Coffee Demand

December 1, 2012 | Author: | Posted in Architecture and Interior Design, Business

* Coffee Demand

* Green coffee

* Roasted coffee.

* First world consumers.

* United States.

* The European Union.

* Japan.

* Consumption in producing countries.

* Demand Analysis.

* Factors that influence demand.

* Elasticity of demand in terms of revenue.

* Current Demand.

* Bibliography

INTRODUCTION

Coffee consumption in developed countries has its history, as explained by Dr. Aurora C. Martinez Morales, in the old system of colonial domination over the territories, which made it possible to transfer their resources to the economic structure of cities. This led to the development of certain dietary habits and intake of amphetamine within the wealthier strata of these societies.

Since then, demand for various grades of coffee has been a function of the cultural tradition of consumers. France for example, has a predilection for strong coffee, which accounted for 56.2% of demand during the period 1984/85 to 1988/89. Germany denotes a penchant for soft brown, which is why the soft Colombians accounted for 40.8% and other 28.3% of soft demand. The same applies to Switzerland, where 61.8% of demand is made of soft brown.

In the case of Spain, Britain and Japan, there is a trend towards increased use of strong coffee, since their demand is characterized by a greater weight of the robust and Arabic unwashed. In contrast, in the United States and Canada has a strong tradition of consuming mixtures of different qualities of coffee, where the price has a role in establishing the proportions as each of the qualities in the mix. However, these countries have a predilection for the soft brown, so that the quality of coffee accounted for 58.2% of demand in Canada and the U.S. 61.8%, other milds highlighting the quality of their consumption.

COFFEE DEMAND

In quantitative terms, exports are equivalent to external demand. To incorporate this demand as a variable in the market studied, their relative importance should be observed in total demand.

In regard to the production of roasted coffee with caffeine content in Canada, it was observed that declined to about 10% during the last quarter of 1994, while production of decaffeinated coffee generally increased.

However, in regard to Canadian exports of coffee roasting, these rose dramatically during 1994, with the roasted coffee caffeine do a 90% greater than the previous year and decaffeinated coffee roasted more than 27% 1993 [51].

The ten main countries of destination for Canadian exports in 1996 were United States-Puerto Rico-USVI (62.94%), Russia (6.62%) and Japan (1.87%)

1.1 GREEN COFFEE

Most coffee imports to Canada are made through indirect importers, who buy coffee to large companies based in New York and London mainly.

There are very few importers who buy directly from Mexico. Those who buy now use the following mechanics:

The Canadian importer request a quote FOB U.S. border. The price is set taking into account the contributions of coffee in New York the day the order is closed. Then sent the product to the border for an independent and internationally recognized cargo verifier, to verify the quality of coffee. If the coffee meets the requirements of the importer, the exporter will receive payment upon presentation of documents requested by the importer. Initially used credit cards and once there is trust between the importer and exporter payment is made via bank transfer on presentation of documents.

Due to strict labeling regulations required by Canada, the Canadian importer usually send the tags to the Mexican exporter.

ROASTED 1.2.

In this type of coffee they sell through importers who sell primarily to the institutional market (hotels, restaurants, hospitals, etc.).. In this case also the importer claims that the Mexican export credit between 30 and 90 days.

The container varies according to the specifications of the importer. Note that it requires a container that can escape the aroma of coffee and to ensure a minimum shelf life of six months [53].

If the relative share of demand is important, take note of the following: volume and destination of exports, major foreign applicants, historical trends, total value and unit value of foreign sales. This category of demand can be applied to a locality or region, although the most common is the national [54].

In 1996, Canadian industry and coffee you had a trade deficit of $ 129.6 million. Canadian exports in 1996 were $ 93.8 million. During the period from 1990 to 1996, these exports had a compound annual growth of 19.17%.

In 1996, total imports to Canada were $ 239.6 million, representing an increase of 10.26% compared to 1995 level, which was $ 217.3 million. During the period from 1990 to 1996, total Canadian imports of tea industry and coffee had a compound annual growth of 14.53% [55].

COFFEE DEMAND

GLOBAL SUPPLY AND DEMAND FOR COFFEE

1997 – 2005 (million bags)

On the other hand, the majority of demand is aromatic long concentrated in a few U.S. and European companies that buy green coffee and then process it, mix it and sell it with higher prices. This situation was accentuated by the 1989 crisis because only the biggest companies could successfully confront this stage, while many buyers and small and medium roasters were forced to close their businesses.

1.3 First world consumers.

The three main buyer countries (USA, Germany and France) have shown, for coffee years 1980/81 to 1988/89, 54% of global consumption. If these nations plus Japan and Italy consumption for the years 1989/90 to 1994/95 accounted for over 70% of global imports.

In this section we describe the situation in which poles are the three most important global demand for grain. Thus, we begin with the world’s biggest: the U.S., analyzing its trend in the annual loss per capita consumption, then will examine the development of some member countries of the European Union and finally describe what the demand in Japan due to which is the nation with the highest growth rate in consumption in recent years, it is expected to continue growing.

1.4 UNITED STATES.

The U.S. market is the first in the world in terms of demand aromatic consumption for 1997 of 17’550, 000 Qq. of 60 Kilos [3]. This situation within the international market comes about the 50′s, with its peak in 1962 with 24, 519.386 of Qq. And then decreased slowly (in 1981 16’000, 000 and 1994 17’180, 000), although to date remains the priority in the world. Here is also noteworthy that this country is a major re-exporter of aromatic and procesado.La downward trend in demand in the U.S. is seen even better taking into account the consumption per capita per day because the annual figures of total imports constant, explicable by population growth, consumption in the U.S. had its peak year in 1962, with 3.12 cups / day / person. In 1980, consumption was about 2 cups, mugs in 1985 from 1.9 in 1988 to 1.67 cups. This decrease is due to the effect of intensive competition from other beverages along with Anticafe campaigns in the field of health.

To illustrate this, suffice to make a comparison between drinking coffee and soda United States between 1970 and 2000. Thus, in the late seventies coffee consumption was 136.27 liters annually per capita compared to 87.06 liters of soda, for the year 2000, these figures have changed dramatically, taking a coffee consumption of 64.35 gallons of coffee per year compared to 200.62 liters of soda in the same period [5].

The composition of imports has also changed, the participation of Colombian soft and unwashed (Brazil) decreased, while the other soft (from Mexico and Central America) and robusta (Southeast Asia), rose. Its main suppliers in 1996 were Mexico (21% of imports, worth $ 473 million), Colombia (19% and $ 421 million), Guatemala (11% and $ 248 million), Brazil (11% and $ 245 million ), Indonesia (5% to $ 120 million), Vietnam (5% and $ 108 million) and the rest of the world with 28% profit by 622 million. By 1997, with an annual consumption of 3.72 kilograms of coffee per capita, Americans are among the developed countries consume less coffee [6].

1.5 THE EUROPEAN UNION.

The European Union countries, taken together, have become the last three decades in the major media of global consumption, with more than 40% of imports. The total coffee consumption in Europe has grown at an average rate of 3.8% per year in the period 1986 to 1991, being the major importing countries Germany, France and Italy. For its part, the United Kingdom, has also begun to increase demand for coffee mainly because young people are replacing the consumption of tea.

Like what happens in the U.S., the current consumption levels have declined in several European countries, mostly due to high retail prices, to lower income consumers, the changing preferences of young people on exceptionally hot summers and drinks. These countries include Germany, Belgium / Luxembourg, Denmark, France and the Netherlands.

In the October 1995 Report of FO’s Coffee Licht was estimated that the total consumption in Western Europe could have fallen by more than 2 million bags in 1994/95, equivalent to more than 5% compared with 1993/94, and consumption is expected to recover hard until the end of the 1990s

Nonetheless, we recognize that Germany is the largest consumer of the region and second in the world, performing 15% of world imports. Mexico imports mostly mild type coffees (Colombia, etc.) and Arabic unwashed, with the peculiarity that re-exports, after roasting, about a quarter of its imports, becoming more than 3 million bags in the sixth largest exporter in the world.

Germanic demand has increased with the addition of the former German Democratic Republic, which has strengthened the trend of growth of the same, because during the period from 1980/81 to 1988/89 had an Annual Average Growth Rate the order of 3.38%, while France experienced in that period a TCMA 0.5%, showing a virtual stagnation of consumption.

1.6 JAPAN.

In contrast to the previous two examples, Japan offers a counter trend in the consumption of the aromatic, where demand was negligible 20 years ago (200.000 Qq. Per year), there was a progression of 5% per year, currently holding fifth place [9] of the importing countries, although others place him as the third largest importer after the United States and Germany, surpassing even to France and Italy [10]. The demand for this country is composed mostly of Arabic coffee unwashed and robust, but also small-scale coffee imported into other soft type.

Only in September 1998, Japan imported 512.456 sacks, which is more widely to imports of the same month a year earlier, which were 387.099. Thus, by 1998 they had imported a total of 4’302, 000 bags. Its total imports in 1997 was 5’476, 000 bags. The main suppliers in order of importance are Brazil, Colombia and Indonesia [.

1.7 USE IN PRODUCING COUNTRIES.

In this section we will explain what the actors involved in domestic demand in producer countries, as well as recent trends in consumption observed in some of these countries, among which Brazil, second largest consumer of the grain. The reason for taking them into account is that, together, have made significant consumption tend to increase due to the intensification of campaigns to promote the consumption of the aromatic. As we shall see, the increase in domestic consumption can be beneficial to the economy of the producing countries themselves.

In producing countries the market is set not only by final domestic demand (industrial or consumer terminal), but is integrated and is explained by the demands that are generated in different steps of the national marketing network, consisting production facilities, storage or industrialization of grain to get to the root or exporters of green coffee roasting industry, decaf and solubilizer, where the final trade is selling as an input or as a ready to develop drinking aromatic .

In the case of Brazil, the total consumption for the domestic market for 1998/99 is forecast at 12.5 million bags, including 500,000 bags of soluble coffee, up almost 9% compared to 1997/98. Probably the biggest production expected to lead to a decrease in retail price and may promote an increase in domestic consumption, which registered a lower volume in 1997/98 to 11.5 million bags to 500,000 bags for soluble coffee. The decrease in consumption was due to the retail coffee prices were higher [15].

For its part, it is estimated that domestic consumption of all producing countries has increased from about 20.5 million bags in 1990/91 to around 21.5 million bags in 1994/95. Domestic consumption in producing countries of Asia has, in general, considerable potential for growth [16]. During the 1996/97 cycle, producing member countries of the International Coffee Organization (ICO) consumed a total of 23.8 million bags, of which Brazil consumed 46.6%, Indonesia 7.5%, 6.7% Colombia and Mexico 4.5%.

Although Indonesia is a major producer of coffee, per capita consumption is relatively small. In 1996/97, the annual consumption was estimated at 629 grams per capita. For 1997/98 is forecast to be a slight decrease since the economic crisis continues to hit Indonesia, which had a dramatic impact on consumer prices, including all food and drink. However, total coffee consumption is estimated to be up 5%, ie from 2.09 million bags in relation to levels of previous years from 2.08 million bags.

Thus, encouraging the consumption of the population of the producing countries could be a proper coffee policy in the context of the global crisis that exists, especially if accompanied by a plan that is aimed at promoting the consumption of 1) coffee, and 2) small coffee producers.

1.8 ANALYSIS OF THE CLAIM.

According to the type of property that addresses, you can identify current and future claimants, the way they exercise their demand and under what conditions, can be considered a potential demand (expect) that becomes effective demand or real.

Can be categorized to the applicants attention to their income, their consumption habits and preferences, seasonality and the factors influencing it. When typifies the intermediate applicants also should identify their characteristics, among which can be logged: location, size, timing, preferences, etc.

People have different reasons for deciding to drink or coffee. It may be necessary to divide the total potential market in many sectors, so-called target markets, each of which require a different promotional message or even a product or distribution channel differential.

In highly aggregated terms, a first approximation to the demand is obtained from apparent consumption (Ca), it is determined as the sum of production and imports, less exports within a defined, more applicable to the domestic market, the National Consumer Apparent (CNA), regional or local.

1.9 FACTORS AFFECTING THE DEMAND.

The analysis of these factors can gauge the actual demand, which is intended to demonstrate the extent and location of purchasers of the product studied.

The factors that mostly affect the demand to be analyzed are: population size, habits and consumer preferences, prices and income strata. The management of these factors can set the current state of demand, explaining its historical background and determine the basis of the likely demand in the future.

Main aspects that determine demand.

1. Quality and freshness. 2. Variety. 3. Convenience. 4. Nutritional Values. 5. Security. 6. environmental protection. 7. Price.

It is important to know the reactions of consumers from product presentation, features, the advantages arising from their use and trade promotions, as this information is valuable when it is projected demand for goods consumption [9].

When you know the size, population growth and consumption patterns, will be added to the analysis of family income levels, in order to meet the economic profile that has the population and the distribution of household expenditure. Family income levels can be obtained from the censuses of population, income-expenditure surveys or other sources to report information about [10].

Canada is one of the richest countries in the world. In 1997, gross domestic product, ie the value of all goods and services produced in the country, was 855 billion dollars. Canada has a workforce of about 16 million and a per capita income highest in the world. Either way, compared to other industrial economies, the Canadian economy is still small. The U.S. economy is almost 14 times larger. Despite the relative small size of its economy, Canada has been able to give its citizens one of the highest living standards in the world. This is mainly the result of high productivity of the country [11].

Across Canada more than 55% of the total population above 30 years of age [12].

In 1994 Canada imported 118.955 metric tons of coffee, resulting in consumption of about 4.5 kg per person in the country [13].

1.9.1 ECONOMIC

There are no restrictions on the movement of funds in or outside Canada. Banks, corporations and individuals can do business in foreign currencies or arrange payments in any currency they choose. There are no requirements to trade (contertrade).

If we should consider three business areas, Quebec and the Atlantic provinces could include the first, with a distributor in Montreal, Ontario in the second, with a dealer in Toronto, and the four western provinces and the third, with a dealer in Vancouver.

Elasticity of demand in terms of prices.

Demand changes in response to a 1% change in prices are represented by negative signs, indicating that these increases lead to reductions in demand or otherwise, that a fall in prices causes an increase in demand. For example, the figure for Canada, -0.13, indicates that the retail price of coffee increased by 1%, demand would decrease by 0.13%. Since the 1% increase in price does not reflect the 1% decline in demand, it follows that the demand for coffee in Canada is relatively inelastic with respect to prices. If the value of the elasticity is greater than 1% (for a price increase or decrease of 1%), it seems that the demand was quite elastic.

Finally, the analysis is added to the price factor and its impact on the demand identified because the price can affect the volume of goods consumed. This statement is clear in stating that the family budget is allocated to demand an amount well studied. If the price is altered, the defendants volumes can also be altered, for which applies the technique known as price elasticity of demand.

The knowledge of the coefficient of price elasticity of demand can achieve the quantification of the extent to which you can change the amount of the claim and, consequently, the value of sales in the event that there is a change in the price

* SOCIAL

Another determinant of demand concerns habits. Although very large population, the habits determine the extent of market demand analysis. The habits of a population are a reflection of consumer characteristics associated with income level, ie high-income people have different habits to those of low income. Be warned though, the population may have high income, but not have a habit of consumption. The new product, therefore, must take care of this aspect

Canada is a country with a population with declining fertility rate, the rate of immigration is not traditionally Caucasian and has a young population composition.

As for the style of life, going from a traditional family company with a single-person households or couples where both work normally and the time available is limited, so families need food to be quick to prepare in some products have a greater degree of processing and demand particularly fruits and vegetables [40].

The type of food preferred by the consumer can affect the amount of coffee you drink. The coffee and drink it out of habit or taste, seems to accompany certain foods better than others. This could be the reason that coffee tends to be less popular in restaurants that serve oriental meals in restaurants specializing in American and European dishes.

* ELASTICITY OF DEMAND IN TERMS OF REVENUE.

Demand more responsive to changes in income than to changes in prices. For example, the elasticity with respect to income in Germany is estimated at nearly unity, ie, a 1% increase in income leads to an increase in demand of nearly 1%. In the case of Canada, the same 1% increase in income means 0.28% increase in grain consumption.

The income elasticity to analyze whether the increase in income of the population derives most studied product consumption, and therefore, if future increases are expected income of the population, demand will behave in future study .

It is also useful for the analysis of demand by income strata because each stratum reporting a different use of the product studied. This indicator measures how the level of income affects the behavior of the current and future expectations

In 1995, the average family income was $ 54.161 U.S. dollars, representing a slight increase over last years average of $ 52.858. Family income in any way is still below the peak reached in 1989. Currently, the average family income level is the same as was presented in 1980. In contrast, the average family income per capita in 1995 was 8.1% higher than in 1980, although this increase was due to the reduction of family size, and not to an increase in income.

As with investments, only a small number of industries are the real force behind the GDP. Taken together, only ten major 7industrias contributed more than half (54.2 percent) of total revenue in production (output). The communications sector, wholesale and business services were most important, with average gains of almost 10%, representing one third of the expansion of the economy. There are five branches of production of durable goods round out the list (furniture, transportation equipment, machinery, electronics and metal fabrication) as well as recreational facilities and oil and gas industry.

In 1981 unemployment reached about 13% and about 11% in 1992. Given the general weakness of the economy, inflation was below 2% measured in 1993. In 1997, the average was only 1.6%. Inflation, which once seemed a permanent part of the Canadian economic landscape is no longer a determinant of economic policy.

The Canadian dollar was allowed to float on international currency markets since the October 2, 1950, having been set at various levels since 1939. The decision of a managed float of the currency reflected the significant flows of capital within, associated with an increase in commodity prices, which led to an increased risk of high domestic inflation, making the fixed exchange rate unsustainable [29 ].

In order to receive a preferential tariff under NAFTA, we need a written statement from the exporter stating that the goods will be imported to meet the specific rule of origin for that product. The certificate must be signed by an officer vested with legal authority to sign in support of the exporter, and must be sent directly to the importer. The certificate must accompany the shipment.

The philosophy of the Canadian buyers is to have long-term reliable suppliers. The prices paid by Canadian importer are not above the prices that can be obtained through brokers located in the markets of London or New York. It is noteworthy that there is a strong loyalty to regular and reliable suppliers.

The negotiations for the purchase of coffee are made through brokers, who in turn sell the coffee to their customers by instructing the exporter to ship the product directly to the ultimate purchaser.

Canada is the largest foreign market for U.S. franchises. A large proportion of franchisees are engaged in retailing non-food products, restaurants, automotive products and services. It is expected that stable growth within the Canadian market these franchises continue.

1.11 ACTUAL DEMAND.

The historical evolution of the demand is analyzed statistical series, whose length depends on the availability and reliability of the information of the products under study. We recommend the analysis of historical series of 5 to 10 years, although this depends on the time you have the product on the market.

It is the purpose of historical analysis of demand behavior have an idea of its evolution, in order to predict their future behavior with a reasonable margin of safety. Know or not know the preferences of consumers and explain how it affects the demand for other variables such as market prices, the level of incomes, the presence of substitutes, etc..

The historical pattern of demand can be seen in the apparent consumption and consumption per capita, as both allow analyze whether the application is modified by population growth or changes in consumption per capita [56].

As for the food and beverage market, the products sold under private label in supermarkets now account for about 15% of the market and it is estimated that by 2000, they will constitute 40% of it. This is a category where the competition is very strong, so that the tendency of the strings in the future will increasingly sell their own brand, with leading commercial brands on the market [57].

About 95% of all exports of coffee as green beans. Processed coffee exports have not exceeded 5% of world exports by producing countries made in any year since 1980, and the greater proportion of that 5% is soluble coffee. Roasted coffee exports comprise an average of only 0.2% of exports of coffee producing countries [58].

Per capita consumption has not changed dramatically in recent years and is still 4.2 to 4.5 kilograms a year. However, some observers have detected encouraging signs of increasing, albeit small.

Instant coffee comprises a much larger market share in Canada (approximately 50%) than in the U.S. (around 23%). The percentages are based on liquid coffee cups consumed [60].

Gross imports of coffee made by Canada have fluctuated around the 2’100, 000 sacks since 1987. Approximately 80% of this figure is composed of green coffee, mainly from Brazil, Colombia, Guatemala, Mexico and El Salvador. The washed Arabica accounts for 60% of imports, in unwashed arabica and robusta 33% 7%.

Most roasted coffee is blended with coffees from various countries, and in general is this preference for certain mixtures which hinders the entrance of the producer self-employed in the retail market.

Exports of roasted coffee producing countries of the CIC members have declined in recent years, so that the average export now stands at 228.000 bags a year only. Of these, 178.000 sacks were exports of other mild coffees, primarily from Mexico (to the United States) and Ecuador. To make the projection of demand, knowledge of its historical evolution. You must have a reasonable explanation to justify this change and approach the evidence or probable future change in circumstances which have arisen. A common practice in the demand projection is to continue in a linear historical trend, a technique that will be correct provided that the conditions observed in the past, the presumption will be perceived in the future. Otherwise, it is best to affect this trend is assumed circumstances will arise.

REFERENCES

Aurora C. Martinez Morales, op. cit., p. 10

Owned and Jorge Betancourt Dario Lopez Arevalo, op. cit., p. 20

FOLicht’s, International Coffee Report, London, January 1999, No. 14, P. 200

Maria Cristina Renard, op. cit., p. 66

Figures taken from Oxfam, Poverty in your cup, op. cit., p. 19

Figures taken from Best Investments: Daily Coffee Newsletter “in

UNCTAD / WTO – ITC, Coffee: An Exporter’s Guide – Supplement, op. cit., pp. 28-29

 

Student:

Junior Delgado Edgar Lecca

* 2006 *

 

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