For instance, many roasters have set minimum supply of coffee from specific producing countries. This implies that the corporations are able to get sufficient supply of coffee beans notwithstanding the prices offer (Raynolds 2009, p. 1084). On the other hand, big corporations are responsive to consumption dynamics within the coffee market. As such, they can decide not purchase specific type of coffee due to changes in demand.

This in turn leads to losses and diminished earning among the farmers. Ponte (2002, p. 1109) says that this trend became popular in many exporting countries owing to the superior marketing and corporate strategies adopted by large multinationals. Due to their expansive revenues, the multinationals are also able to monopolize the prices of coffee in the market by setting the prices.

They also influence the policy-making processes of the governments in producing countries (Reed 2009, p. 17). This does not only make them major stakeholders in the production of coffee but also major influencers of the policies and regulations governing the production of coffee within a country (Daviron & Ponte 2005, p. 59). This illustrates the power relations between the corporations, state actors and farmers in GCC.

Dynamics in Coffee Consumption

Reed (2009, p. 17) postulates that the major roasters of coffee in the world have put up with the ever-changing tastes and needs of consumers. This is apparent in UK and US markets where major roasters have controlled the food retail stores. This does not only make them the major controllers of coffee quality and prices but also the determinants of the coffee supply chain.

Due to the increase in differentiation of coffee products and rise of ‘instant coffee’ stores, Daviron & Ponte (2005, p. 56) say that the roasters have adopted strategies that have made them even more dominant than earlier.

Since the consumption of coffee is fragmented in the markets, the coffee roasters have been able to brand their specific types of coffee to gain a competitive edge over their rivals. Ponte (2002, p. 1109) postulates that the companies have shaped the supply chain in a way that it allows them to access cheap and low quality beans.

Consequently, they blend the coffee beans with relatively higher quality beans to cater for demand of coffee especially in major markets. This has led to reduction in quality of coffee retailed in UK and US markets. Since the roasters have a near monopoly of the coffee supplied in global markets, the consumers have no power on the quality of coffee they purchase (Gibbon & Ponte 2005, p. 34).

As such, the market dynamics particularly regarding the consumption of coffee have shifted in favor of the roasters and the expense of consumers. To that end, consumers, producers and state actor have lost their power and have become dependent on the roasters to dictate the prices and the quality of coffee supplied and the get.

Power Relations in the Wake of Fair Trade Coffee

Due the immense powers amassed by the roasters and major corporations, there has been a major attempt to cushion both the producers and consumers from the profit motivation of the corporations. Over the last decade, the concept of fair trade has become popular across the world. It refers to standards that producers and marketers ought to adopt when participating in GCC (Talbot 1997, p. 60).

Particularly, the final products of coffee ought to bear the logo that certifies the coffee brands in line with the standards. As such, the consumers tend to believe that such branded coffee has a premium price that ends up compensating the coffee farmers in the global south.

Fair Trade Coffee has had colossal impacts on the power relations among the stakeholders. At the outset, the principles underlying this type of trade and practice dictate that coffee importers ought to register with the fair trade organizations and have their coffee certified. Besides, registration of the coffee requires the importers to pay significant fee upon importation (Mohan 2010, p. 121).

While this is a major step towards enhancing fair trade practices and regulating the power relations between importers and exporters, the importers have more bargaining power than exporters in this arrangement. For instance, the importers of fair-trade coffee may demand high quality beans at the same fair trade price (Niemi 2010, p. 269).

In other words, the importers still have the monopoly to decide on which exporter to buy their beans. Hence, they ‘arm-twist’ the exporters to produce high quality beans with threats to change their suppliers. To this end, the fair trade coffee has done little to balance the power relations between the exporters and importers.

Moreover, the power relations are still skewed between the retailers and roasters even in the wake of fair trade coffee and regulations (Mendoza & Bastiaensen 2003, p. 39). For instance, the retailers in developed countries have no obligations to follow the fair trade principles. In other words, they may sell their products highly even without disclosing their premium charges for fair trade coffee.

In other words, they do not explain the amount of money charged as fair trade price that reaches the farmers in developing countries. According to Mendoza & Bastiaensen (2003, p. 43), only negligible percent of the fair trade prices charged by retailers on consumers reaches the farmers.

Dicken (1998, p. 45) pinpoints that the coffee prices remain high for consumers. Besides, the farmers receive negligible percent of money charged as fair coffee price (Talbot 1997, p. 67). As such, the retailers and importers have remained to be powerful actors in the GCC despite attempts to regulate the skewed power relations.

Taylor (2008, p. 69) says that fair trade coffee has demanded that the coffee producers and farmers should meet stringent criteria during the process of production. The principles of fair trade demand that the farmers should not use forced and child labor during the cultivation of coffee beans (Mohan 2010, p. 121).

Besides, the farmers should use specific herbicides and other farm inputs for their coffee to achieve the required standards at the global markets (Ballet & Aurelie 2010, p. 321). All these limits imposed on farmers imply that farmers have to spend increased amounts of financial resources in procuring the farm inputs.

This implies that the production cost of coffee has increased tremendously leading to marginal earnings by the farmers. As such, fair trade coffee has failed to achieve its objectives of cushioning the farmers. In other words, the farmers are worse off than when the coffee market had no fair trade practices.

To this end, coffee farmers enjoy diminished power on the price and earnings from coffee. Niemi (2010, p. 270) says that fair trade in Nicaragua led to an improvement in organic farming methods leading to high quality coffee produced and high prices. However, the earnings were marginal owing to high production costs imposed on the farmers (Ballet & Aurelie 2010, p. 323).

Conclusion

In essence, coffee is one of the major foreign exchange earners in developing countries. Nonetheless, the production, sale and consumption of the product have been typical of major power imbalances. Prior to the fall of International Coffee Agreement in 1989, coffee was regulated.

As such, there was a balanced power relation among the actors. Deregulation of coffee led to a shift in power relations in which major corporations and roasters dictate the quality, prices and production of coffee (Raynolds 2009, p. 1086). This is due to the reduced control of state actors in the production of coffee. Attempts to restore balance of power among the stakeholders have been futile. In particular, the formulation of Fair Trade Coffee increased the powers of the importers and retailers at the expense of farmers and consumers.

References

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Ponte, S 2002, ‘The Latte Revolution? Regulation, Markets and Consumption in the Global Coffee Chain’, World Development, vol. 30 no. 7, pp. 1099-1122.

Porter, M 2004, Competitive Advantage, Free Press, New York.

Raynolds, L 2009, ‘Mainstreaming Fair Trade Coffee: from Partnership to Traceability’, World Development, vol. 37 no. 6, pp. 1083-1093.

Reed, D 2009, ‘What do Corporations have to do with Fair Trade? Positive and normative analysis from a value chain perspective’, Journal of Business Ethics, vol. 86 no.3, pp. 3-26.

Strange, R. & Newton, J 2006, ‘Stephen Hymer and the externalization of production’, International Business Review, vol. 15 no. 2, pp. 180-193

Talbot, J 1997, ‘Where Does Your Coffee Dollar Go: The Division of Income and Surplus along the Coffee Commodity Chain’, Studies in Comparative International Development, vol. no. 32, pp. 56-91.

Taylor, M 2008, Global Economy Contested: Power and conflict across the international division of labour, Routledge, London.

It Would Be Economically Viable To Create a Coffee Hot House in U.S. It’s not clear when coffee was first discovered but the history has it that it originated from highlands of Ethiopia. It used to grow as a wild weed. Coffee was used to make energy bars before it was used to brew coffee. Britons realized the importance of coffee in 1860s. Unfortunately, the coffee they planted was destroyed by coffee rust fungus and it lost its economical viability. Americans had chosen coffee as their drink of choice. Coffee was enjoyed by all people of all social classes.

The rich almost enjoyed coffee ceremonially to replace a hot meal and also they used it to suppress hunger. Large companies took advantage and adopted coffee as a commodity. Companies introduced machines to brew coffee and this created a great demand. With industrialization coffee roasting technology improved and it was not even enough to meet the high demand of coffee. This is evidence that coffee can still be economically viable in the U.S if given attention.

Economically, coffee provides employment and its income lifts the livelihood of the farmers in rural areas. Unfortunately, due to poor production practices of the farmers coffee prices reduced greatly. If coffee house industry is to be invested in the U.S, it would mean first to upgrade its production at the farm level. This means a large amount of money is to be used. Coffee market began to collapse in the world market in 1998 and the prices continued to fall due to oversupply.

Many employees in coffee industry lost their jobs. This has led to high levels of poverty. In Central America, coffee is of low quality such that it cannot qualify for free market. This has led to loss of employment and economic collapse which has led to class conflict. Indeed if coffee is well taken care of that is money be invested in to provide farmers with input and in return they get a great reward, it can improve economy of the U.S. thus it would be economically viable to introduce a hot coffee industry in the U.S

On the other hand textile industry was of great economic viability. It used to bring great profits. Textile industry grew in the 18^th century as a mass production. After revolution many people were employed in the textile industry. In the 20^th century textile industry gained a bad reputation worldwide due to paying workers less than minimum wages. The existing industries are being challenged by developing countries in south East Asia and Central America.

Due to globalization manufacturing is been outsourced to overseas labour markets. British industries had unfavourable working conditions; workers were exploited. People were made slaves and children started working at the age of four. The market environment changed and the U.S experienced competition of foreign manufacturers who employed cheap labour. This forced the companies to look for market overseas and closed the U.S plants for there were no domestic sales.

With this in mind it would be of economical viability to start a coffee hot house industry in the U.S rather than to bring back textile industry. This is because coffee would contribute greatly in the economy for it already has both domestic and foreign market if its quality is improved. Coffee employs a great number of people both at production and processing levels. The livelihood of the farmers would improve thus bridging the economic class between the rural poor and the urban elite.

Presently, the scene has changed significantly, with visitors more conscious than at any other time in recent memory of where their food comes from. With expanded mindfulness comes an increment in obligation regarding eateries to be more cautious in their sourcing and more dependable by the way they work their organizations (Abrams, 2019). The arrangement is to reuse glass and cardboard and return bundling to my providers to be reused.

Demographic Description

The primary target market is understudies aged 18-23 of any gender who come from metropolitan and advanced education foundations.

Geographic Description

The geographical location would be a city with a great density of students, such as Boston.

Lifestyle Description

The understudies that would buy our item stay at the university or college campus for studies. They wear comfortable clothes such as jeans and hoodies, or they can be students who follow modern fashion styles for the youth.

Psychographic Description

Collectively, they focus on advancement and sustainable arrangements. The young millennials are typically early adopters and are quick to attempt novel thoughts and items (Serhan & Serhan, 2019). In addition, they are those who will, in general, be the most proactive in searching out sustainable brands. These are people who are committed to maintainable and eco-accommodating living.

Purchasing Pattern Description

The students are expected to come daily to the shop to drink coffee and get snacks during lunch breaks or during doing homework and projects. They can purchase coffee or food several times since they will be staying in the shop for a long time studying or chatting with friends. They can pay with cash, bank card, or using online payment apps that are popular among millennials.

Buying Sensitives Description

This is a great deal to save money for students on a low budget. The price of coffee is estimated to range from $4.5-6.5, which is acceptable for such a target market. All the packages and cups in the shop will be recyclable. The homemade prepared products would effectively be more famous than the cafeteria’s heating. Likewise, a few cafes offer a rebate to undergrads who present their understudy IDs (Serhan & Serhan, 2019). The coffee shop considers the more youthful local area of specialists and understudies, offering enormous tables for concentrating on materials and free Wi-Fi to support one through a working day. It will also offer discounts to those who bring their own cups.

References

Abrams, R. M. (2019). Successful business plan (7th ed.). The Planning Shop.

Serhan, M., & Serhan, C. (2019). The impact of Food Service attributes on customer satisfaction in a rural university campus environment. International Journal of Food Science, 2019, 1-12.

Introduction

Recent years, the coffee crisis affected many regions in the world leading to price decrease and market failure of many companies. The main tendencies on the coffee market today are uncertainly and instability. If nothing is done, the crisis will affect farmers and trade organizations leading to the bankruptcy of small and medium-sized enterprises. Because of the crisis, 26 million coffee farmers lost their source of income and bankrupted (Walk the Talk 2003). The consumer-buyer and his decisions are central to any market analysis that seeks to explore the relationship between forms of competition and consumer choice. To the business firms that sell to consumers, however, this aspect of demand is less important than consumer preferences, for it has been shown that families and individuals seek variety in goods and services and in shopping methods. The newly established price, 65 percent a kilo, could not cover all expenses and saved farmers from poverty. Another problem identified by economists is that global coffee consumption has failed and this situation worsened the crisis. “The quoted price had dropped below &1 per pound” (Walk the Talk 2003). Thus the lowest price was reached in 2003, 42 cents per pound.

The problem is important because it has a great impact on international trade and partnerships between international and local companies. In the markets in which consumers buy, competition takes many forms. Most models of economic theory analyze markets using a conventional definition of demand framed in terms of prices and quantities, which shows that buyers choose smaller or larger quantities, at higher or lower prices, of the same product or service. Strategy is not a game played against nature. Instead, it is an activity geared to secure an advantage over or deny advantage to, an adversary who is motivated, and not infrequently able, to thwart a company (Barro and Grilli 2003). The main countries that suffered from the coffee crisis are developing regions of the world relying on coffee export and favorable market conditions. The main regions affected by the crisis are Latin America, Africa, and East Asia.

Proposed Policy Solutions

The first of the proposed policy solutions are based on “the law of comparative advantage’ concept. The proposed policy is to export coffee beans with the lowest relative costs. Thus, these costs should cover the main expenses: amortization and labor resources. According to this model, countries export products with the lowest relative costs. In this case, because strategy is always devised ‘at home’-nationally or within a coalition — through the workings of a process beset with myriad domestic difficulties, the enemy is often neglected in deliberations. In fact, from the peacetime point of view of the strategic planner, the adversary is actually the easiest variable to manipulate (Froyen, 1995; Barro and Grilli 2003). This model will help to employ people and reduce the current unemployment rate which reaches 50% among farmers.

The second proposed concept is the specific factors model. The advantage of the country is based on “immobile endowments” which can be unique coffee beans and a country image. The proposed policy is product differentiation. It will be difficult to achieve it is the only possible solution to sell coffee beans on a global scale. The relation between non-price competition and consumers’ preferences makes information, on both sides of the market, critically important. As buyers of a general class of products, consumers confront many sellers of products that are closely equivalent: the consumer’s taste for variety is satisfied by the existence of a wide range of differentiated articles (Barro and Sala-i-Martin 2003). Given information about the differences in products and prices, an astute buyer could select the particular item that best fits his set of tastes and preferences; his choice would reflect not only the availability of substitutes but the degree of closeness to which they are equivalent.

The third concept for the coffee market is the imperfect competition model. The trade will be affected by the economies of scale and it will help coffee companies to overcome the crisis and add value to their products. The proposed policy is price competition. Sellers thus differ only in the quantities they offer at a given price; buyers differ only in the amount they are willing to purchase at a given price. Competition in such a market is price competition: many buyers and many sellers, each a minor part of the whole market, help to establish the equilibrium price that results. As in the case of monopoly, a specific example of the competitive model can be found only with an extremely narrow definition of the product (Wickens, 2008).

Costs

The costs of the first model are low but it will take time to introduce the policies. If consumers want what a monopolist is selling, they must either buy from him or go without. To cite a specific example of an existing monopoly, however, requires an extremely precise definition of the product or service. For example, in most urban areas public utilities are monopolies: there is only one telephone company, water company, gas company, electricity supplier. But if telephone service is defined as a form of communication, more than one supplier of such facilities exists telegraph, mail, and face-to-face conversation are among the other forms communication can take. Only insofar as the consumers find telephone service unique and are unwilling to substitute for it another form of communication does the company have a monopoly. The strength of the monopolist’s power, therefore, is a reflection of consumer preference (Wickens, 2008).

The costs of the second model are low, but it will bring desired outcomes only in half a year. The general class of products is differentiated because Brazilian coffee beans are not identical to other coffee beans. Each processor has taken steps to ensure this — by his selection of particular ingredients and the specific details of his technology; by the use of distinctive packaging and a brand name to identify his product; by his advertising of its superior quality or its appeal to gourmet tastes. But all such attempts are worthless unless the potential buyers — the consumers — are willing to recognize significant differences between coffee beans. If a firm competes by changing its output — for example, by introducing a product variation — its competitive position will be improved only if consumers accept the change, and prefer it to what is offered by others (Mankiw, 1994).

The third policy is the most efficient for the coffee market. Yet in neither case is the consumer indifferent to the sellers from whom he buys. It is true that one share of common stock is identical with another share; but the consumer is not only buying common stock, he is also shopping at his broker’s. Similarly, the consumer may well be indifferent as between the coffee beans from one country and that from another-but not if the first case sells to Starbucks and the second to a less known company. differ in the abundance (and relevance) of the information they offer and in their provision of credit; retail dairies may have different delivery schedules and will surely have nonidentical routemen (Froyen, 1995).

The expected outcomes of the first model are improved market position and stable growth achieved in a year. So the consumer’s preference for one seller over another exists; because the shopping or buying process cannot be separated from consumer choice, there is no possibility of finding identical sellers to consumers, and the model of pure or perfect competition is irrelevant to an analysis of consumer markets. The outcomes of the second model are product differentiation and short-term market stability. And each variation introduced into the shopping process will actually serve to differentiate only when consumers accept it as a means of distinguishing one retailer from another (Mankiw, 1994).

The best model for market change is the third one. Exactly parallel reasoning applies to firms. As sellers of a general class of product or service or shopping process, firms face many buyers, who have closely similar, yet different, preferences. Given adequate information about consumer preferences as well as estimates of the quantities that buyers will take at different prices, the profit-maximizing firm could produce the particular item that best fits its available resources of technology and know-how. The seller can differentiate his output from that of competitors most successfully by incorporating in his product or service the differences that consumers will find significant — by giving consumers, in short, what they want. The more information he has about consumer preferences, therefore, the better off is the supplier (Froyen, 1995).

Conclusion

The selected model will help to overcome the market crisis and stabilize the price of the international coffee market. In competition, each competing seller offers a unique output, but one that is closely similar to the output of others. The amount of differentiation depends on consumer preferences: the long-standing and acrimonious debate over “real” or “imagined” differences and “rational” or “irrational” preferences is quite beside the point.

Future research is needed to analyze the industry product differentiation and selling costs. Clearly, it is consumer preferences that establish the existence and the extent of product differentiation. The model of monopolistic competition places its emphasis on sellers’ attempts to differentiate their offerings via variations in the product or service or shipping process rather than price competition. All the empirical data so far presented support this analysis for the markets in which consumers buy. This is not to say that pricing is never used as a competitive weapon, or that these characteristics of comparative advantage apply with equal strength to all consumer purchases.

The main limitation is the lack of market information and real-life examples of model applications in the coffee market. Both types of information, however — that which is sought by consumers and that which is sought by producers -have an important bearing on market structure.

References

Barro, R. J. and V. Grilli (2003). Europea Macroeconomics, London: Macmillan.

Barro, R. J. and X. Sala-i-Martin (2003) Economic Growth, New York: McGrawHill.

Froyen, R. T. (1995) Macroeconomics: Theories and Policies, 5th edn, London: Prentice Hall.

Mankiw, N. G. (1994) Macroeconomics, 2nd edn, New York: Worth.

Wickens, M. (2008). Macroeconomic Theory: A Dynamic General Equilibrium Approach. Princeton University Press.

Walk the Talk. Oxfarm Briefing Paper. 2003.

Introduction

There comes a time in life when a chance to invest knocks on everyone’s door. Having inherited five million dollars from my aunt, I feel that this is that time in my life. I need to invest. Consequently, I have taken time with my wife to think over several viable investment options and we have come to settle for coffee production. This paper is a record of the underlying principles behind our choice.

Brazil is the leading producer of coffee, a world wide cherished beverage according to (Lemos 47). My wife and I having been born, raised and settled in Brazil imply us having the advantage of distinct familiarity with the coffee industry. Our parents have worked in the coffee plantations and up to date, several members of our families still do. I majored in Agricultural Economics in my University Degree while my wife took Pure Economics. This means that we have both been exposed enough to understand the coffee industry from both a personal and professional perspective. Before I made the final decision on my choice of investment, I analyzed the coffee industry in sections as discussed below.

Trade Zones

There are three main trade arrangements to consider.

Free Trade Area of The Americas

First to consider is the 1994 Free Trade Area of the Americas. This was an arrangement to open up all countries of America for free trade except Cuba says (Lemos 48). This has been received both with applause and booing by the public. Those opposed argue that its undercover plan aims at exploiting the less developed countries of Latin America. On the other hand, its supporters argue that it’s geared to promoting access to foreign markets and considering the special needs of its members. FTTA failed to meet its plans of 2005. Generally, FTTA has not been so vibrant on the economy and therefore its effects are too mild to feel according to (Lemos 50).

Southern Common Market

Apparently, Brazil belongs to one very vibrant trade region called the Southern Common Market (MERCOSUR) as explained by (Fiallos 72). Adopted in 1985, its objectives were to implement free transit of products and services between member states, adopt a common trade policy for member states and coordinate national economic policies relating to foreign trade and commitment by member states to strengthening the integration says (Fiallos 72).

Achievements of MERCOSUR

MERCOSUR in its list of achievements saw the construction of Free Trade Zones that provide favorable conditions for foreign exchange among member states. This FTA has seen an increase in Brazilian coffee production from about 20 million bags to well over 45 million 60 Kg bags between 1997 and 2009. This can be attributed to MERCOSUR’s objectives. The objectives have made it easier for Brazil to use advanced technology in this industry thus increasing yields, reducing costs and diversifying the end product. Eventually, the prices of the product have been relatively rising. This has seen an increase in returns to all dealers in this industry thus motivating them to work harder for better results.

Challenges and Opportunities in MERCOSUR

MERCOSUR is however faced with several challenges such as insufficient capacity for a judicial system where member states can solve disputes, biased balance of power among member states and the influence of controversial politics.

Despite the challenges, MERCOSUR remarkably provides its member States with opportunities as discussed in its objectives.

Fair Trade in Brazil

Another consideration worth making is the presence of Fair Trade in Brazil. According to (Downie A16), Fair trade has its roots in the Solidarity Economy works of the European NGOs around the 1970s. However, it was not until the wake of the millennium that remarkable progress was made towards developing an internal Solidarity Market in Brazil. Fair trade objectives include creation of an enabling environment for producers, encouraging open transactions, promotion of fair trade, fair and timely rewards, improving the working environment, protecting child rights, conserving environment and respecting cultural identities says (Downie A16). With fair trade have come numerous fair opportunities and rewards to the chain players. Thus, it has not only been received with applause in the region but also active support for its continuity.

Difference of Fair trade from Free Trade

Unlike Free Trade, fair trade is an agreement between the South American countries based on social, economic and cultural promotion and therefore no aspect of national exploitation.

Again, Fair trade development is through projects that collectively involve the producer, the dealer and the consumer therefore implying mutual and fair benefits to all says (Downie A16).

Achievements of Free Trade

Despite Fair trade having a few mild challenges that is in fact already being dealt with such as the call for a common definition of Fair trade, many are its tangible positive implications. For instance, in Ceara (North of Brazil), World Vision was able to redeem poor local farm families by establishing a fair trade co-operative. Through this co-operative, these peasants have been able to grow organic melons for supply in large chain supermarkets of the European Continent. Without much say, I chose to get into coffee production through fair trade co-operative. It is an agreement that not only benefits the players but is also in line with the United Nations Millennium Development goals.

Connection between Fair Trade and UNMDG

One of the UN Millennium Development goals is to end poverty by 2015 as put by (Ross A01). I believe that this is achievable. However, it is not going to come unless individuals, organizations, institutions and governments take active roles in living up to it. The wider players are a constituent of us as individuals. It is therefore a responsibility of each one of us to take position and roll the ball. I feel obligated to invest in coffee production, a heritage of my motherland.

My choice is with no doubt going to be part of poverty eradication by 2015 as designated by the UN. First, it will be through the creation of a fair environment. My company, operating with Fair Trade co-operatives, will provide for the continuity of fairness in the coffee industry. Second, through employment, workers will be subject to fair wages and as a result be able to raise their living standards. Third, Fair Trade obligates consideration of child rights and support for education. This is a long term measure for poverty eradication.

These among others are the key links between my company’s preset objectives and the United Nations Millennium Development Goals to eradicate poverty by 2015.

Conclusion

To conclude, I have taken enough time to research before making my choice. There is a lot to show of the successes of Fair Trade in Brazil that could not be covered in this paper. There is a lot more that can be achieved through the same procedure. Fair trade is a sure way to go in investment and I would recommend it to anyone interested in investing in Brazil says (Ross A01). I choose to invest in coffee production under Fair Trade.

Works Cited

Downie, Anne. “Fair Trade Brand Helping Brazilian Farmers.” The New York Times Media Group 2007: A16. Print.

Fiallos, Micah. “Implications for global coffee players.” Management Magazine 2001: 72. Print.

Lemos, Frances. “Fair Trade and Solidarity Economy in Brazil.” The Economist Magazine 2006: 47-51. Print.

Ross, Judith. “A Bitter Brew for Coffee Farmers.” Toronto Star 2002: A01. Print.

Fair Trade is a noble movement meant to support coffee growers due to their low share of the final price. However, despite the good intentions, it faces several challenges, most of which are evident at the retail level. Some appropriate Fair Trade to promote their goals, and the market situation was unstable for the time being. The movement itself is not perfect, only partially addressing the issue. This paper will discuss the symptoms and the precursors presented in the case and attempt to offer some recommendations.

As mentioned, Fair Trade aims to help coffee growers, who are mostly based in developing countries, to obtain a bigger share of the final price. Approximately a half of it is distributed to roasters and shippers, leaving only a small percentage to actual producers. The movement attempts to bridge the gap between growers and retails and establish certain standards. While they appear to resolve some issues, it is still unclear how the income is impacted. Moreover, big corporations appropriate Fair Trade to improve the brand image, diluting its meaning, failing to explain the details, and increasing the prices in bad faith in the process. On the other hand, the movement threatens those not participating in it and only partially address the concerns of developing countries. Thus, multiple causes lead to the current state of affairs, which manifests in such symptoms as image laundering and premium pricing.

As a retailer, one can address the problem in several ways. First of all, it is advisable to calculate whether decreasing the coffee price will be beneficial for growers due to an increased customer base in the long run. If the forecast is positive, the initiative is viable; otherwise, the focus should be on maintaining the existing buyers. Then, the Fair Trade production needs more transparency, which can be achieved by providing the necessary information on packages or separate stands. Perhaps, after convincing the consumer of the movement’s importance, they will be more receptive to pricing changes. Most importantly, the retailer should establish a relationship with growers directly and remove other elements from the supply chain, benefiting both parties. While the movement will still have issues, the ones on the wholesale level will be resolved, improving the producers’ financial gains and motivating them to enhance quality and adopt more roles than a grower.

Coffee is one of the most popular beverages worldwide. In the United States, the figures related to coffee consumption are impressive, with more than 60% of adults drinking coffee daily. According to the National Coffee Association (NCA), 46% of coffee consumed in 2017 was tasted outside the home, while an emerging trend privileged the consumption of specialty coffee (Auffermann, 2017). The price for a coffee ranges from $2,7 for an average cup of standard coffee to even $80 for a cup of Kopi Luwak, the most expensive coffee in the world. In this paper, I will evaluate which is the cost I would be willing to pay for an average cup of coffee, highlighting how ethical considerations could affect this value, and assessing the consumer surplus on my consumption.

The popularity of coffee is steadily growing, and the demand for quality and fairly traded coffees is on the rise. The diffusion of ethical principles in trading has led to a widely spread social awareness, where recognizing the right value to small coffee producers is considered paramount by consumers, producers, and sellers. Even a giant like Starbucks shows attention to small producers and evaluates sustainability, claiming that 100% of its coffee is ethically sourced. The fair trade ideal has progressively led to the abandonment of the traditional market in favor of direct trading, giving birth to the Third Wave coffee market. Interestingly, this practice has favored the emerging of shared values across the market, with a new lexicon that defines the quality of the coffee through the narrative of its provenance, ecology, attention to detail, and integration (Morland, 2018). These symbolic values influence demand, offer, and prices across the globe.

Such an approach to the world of coffee is desirable, as it makes the simple act of tasting a cup of coffee a unique experience, a sort of narration, where taste, flavor, and scent evoke distant and exotic lands. Indeed, I agree with those scholars who claim that authentic social interaction thrives in third-wave coffeehouses, where even shop employees play a role in the narration (Manzo, 2015). However, consumers should keep themselves informed on the dynamics behind the fair trade market and expensive coffees such as the Kopi Luwak. For example, while many buyers prefer fair trade brands in the trust that they are improving the lives of small producers worldwide; recent changes in the certification policies are creating more than a problem for small coffee farmers. Also, the increasing popularity of the Kopi Luwak coffee has resulted in intensive farming where civet-cats, essential in the manufacturing process of this coffee, are caged and forced to live in terrible conditions.

Assessing the cost of a cup of coffee should take into consideration all the topics discussed above. Considering the cost of production per cup of coffee ranging from $0,30 to $0,60, and a labor cost comprised between $0,20 and $0,40, I would be willing to pay no more than $3,00 for a cup of standard coffee at Starbucks or McDonald. However, for a cup of specialty coffee, I would be willing to pay even $5,00 or more, depending on the shared values involved in the ‘narration’. On this consumption, there is a consumer surplus, as I am willing to pay a cup of coffee more than the current price.

Summing up, the average cost of a cup of coffee should take into consideration the added values of the current trend in the market besides the traditional parameters of the labor force and the production cost. These values are the result of the fair trade policies and relate to some narrative components of specific coffees, such as origins, history, and ecological impact among others. Under this perspective, I would be willing to pay more than the current average cost for a cup of coffee, creating a consumer surplus.

References

Auffermann, K. (2017). From brew boomers to the gourmet generation: National coffee drinking trends 2017 [Blog post]. Web.

Manzo, J. (2015). “Third-Wave” coffeehouses as venues for sociality: On encounters between employees and customers. The Qualitative Report, 20(6), 746-761. Web.

Morland, L. (2018). Values added in speciality coffee. Connecting product and place through songlines.The International Journal of Entrepreneurship and Innovation, 19(2), 113-124. Web.

Coffee has been a topic that has provokes intense argument among medial men and scientists that have investigated its harmful as well as positive effects on human organism (Derbry 166, Ries, Miller, Fiellin, and Saitz 166). The essay under argumentative analysis is entitled as “The Whole Scoop on Coffee” and it is devoted to the same issue, the analysis of the positive and negative effects of coffee on human organism. However, the main focus of the present paper is neither benefit not harm done by coffee to a human being that is in the habit of consuming it, but the way the argument in the analyzed paper is put forward and proved with the help of certain evidence. Though the article lacks a carefully formulated argument (that is its primary weak point), the article as a piece of argumentative writing can be characterized by a certain number of strong points which will be analyzed in this paper and a number of weak points that are prevailing in the analyzed article. As it is necessary to define if the argument is effective or not, it can be presumed that it is somewhere in between, though inclining to ineffective.

The present analysis of the essay will be built according to the structure of the essay so that the development of the argument could be analyzed step-by-step. Since the author of the articles intends to create a scientifically proven argument, it is necessary to analyze authority of the argument and the use of statistics in the essay.

In the introductory paragraph of the essay under analysis, the author formulates a problem which seems to be too vague and lacks concrete support. The opening statement that says that “the estimated 100 million of us sip” is not proven by any reference (John Hopkins Medical Letter 200). What is more, the author mentions “our morning paper” as the main the source of the argument (John Hopkins Medical Letter 200) and he/she does not give any title of a newspaper though such recognized publication as New York Times can be considered a reliable source to refer to. Further, the author offers a premise saying that there can be awful withdrawal headaches connected with the implementation of the decision to stop consuming coffee. The author gives a proof of the general idea, mentioning the researchers at John Hopkins and their “recent” research that has proven the withdrawal symptoms. Thus, this is the case of deduction where the first statement is general and the succeeding one offers specific information on the point. However, this successful case of deduction is followed by invalid syllogism stating that coffee is a cure for headaches that is prescribed for migraines (John Hopkins Medical Letter 200). First, the author does not give any reference for this idea, second, even a brief research shows that the premise is invalid, as caffeine triggers migraines if either too much or too little is consumed, thus it cannot be positioned as a sure for headaches (Magee 53). Also, the introductory paragraph suggests an idea of the subsequent analysis of various products (tea, cola, etc.) though the essay is focused entirely on coffee.

The subsection on coffee and heart disease is opened with a reference to the Harvard study that can be characterized from the point of view of statistics and authority of the argument. Harvard study is, definitely, an authoritative source to refer to, the sample is mentioned, thus, it is known, sufficient (45000), and reliable. Also, first three sentences of the second paragraph of the subsection “Coffee and Heart Disease” present a case of induction. The syllogism of the premises can be considered valid since the source of the specific statement is reliable (American Journal of Public Health). As for the study conducted in the Netherlands that is mentioned in the essay, it does not contain proper referencing (which the essay lacks on the whole). Also, the idea conveyed by this statement is that there is the connection between coffee and the level of cholesterol and this study is recent, though the previous statement contains the opposite idea, that such research is poor.

The last paragraph in this subsection contain a fallacy, it ignores the question posed at the beginning of the paragraph, “What if you already have heart disease?” The whole paragraph is devote to “another recent study” (which is not identified, by the way) of the patients with angina who drink coffee. Thus, the initial question is ignored and only the last two sentences tackle the problem of heart disease though the source used is, in fact, irrelevant as it is based on animal studies, not human studies.

The subsection on the connection of coffee and cancer seems to be weak from the point of view of the evidence for the argument. Such phrases as “various studies”, “recent analysis of 24 studies” (John Hopkins Medical Letter 201) are too vague and no logical connection between the ideas can be observed in case of the statement about 24 studies on coffee and “similarly inconclusive results …on other cancers” (John Hopkins Medical Letter 201).Twenty four studies can be considered a sufficient ground for a conclusion, thus the idea about inconclusive results is senseless, it is a fallacy.

However, the subsection on the connection of coffee and osteoporosis starts with a case of deduction that relies on the Framingham study with convincing results (John Hopkins Medical Letter 201). At the same time, no conclusion is given, though the two premises can be considered valid. Finally, the conclusion of the essay is too weak as it states that “the worst thing” that can be said about coffee is that is keeps a person awake (John Hopkins Medical Letter 202). Thus, the conclusion seems to ignore the abovementioned information on coffee and cholesterol, ulcers, and osteoporosis. The conclusion contains the fallacy called “Non Sequintur” (Gocsik unpaged) as it does not present a logical flow of ideas based on the premises.

Drawing a conclusion, it can be stated that the author of the analyzed article has used certain argumentative strategies, such as induction, deduction, statistics, expert testimony. However, the weak points of the argument are prevailing: the author uses false premises, there are fallacies, such as ignored question, irrelevant references, too poor referencing. The conclusion of the argumentative essay does not reflect the logical flow of ideas that is one of the worst weak points of the essay.

Works Cited

Debry, Gerald. Coffee and Health. London: John Libbey Eurotext, 1994.

Gocsik, Karen. “Logic and Argument”. Dartmouth Writing Program, Dartmouth College Online Writing Materials. 2008. Web.

John Hopkins Medical Letter. “Health after Fifty”. The Language of Argument. Buton, Larry W., and Daniel Lamont McDonald. NY: Pearson Longman, 2004.

Magee, Elaine. Tell Me What to Eat if I Have Headaches and Migraines. NY: The Rosen Publishing Group, 2008.

Ries, Richard K., Miller, Shannon, Fiellin, David A., and Richard Saitz. Principles’ of Addiction Medicine. Philadelphia, PA: Lippincott Williams & Wilkins, 2009.