Tuesday, February 9, 2010

The Price of a Cup of Coffee

When I first moved to Brazil, I could not believe the local prices for coffee - at the supermarket, in a restaurant, in a bar, or from a vendor on a street corner. The price was invariably many times lower than what I was used to paying in North America or Europe. Just to give one example, yesterday I bought some premium brand coffee, ground, in a local supermarket here in Fortaleza called Cometa. The brand was Santa Clara, which is considered a premium brand in Brazil. A package of 250 grams cost me R$2.28. Converting from metric to imperial measurements and from reais to US dollars, that package of coffee cost me US $2.22 per pound.

I'm well aware that Brazil is the world's largest coffee producing country by far (5,6 billion lbs. in 2006), and so prices should be lower here, as there is less transportation, tax, customs duty and merchant fees in the retail price, but the difference is quite shocking. Even with Brazil's lower cost of living. I would think the price would be perhaps half of the North American price, or even one third. But compared to what I had to pay when I last lived in Canada, my cup of coffee here in Brazil costs me about 1/8 of the price of a cup of Canadian coffee.

Being curious about this, I have been doing some internet research on coffee pricing internationally, and although I haven't found out the answer to my question yet, I've read some very interesting material. If I ever get a complete understanding of coffee pricing, I'll post it here - but don't hold your breath, as I think no one has ever understood all the mechanics of coffee pricing. Coffee is traded internationally as a commodity, not as a food item, and thus is subject to the whims and quirks of the marketplace. One thing that I have learned so far is that trading in coffee futures seems to be a VERY risky business, even though it has potential for huge profits.

In the Wikipedia article on the economics of coffee (click here for the link), I found a very interesting graph showing what percentage of the price of a cup of coffee is paid to the workers, the roasters, etc. Here are the numbers:

44.9% (pink) - taxes, transport and duty
23.7% (lavender) - wholesale and retail vendors
17.8% (blue) -  roasters and producers
8.5%   (yellow) - planters
5.1%   (green) - workers' wages

Suddenly it becomes clear why fair-traded coffee costs quite a bit more, doesn't it? If those two bottom categories, planters and works, are to get an increased percentage of the final price, it will have a large impact on the price per pound at one's local store. Since the fair-trade movement seems not to have reached Brazil, that $2.22 per pound I'm paying at the supermarket, even with lower Brazilian taxes, transport etc. means very little is going into the hands of the planters and workers. It makes the cup just a bit more bitter to the taste - for me at least.

1 comment:

  1. so true! nice blog, by the way! you're at first excited about the saving but then have to reconsider what is costing others for your savings :-(
    thus is the world in which we live, unfortunately. i say, let's change it ;-)