The Economics of Coffee in One Chart #infographic

 

The Economics of Coffee in One Chart #infographic

What goes into your cup of coffee in the morning, and what makes that possible?

The obvious answer may be coffee beans, but the complexity of a vast $200 + billion coffee supply chain becomes apparent when you begin to account for additional costs.

There are many underlying costs that factor into every cup of coffee consumed, from the labor of growing, exporting, and roasting the coffee plants to the materials such as packaging, cups, and even stir sticks.

The above graph breaks down the cost of one pound of coffee from retail coffee processing, equivalent to around 15 cups of 16 ounces of coffee brewed.

A difficult ordeal is to calculate and average out a global industry.

Not only are global coffee prices fluctuating constantly, but there are also variations in supply, relative costs and the final price of the finished product in each region.

Today's infographic above uses statistics sourced from the Specialty Coffee Association that are illustrative but focused on the Benchmarking Report and Coffee Price Report of the company to address these differences.

What they end up with is an average fixed price at a specialty coffee shop of $2.80 for a brewed cup of coffee. Every shop, and indeed every country, will see a different price, but that gives us the basis for beginning to backtrack and break down the total costs.

To make coffee, in order to grow it, you must have the right conditions.

The two main types of coffee, Arabica and Robusta, are mainly grown in sub-equatorial nations. The plants originated in Ethiopia, were first grown in the 1600s in Yemen, then spread through European colonialism around the world.

Today, Brazil is by far the largest producer and exporter of coffee, with a double-digit percentage of global production accounted for by Vietnam, the only other country.

Margins for Retail

It is standard to see a 1 lb bag of roasted whole coffee for $14.99 and higher for customers buying quality, roasted coffee beans directly through distributors. However, retailers are able to access coffee closer to the wholesale prices reported and add their own expenses to the equation.

For a supermarket, one pound of roasted coffee beans can convert into about 15 cups of brewed 16 ounce (475 ml) coffee. At a cost of $2.80 / cup, that translates into a coffee yield of $42.00 / lb.

That doesn't sound half bad when you start factoring in the expenses. The cost of materials includes the coffee itself, the cups and lids, the stir sticks and even the condiments (often paid separately). After all, half-and-half and ground cinnamon cans do not pay for themselves.

Factoring them all together equals a $13.00 / lb retail material rate. That still leaves a healthy gross profit of $29.00 / lb, but it is an costly business to operate a retail store. In addition, operational costs, including labor, leasing, marketing, and administrative costs, are steadily ramping up to $35.47 / lb in overall costs.

Factoring them all together equals a $13.00 / lb retail material rate. That still leaves a healthy gross profit of $29.00 / lb, but it is an costly business to operate a retail store. In addition, operational costs, including labor, leasing, marketing, and administrative costs, are steadily ramping up to $35.47 / lb in overall costs.

The Economics of Coffee in One Chart #infographicThe Economics of Coffee in One Chart #infographic

infographic by: www.visualcapitalist.com

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