Nestle Report

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  • Topic: Coffee, Coffea, Coffea arabica
  • Pages : 81 (12642 words )
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  • Published : April 12, 2013
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The Nestlé
coffee report

Faces of coffee

Contentsii

Page 2ii

The changing world of coffee
Page 10ii

From cherry to cup
Page 50ii

1 Faces of coffee

The future of the coffee world

2 Faces of coffee

The changing
world of coffee

3 Faces of coffee

The changing world of coffeeii

Coffee price 1900–2003
US cents/lb
300

250

200

150

100

50

Millions of bags

Rest of
the world
40.2

4 Faces of coffee

60

Rest of
the world
44.3

50

40

Brazil
32.4

30

20

Brazil
19

10

1992-1993
Source: Nestlé Purchasing Department

2002-2003

2000

Worldwide Arabica production

1990

Source: McKinsey/Technoserve Study, 2004

1995

Post-ICA trend

1985

1980

1970

1975

1965

1960

1955

1950

1940

1945

50-year trend

70

Price volatility
Until the late 1980s, the green coffee market was
protected from wide price swings by the International
Coffee Agreement (ICA), through which consuming
and producing countries agreed on export quotas and
price bands for coffee. It had been established in the
1970s after wide swings in prices. However, the
economic clauses of the ICA collapsed in 1989 due
to systemic shortcomings, mainly as a result of the
withdrawal of support by the United States. The
consequence was a more volatile market, in which
prices, after initially collapsing, reached levels
well above production costs by the mid-1990s.
This was worsened by severe frost and drought
damage to the Brazilian coffee crop in 1994, and the
resulting shortage of supply pushed Arabica prices
to over USD 3 per pound by 1997.
But by the end of the decade, export earnings had
begun to slide – from USD 12.9 billion in 1997 to just

1935

1930

1925

Real price

1920

1915

1905

1910

1900

Take any morning in London, Brussels or Paris. Millions
of people start their day with a cup of coffee. For some,
a day without coffee is worse than a day filled with rain.
From Western Europe to the Middle East, from Asia
to Latin America, in busy urban cultures and in remote
rural villages, this ritual is repeated throughout the day,
providing enjoyment and sustenance. Today’s
international coffee culture transcends the globe,
transforming an ancient commodity into a
phenomenon of the consumer age. Coffee brands,
including the number one brand, Nescafé, are
becoming global icons.
Meanwhile in Africa, Latin America and Asia, many
coffee farmers wake up to a starker reality. Green coffee
prices have plummeted so steadily over the past years
that what used to represent hope for a better life has
turned, for some, into a living nightmare. The slump in
coffee prices has plunged many farmers into poverty.
For some, the blow is partially shielded by income
from other crops. Some may work on large, modern,
efficient farms, or may be making a decent living
selling high quality speciality coffee to the coffee
boutiques and companies like Nestlé Nespresso.
But today, they are the minority.
Why are so many coffee farmers in such a situation
which is not of their making?

US cents/lb
120

100

80

60

40

60

50

Rest of
the world
18.8

30

20

10

Rest of
the world
17

Brazil
6.5

Brazil
9.3
Vietnam
11

Vietnam 2.4
1992-1993
Source: Nestlé Purchasing Department

2002-2003

2000

70

1990

Millions of bags

1995

Invention of soluble coffee by Nestlé

Worldwide Robusta production

40

1985

1980

1975

1965

1970

1960

Coffee consumption

1955

1945

1950

1940

1935

1930

1920

1925

1915

1910

1900

1905

Coffee production

Source: McKinsey/Technoserve Study, 2004

USD 5 billion in 2002. Large parts of the Brazilian coffee
sector had already begun to innovate with modern
methods of agriculture, producing at costs significantly
below those of many small coffee farmers, and by the
late...
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