The Issue at Hand:
The price to purchase a cup of coffee at a local cafe has grown at an exponential rate as the coffee boom has impacted cities around the globe. Of course, more money for what we perceive to be the same quality and quantity of a given product can direct a level of frustration toward the cafe, as we can only hypothesize that the reason for these inflated costs can only be greed (on the part of the shop owners). Simultaneously, the specialty coffee industry has been developing higher standards for transparency, ethics, sustainability, processing, quality, roasting, and best brewing practices, which have lead to more resources being directed not only toward the producers of the coffee, but those who study and prepare it. Could the coffee boom and the third-wave occurring simultaneously be the culprit for such high costs, or is the answer much more complex? After all, we have to consider that the world economy itself is a very interconnected and dynamic system that cannot be summed up in a short blog. Instead, let us take a closer look at the costs associated with your cup of coffee, from farm to cup.
The Producer's Cost:
Coffee growing is a daunting and time-consuming task, as the temperamental plant can only grow in certain climates, the annual crop can widely vary based on factors (such as weather or conflict), the plants are subjected to environmental attacks (leaf rust or coffee borer beetle damage are the primary culprits), and the cherries grow at irregular rates, meaning that hand-picking is the preferred method. Next, the coffee must be processed, which involves choosing a style of separating the bean from coffee cherry, drying it, packaging it, then sending it to buyers. This is hard labor, but of course, we pay the producers fairly, right? Well, to highlight just one part of production cost, most pickers are paid per-pound-picked. This means, depending on the country, pickers are being paid equal to or less than $10 per day, for their hard, manual, time-intensive labor.
The price the producer receives for their work is called the Farm Gate cost. The Farm Gate is often looked at, in addition to the FOB (Freight-On-Board) cost, which is a breakdown of what the producer was paid, processing costs, storage costs, transportation, and export fees. In addition to this, we also have what is called the C-Market price, which is the global benchmark price for commodity coffee, and is influential in the pricing of specialty coffee, varying based on origin and quality. Other organizations seek to create standardized and sustainable pricing for producers, due to the exploitation of production means. For example, Fairtrade International has set the standard to $1.80 paid-per-pound, which is meant to be a safety net value for coffee producers to maintain sustainable operations. While more standards and fixed/minimum costs per pound are being paid to producers for their work by specialty coffee buyers, we should note that the cost of production alone is often exploited, due to buyers paying the minimums, rather than the true cost of production.
Keep in mind that higher quality coffee production will increase cost of production, as some varieties, such as geisha, yield a smaller number of cherries annually and require significant attention to development and processing, in order to meet specialty coffee standards. As a recent solution, some buyers have formed direct-trade relationships with growers, in order to pay producers a fair wage and increase transparency.
The Shop's Cost:
As we have previously discussed, the buyers are responsible for purchasing their green, or unroasted, coffee from producers (which will factor into their personal cost for the products they intend to sell). Next, shops must roast the coffee, which is not only an energy cost, but also results in a loss of coffee; roasting the beans leads to a reduction of weight, so let's say you bought 100 lbs of coffee, you'll be left with about 90 lbs of coffee upon completing your roast. Additionally, despite the best efforts from all of those involved, some beans will have defects and will need to be sorted out, meaning even more weight in purchased coffee being lost. Next, fixed business costs must be factored in, meaning everything from rent and location costs, internet, electricity, and licenses must be maintained...and the cost of these things is becoming more expensive, each year. Products, such as packaging, materials, and shop equipment will also need to be purchased and maintained, so those should be included in the cost of operating. Shop staff also need to be paid for their labor, and recently, the specialty coffee industry has been pushing for an increase in staff wages. Some staff members will also require courses and certification in order to grade or learn to prepare coffee, which could include CQI or SCA education. If all of these factors are paid for and addressed, then we can finally start to see some profit being associated with operating a coffee business. Depending on the selection of coffees and brewing methods being offered, prices could vary significantly, as production costs for particular offerings may be entirely different. So, where does the bulk of the cost for your cup of coffee come from?
The Bottom Line:
We have identified that while efforts are being made to pay producers a fair wage for their efforts, they are often exploited and paid the bare minimum for their work. Realistically, coffee producers are paid nowhere near the actual cost for their labor or the value of their grown and processed crops. However, cafes and roasters are also not making massive profits from their operations, either. Of course, they are making a profit, but it is by very small gains made over hundreds of cups sold. The real winners of this industry are the government and those who control property costs, due to a massive chunk of resources being directed toward paying fees, taxes, and cost of living expenses. Inflation, especially in the United States, should be understood as a contributing variable. However, the answer to "why is my cup of coffee so expensive?" is multifaceted; demand has increased, standards for production have increased, the products have become higher in quality, the dollar is worth less, the cost of living is higher, and governments wants their share of the profit. In summary, we do not pay anywhere near what the coffee is actually worth; we pay for a luxury item from an industry that is exploited from the start. The reality is this... you’re paying a lot, you just aren't paying nearly enough to those who actually produce and prepare it.