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Home > Coffee as indicator of wealth

Coffee as indicator of wealth

Coffee as indicator of wealth... World prices for green coffee have grown by more than 40% in last two months. The same growth has been recorded in Russia. According to specialists it has to positively affect the quality of beans in our country. Quality, which was continuously decreasing for the last few years.

This situation is a reverberation of the overproduction crisis of 2001-2002, which was caused by a large harvest of low-quality coffee in Vietnam and Brazil. The cost of production in these countries - leaders of the world market - is lower than in other producing countries. Dumping of huge volumes of cheap coffee beans into the market for several years lead to steep decrease in prices. In these conditions other producing countries were unable to sustain the needed level of production. In addition to that, during this time a substantial amount of the product was being kept in the inventories. At the same time the price of final product has decreased because of falling raw materials' prices. As a result, the world coffee consumption has significantly grown. It became affordable for a wider circle of people. Even such traditionally tea-consuming countries as China began to consume a lot of coffee. And it was not the cheap instant coffee but more expensive coffee, including ground coffee and coffee beans. Which some unscrupulous salesman took advantage of. Because of confusion in concepts and undeveloped culture of coffee consumption they were able to sell cheap commercial kinds as Specialty Coffee. While when doing it the proper way Specialty Coffee is not only grown in the most beneficial conditions and in small quantities but is also being tracked all its way from the plantation to the consumer; professional degustations are conducted; it's storage is monitored to assure proper conditions and the beans are supplied to the consumer freshly roasted. This explains why the price of such coffee is substantially higher. But an inexperienced consumer cannot distinguish it from trivial commercial kinds. Especially in Russia, where the culture of coffee consumption is still, so to say, at its very beginning.

Yet the increase of the demand for coffee, which was to a big extent provoked by the fallen prices, also brought some positive results. A lot of small and medium-sized coffee-producing enterprises have emerged in Russia. Though in that regard we are still far behind Western countries. By expert estimates, today there are only 20 companies roasting coffee grains in our country. To compare: there is 900 of them in USA and about a thousand in Italy. But still, there is growth. Also, the increased competition made many coffee roasting and processing enterprises to invest their profits in the renovation of the equipment, which should have a definitely positive effect on the future quality of the product.

In 2004 coffee started to rapidly increase in price in the world market. In two months the price at the New York Commodity Exchange grew up from 1.4 to 2.2 dollars per kilogram. This was caused, in the first place, by adverse weather conditions in Brazil (rainy winter has affected the crops). The situation was aggravated by earthquakes in Columbia and Indonesia.

The growth of prices caused corporate price wars and a noticeable stratification among coffee producers. However, specialists think that one shouldn't panic because of the price increase. It is important to understand that unlike a few years ago, today the coffee business is no longer providing the opportunity to just make easy money. It is a hard and routine work, and good prospects here are only for the companies that came into the business seriously and for long haul.

Generally, Russian consumers have little grounds for worries about the price increase. According to Saint Petersburg analysts, Russians who spend on utilities and food no less than 70% of their income consume practically no coffee while preferring tea. And about 65% of those who nevertheless drink it prefer instant coffee, which is cheaper. Another 15% drink it along with ground coffee and coffee grains. And in the cost of instant powder the share of green coffee price (it is green coffee that is sold on world exchanges) is no more than 15%.

Only in Moscow and Saint Petersburg, residents of which are gradually moving to whole-bean and ground coffee, the growth of raw coffee prices can lead to a serious increase in the price of the drink. In the capitals the number of instant coffee lovers has fallen by 5% during last two years. Which, according to of some studies, can be explained by higher life standards.

Coffee houses play an important role in the development of coffee-consuming culture. However, by unanimous expert estimates, there are still too few of them in Russia. But even with such lack of these outlets the competition in this market is tightening. The coffee houses clientele is becoming noticeably younger. And since the youth likes the extremes, it makes sense to introduce new and unusual compositions into the menus of coffee houses - say, coffee with pepper or other add-ons. Only precisely calibrated marketing policy will help the companies owning coffee houses survive.


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