ECON 101 - Essay 1
Supply vs Demand of Coffee and the Reasons for Starbucks’ Success
Daria Lexi Gabai
ECON 101
American Public University Systems
Professor Medani Adhikari
Coffee has historically been one of the most favorite beverages available. Almost every country in the world consumes coffee in some shape, way or form. Interest in this drink has increased even more over the last century. According to Talbot (2004), from 1970 to 2000 coffee was “the second most valuable commodity exported by developing countries" (p. 50). Since then, there have been some changes in the supply and demand of this product. This essay will analyze the steady growth in demand for specialty coffee, the change in supply available, and present a case as to why the Starbucks Corporation is successful.
The demand for coffee and specialty coffee products have been steadily increasing. One of the leading factors affecting the demand for coffee beans is an increase in specialty coffee shops, such as Starbucks. Starbucks has become one of the most favorite coffee spots with over 21,160 stores in 63 countries and territories, including the United States, China, Canada, Japan and the United Kingdom (Starbucks Corporation 2013 Fiscal Report). Their locations serve hot and cold infusions, ranging from a regular Americano to Frappuccino’s and a whole array of whole-bean coffee, micro ground instant coffee, full-leaf teas among other goodies. It is no surprise that Starbucks has become a significant success, controlling a high percentage of the coffee supply.
In the early 2000s, Vietnam had flooded the market with coffee, and overproduction held prices low for quite some time. Recently, however, the price of coffee has increased; Starbucks has raised its prices by almost a whole dollar per cup. According to an article in PS Mag, “Folgers, Kraft Food Groups, and Dunkin’ Donuts have all raised their coffee prices over the past year as well”. Various environmental and weather changes have affected the
Daria Lexi Gabai
ECON 101
American Public University Systems
Professor Medani Adhikari
Coffee has historically been one of the most favorite beverages available. Almost every country in the world consumes coffee in some shape, way or form. Interest in this drink has increased even more over the last century. According to Talbot (2004), from 1970 to 2000 coffee was “the second most valuable commodity exported by developing countries" (p. 50). Since then, there have been some changes in the supply and demand of this product. This essay will analyze the steady growth in demand for specialty coffee, the change in supply available, and present a case as to why the Starbucks Corporation is successful.
The demand for coffee and specialty coffee products have been steadily increasing. One of the leading factors affecting the demand for coffee beans is an increase in specialty coffee shops, such as Starbucks. Starbucks has become one of the most favorite coffee spots with over 21,160 stores in 63 countries and territories, including the United States, China, Canada, Japan and the United Kingdom (Starbucks Corporation 2013 Fiscal Report). Their locations serve hot and cold infusions, ranging from a regular Americano to Frappuccino’s and a whole array of whole-bean coffee, micro ground instant coffee, full-leaf teas among other goodies. It is no surprise that Starbucks has become a significant success, controlling a high percentage of the coffee supply.
In the early 2000s, Vietnam had flooded the market with coffee, and overproduction held prices low for quite some time. Recently, however, the price of coffee has increased; Starbucks has raised its prices by almost a whole dollar per cup. According to an article in PS Mag, “Folgers, Kraft Food Groups, and Dunkin’ Donuts have all raised their coffee prices over the past year as well”. Various environmental and weather changes have affected the
References: Coffee cravers ignoring bean-price surge for caffeine fix. (2014, March 13). Retrieved February 16, 2015, from http://www.bloomberg.com/news/articles/2014-03-12/coffee-cravers-ignoring-bean-price-surge-for-caffeine-fix Starbucks Corporation 2013 Fiscal Report (2013, January 1). Retrieved February 16, 2015, from http://news.starbucks.com/uploads/documents/Starbucks_Fiscal_2013_Annual_Report_-_FINAL.PDF Starbucks in alliance to maintain coffee supply - seattlepi.com. (n.d.). Retrieved from http://www.seattlepi.com/business/article/Starbucks-in-alliance-to-maintain-coffee-supply-1155279.php Talbot, John M. (2004). Grounds for Agreement: The Political Economy of the Coffee Commodity Chain. Rowman & Littlefield. p. 50. Why coffee shortages won 't change the price of your Frappuccino. (n.d.). Retrieved from http://theweek.com/articles/444832/coffee-shortages-wont-change-price-frappuccino