Wake up and smell the coffee!

Submitted By: XXXXX

Date of Submission: 2008 5-05
Teachers Name: XXXXX
Course Code: XXXXXX
Background Info

Coffee is one of the world’s most popular drinks of all time. It has become the
“worlds most widely take legal drug.” Coffee-fiends around the world drink about
“500 billion cups of coffee a years are consumer around the world, half of them at
breakfast.” Coffee was not always such an internationally renowned drink. There
are many legends on the discovery of coffee. The most popular and universal
legend, “said the bean was discovered by the frisky goats of an Ethiopian
goatherd called Kaldi.” (Coffee Culture)

The middle-east has its own beliefs on the origin of the coffee bean. Another
legend is about how coffee’s name originated from, “An Arabian was banished to
the desert with his followers to die of starvation. In desperation, Omar had his
friends boil and eat the fruit from an unknown plant. Not only did the broth save
the exiles, but their survival was taken as a religious sign by the residents of the
nearest town, Mocha. The plant and its beverage were named Mocha to honor
this event.” (The History of Coffee)

Religion is also tied to the origin of the coffee bean. “Another legend has it that
the Prophet Mohammed had forbidden his followers to consume beverages of
alcohol. It was most appropriate, then, that he should lead his people to a
suitable substitute. This was accomplished when Mohammed lay ill on his sick
bed and the Archangel Gabriel came to him with a cup of hot, steaming, dark
roast. The Prophet took a sip and was immediately restored to health and
vitality.” (Coffee History, 2006)

There are also some “who credit the first coffee reports to Homer in the Odyssey.
Homer describes an instance where Helena, daughter of Zeus, mixes a drink in a
bowl ‘which had the power of robbing grief and anger of their sting and banishing
all painful memories.’ Presumably, the Gods sat around Mount Olympus sipping
espresso.” (Coffee History, 2006)

With respect to these legends, which have become the cultural identity for many
people of Africa and the Middle-East, today we can accurately hypothesis where
coffee originated. There is “botanical evidence indicates that the coffee plant
‘Coffea Arabica’ originated on the plateaus of central Ethiopia where it still grows
wild.” (Coffee History) Originally, coffee was not used as a drink like today. The
Ethiopians warriors would eat them as a way to boost their energy for battle.
“They would wrap the beans in animal fat as their only source of nutrition while
on raiding parties.” (The History of Coffee) This use of coffee is rarly used today
in the modern world.

“Arabs were responsible for the spread of coffee.” (Coffee History, 2006) The
Arabs had brought Coffee into the Arabian Peninsula, where Islamic philosopher,
Avicenna described coffee as a drink that "fortifies the members, it cleans the
skin, and dries up the humidities that are under it, and gives an excellent smell to
all the body." Coffee was a tremendous success throughout the Middle-East. “By
the 13th Century Arabian Qahveh (Coffee) houses serving the drink had become
very popular.” (Coffee History, 2004) Arabian plantation owners and traders
made great efforts to protect their lucrative monopoly. (Coffee History, 2006)
The Arabs kept a tight position on trade of coffee, only allowing roasted coffee
from leaving Arab nations.

Eventually The Arabs lost their position in the coffee trade to the Ottomans, who
conquered the Middle-East. The Turks were in a position to control the worldwide
“trade in coffee throughout most of the 15th and 16th century.” The Ottomans
tried to prevent the spread of Coffee so they could maintain a monopoly but
eventually the bean spread towards Europe. “Reports of coffee being smuggled
across the Alps start around 1600.” (Coffee History, 2006)

At first, the Europeans believed Coffee was an evil drink, but once the Pope
baptized the drink, they brought coffee into the world economy and made it one
of the largest commodities in the world. Coffee also entered European culture
and tradition, with Coffee Houses sprawling across the continent.

European Coffee Houses

Coffee was relatively unknown in the western world until “in 1615, the first
shipment of coffee arrived in Europe at Venice from Turkey. Coffee houses
quickly spread through Italy and Vienna, and soon most of Europe.” (Coffee
History, 2004) The drink was an instant success in Europe. People of Europe
were quickly addicted the caffeinated drink. The first European coffee house in a
traditional sense, opened in England in 1637. (Coffee History, 2006)

Coffee Houses in Europe “have been centers of political and philosophical

activity.” They have been known a place where gentlemen could meet and
discuss politics, social issues and religion freely. At first coffee houses were seen
as a threat to the European kings, they were banned by many countries.
Eventually, people were too addicted to coffee to let it go away, the kings
realized that they also could profit from the trade in coffee and placed a tax on
the sale of coffee. “At the height of their popularity, more than 2,000
coffeehouses flourished in England.” Throughout Europe, many people gathered
and gossiped “over coffee to talk about Goethe or Beethoven, as well as the
latest births, marriages and scandals.” (Coffee History, 2006)

Coffee did not only change the drinking habits of Europeans but also changed
how they think socially and politically. The Europeans also created different
styles of drinks and habits for coffee drinkers. “Espresso came from Neapolitan
impatience; they couldn't wait for coffee to be brewed.” Famous artists and social
thinkers were addicted to the aromatic coffee. “Balzac is reputed to have drunk
40 cups of coffee a day.” (Coffee Culture) Coffee helped Balzac keep his work
habits which kept him asleep during the day and writing by night.
As political discussions grew more and more radically, so did the situation of
Europe. “The French Revolution was planned in coffeehouses.” (Coffee Culture)
The fear of the Coffee House had been a real threat to the feudal system and the
monarchy of Europe. Many of the proletarian class were exposed to radical ideas
and free thinking which would become the basis of liberal democracy across
Europe.

The Europeans also brought Coffee Houses to the ‘New World,’ “New York and
other important towns like Boston introduced the popular institution.” There were
many differences between the European and American Coffee Houses. “The
main difference between European coffee houses of old and American ones of
that time is that radical elements flourished in the European houses and
conservative elements thrived in American ones.” (Coffee History, 2004)

Today the Coffee is still thriving in Europe, it has become almost like a cultural
identity for the Italians. “Espresso is to Italy what champagne is to France”
(Coffee Consumption Report) The Italian style of espresso and the coffee houses
have been successful even today in the United States, which Starbucks
operates.

Conditions of the Coffee Farmer

Coffee plantations originally were slave operated and owned by European

Aristocracy. The demand for coffee grew so much that major European powers
were scrambling to meet the demand of their citizens. The profits for the
exporters were enormous; the ‘New World’ had brought a new opportunity for
expansion. “The French established the slave-run plantations in the colonized
islands.” This brought a new supply for the Europeans to meet their demands,
and not remain dependant on the Ottomans for Coffee. “By 1790, half of all the
coffee in the world was grown in Haiti by African slaves.” (Coffee Culture)

Like their European counter-parts, the oppressed classes of the ‘New World’
Colonies’ rose-up and took up arms against the oppressors. “In 1791 the slaves
of Haiti rose up and destroyed the coffee and sugar plantations; the revolt lasted
12 years and defeated Napoleon's troops.” New plantations sprung up
throughout Latin America, in order to maintain profits and expansion more slaves
would be needed to work. It is said that “Coffee helped foster the slave trade”
throughout the world. Brazil became a new power house of coffee, becoming one
of the largest coffee producers in the world. But this advancement came with the
blood and sweat of the common slave. “By 1816 there were 1 million slaves in
Brazil, comprising 1/3 of the population, more than half of them working on coffee
plantations from dawn to sunset, eating only once a day” (Coffee Culture)
“America’s domestic North-South sectional conflict shaped its international
commercial and diplomatic policy towards the former colony, leading the federal
government to encourage coffee importation from slave-rich Brazil rather than
from emancipated and free Haiti.” (Why Do Americans Drink Coffee: The Boston
Tea Party or Brazilian Slavery)

Coffee brought political and social changes of the societies of western and the
third world nations, in the form of democracy and freedom. It did not change the
economic situation of the producer of coffee. “Many coffee workers are only
marginally better off than their enslaved ancestors.” This was due to the unfair
trade practises of western nations and corporations. “Only one cent of the price
of a $2 cup of coffee goes to the grower.” (Coffee Culture)

Today coffee farmers are still living in poverty. “It costs a full day's wages for
most coffee farmers to buy a cappuccino.” Even more surprising is that “most
coffee farmers have never tasted their own coffee.” (Coffee Culture) “The sad
reality for many workers on coffee plantations in developing countries is that they
are commonly confronted with low wages and poor working conditions. Workers
are often unable to afford the basics in life and are forced to work in unsanitary
conditions, attempting to fulfill unreasonable daily quotas. To make matters
worse, in an effort to meet their quotas so that they can feed and clothe their
families, workers will often enlist the aid of their children, which puts them in the
plantation instead of school and further perpetuates the cycle of poverty.” (Wake-
Up Call – The Coffee Industry) “The gap between the prices paid by North
American consumers and those earned by the growers abroad were –and
continue to be-- vast just as are the difference in the life styles on either end of
the coffee commodity chain from growers to drinkers.” (Why Do Americans Drink
Coffee: The Boston Tea Party or Brazilian Slavery)

Many programs were created in order to fight this cycle of poverty by

international bodies. The International Coffee Agreement was successful in
keeping the price of coffee stable and provided farmers with a living wage. “The
success of the International Coffee Agreements was owed in part to the United
States, who helped to enforce the quota system in an effort to prevent
communism from destabilizing poor Latin American countries. But when the U.S.
pulled out from the agreement in 1989, coffee prices plummeted.” (Black Gold)

The main reason today that Coffee farmers are living in poverty while their
exporters are thriving could be attributed to the unfair trade practises by US
corporations, who are manipulating the prices they pay for the coffee.

The Four Main MNC’s

“The world coffee market is dominated by four multinational corporations: Kraft

General Foods (owner of Maxwell House and other brands), Nestle, Proctor &
Gamble (owner of Folgers and other brands) and Sara Lee (owner of Chock Full
O’Nuts and Hills Brothers).” These corporations have control over major
percentage of the worlds coffee market. Thus have the ability to “control the price
of coffee.” (Black Gold)

“According to Responsible Shopper, Kraft, Procter and Gamble, and Nestle

control over 60% of the total green coffee bean volume. Local and small-scale
farmers are in no position to compete with the virtually limitless resources of
these companies, and are often forced to shut down their operations or plunge
further into crippling debt” (Wake-Up Call – The Coffee Industry).

These four corporations try to lower the price of the coffee they purchase, by “the
exploitation of market power by roasters and retailers.” This price control
devastates the farmers. “By 2001, coffee prices had fallen to their lowest levels
ever, totaling less than one third of their 1960 levels.” (Black Gold) This price
decrease severely affects the farmer, but positively affects the company. The
Company is able to sell the coffee at a higher profit margin then before.

The development of the third world countries are also influenced by these four
companies. “Developing countries find themselves trapped in a situation where
corporate market control and lack of investment keeps them as mere raw
commodity producers and exporters of the green beans, and are unable to
compete against the big coffee companies in the processed coffee market.”
(Black Gold) Coffee prices have a major impact on developing nations. “Coffee
provides a livelihood for 25 million people; 100 million more depend on it for
survival.” (Coffee Culture)

Global Marketing of Coffee & Specialty Coffee

The marketing strategies of Coffee are different bases on the companies selling
it. The companies tried to introduce coffee into the North-American lifestyle. “The
coffee-break was an advertising ploy to sell more coffee.” (Coffee Culture) The
Coffee merchants would make more profit with more volume of Coffee sold,
because their margins were extremely high. At first, Coffee merchants
recommended to increase production of low grade Coffee beans, allowing a glut
to form in the market and lower the value, this would raise the profit margins of
the Companies. More and more countries became Coffee producers which
results in the coffee prices to drop tremendously worldwide.

In order to face the global competition, some farmers have started to grow
Specialty Coffee. This coffee has the highest-quality green coffee beans roasted
to their greatest flavor potential by true craftspeople and then properly brewed to
well-established standards. Specialty coffee is not defined by a brewing method,
such as the use of an espresso machine. (What’s Special About Specialty
Coffee?) There is a lot of room for growth in the Coffee market with“only about
20% of harvested coffee beans are considered to be premium bean of the
highest quality.” (Coffee Consumption Report)
“The definition of specialty coffee begins at the origin of coffee, the planting of a
particular varietal into a particular growing region of the world. However, the
definition cannot stop there. The concept of specialty includes the care given to
the plant through harvest and preparation for export.” Specialty Coffee gives the
farmers a better share and value of their product. The farmers put their best effort
to please the consumer and the exporter, giving the coffee a better value and
selling price. There are many ways Specialty Coffee differs from average coffee.
“Specialty coffee in the green bean phase can be defined as a coffee that has no
defects and has a distinctive character in the cup. It is not only that the coffee
doesn't taste bad; to be considered specialty it must be notably good.” (What’s
Special About Specialty Coffee?)

“The next phase is roasting, and there is a lot of opportunity here to continually
define specialty. Every coffee in combination with every roaster has a potential to
express itself in a way that will be most satisfying for every customer. Bringing
out a coffee's distinctive character is the roastmaster's challenge. If he comes
close to succeeding then it is still specialty if it started out in the green form as
specialty. In roasted coffee, most agree that freshness is a part of the definition
for specialty. If the coffee is not highly aromatic then it no longer deserves to be
called ‘specialty.’ Then there is the brewing phase. There are many different
methods, and all are capable of brewing beverages that can qualify as specialty
coffee, but only if done correctly. The right ratio of coffee to water, the right grind
suited to the method and the coffee's physical characteristics, the proper water
temperature and contact time, a good preparation of the coffee "bed" or "cake"
are all fundamentals that must be satisfied to produce a specialty cup of coffee.”
(What’s Special About Specialty Coffee?) Specialty Coffee is also different from
average coffee by the way it is served ot the customer. “Baristas are the
bartenders of the specialty coffee industry” (Coffee Culture)

Global Consumer Demand

“Coffee is the second-most-traded legal commodity on earth.” (Coffee Culture)

There is a massive demand for coffee around the world. Billions of cups of coffee
are sipped a day. The United States is the largest importer of Coffee in the world.
There are approximately “108,000,000 coffee consumers” in the United States.
(Coffee Consumption Statistics in the United States) Global Consumer demand
is based on the price of coffee. “When coffee prices show big increases,
consumers tend to reduce their consumption commensurately.” (Coffee Futures
and Options)

Overall, the consumption of Coffee has increased around the world. However,
the per capita basis it has decreased. “In the United States, over the last 30
years, per capita coffee consumption has declined considerably and limited
population growth has led total consumption to even out over the past decade.”
(Coffee Futures and Options) But Coffee is still an important part of the American
life-style. Even today, “75% of all the caffeine consumed in the United States.”
(Coffee Consumption Report)

“The downward trend in the United States' per capita consumption of coffee has
been more than made up for by rising European demand. While the United
States coffee imports have dropped from 2/3 of total world coffee imports in the
late 1940s to 1/4 of total world imports in recent years, Europe's coffee imports
have risen sharply. Therefore, consumption trends in Europe will be at least as
important to the analysis of future demands for coffee as like trends in the United
States.” (Coffee Futures and Options)

Fair Trade

Coffee farmers around the world are fighting for a fair value of their products.
This movement is called the Fair Trade. “This global movement - based on a
commitment to justice and human rights - has begun offering millions of
consumers a choice: coffee produced under sweatshop conditions and starvation
wages, or a product based on the principles of Fair Trade, a product which offers
coffee farmers a guaranteed minimum price per pound, paid directly to organized
farmer cooperatives, not to middlemen.” (Fair Trade Coffee)

“Coffee was the first commodity to be labeled as "Fair Trade Certified" in the
Netherlands under the "Max Havelaar" label in 1988.” It was introduced to allow
the consumers be informed of the Fair Trade product. “This seal was offered to
mainstream coffee roasters who were willing to trade even a small portion of their
total volume on fair trade terms. This exposed the idea of Fair Trade to millions of
consumers in the supermarkets” (Fair Trade Coffee, 2004)

Fair Trade Coffee has become successful in the marketplace. “Sales of Fair
Trade coffee have grown steadily from 11,663.8 metric tons in 1998 to 33,991
metric tons in 2005.This may seem like great news for coffee producers amidst
the coffee crisis but unfortunately the amount of coffee traded under the Fair
Trade label is miniscule in comparison to the total coffee trade - less than
0.05%.” (Fair Trade Coffee, 2004)

There are many ways fair trade coffee is different from average coffee:
• Fair Trade certified coffee is bought directly from farmers' cooperatives,
eliminating exploitation by multinational corporations and intermediaries.

• Cooperatives must be democratically organized and use collective

strength to set up strong communities. Community development takes
place in the areas of transportation, education, health care, and
environmental protection.
• Cooperatives must use environmentally sustainable methods of
production. This protects the ecological integrity of the land and
contributes to a quality product.

• A minimum of $3.90 per kilo is paid to members of cooperatives to help

reach the standards set for Fair Trade. The average price for a kilo of non-
Fair Trade coffee is 44 cents, currently below the cost of production.
Cooperatives have long-term agreements with their purchasers and can
receive fair loans to help them get up and going. (Fair Trade Coffee, 2004)

Future of Coffee

There is a positive future for the Coffee Industry; Coffee revitalizes the mind and
body of Coffee-addicts around the world. There will always be a demand for
coffee in the modern world. Today there is a major shift in coffee demand around
the world. “There is some evidence to suggest that changing American lifestyles
have enabled soft drinks to compete with coffee as a social drink.” (Coffee
Futures and Options) Europe is again brewing coffee as it once did before, and
the Americans are swiching towards soft drinks and energy drinks.

Product quality, production costs and relations with international partners have
been coffee trade parameters for years. After more than three years of over-
supply and low prices, however, competition has sharpened. For many producers
and exporters, survival in the industry depends entirely on complying with market
demands for even higher quality; consistency (same quality for repeat deliveries);
traceability of origin; transparency (economic, social and environmental); ability
to tailor delivery on demand; and capacity for long-term partnerships directly
between producer and roaster. Politicians, advocacy groups, and non-
governmental and international organizations are grappling with potential
solutions. Unfortunately, many of them come as bitter news to already-desperate
producers and their families. (Bitter or Better Future for Coffee Producers?)

Coffee producers have devised a strategy for future marketing and producing
coffee.

• Promote coffee consumption in producing countries and emerging

markets.
• Support specialty coffee producers to secure market premiums.
• Encourage diversification for marginal coffee producers without the
potential to supply “specialty” or niche markets. (Bitter or Better Future for
Coffee Producers?)

“The International Coffee Organization (ICO) and others have initiated generic
promotion programs, including in new and potential markets such as China and
the Russian Federation, where consumption per capita is very low. Consumption
is also low in all major coffee-producing countries with a few exceptions, such as
Brazil and Ethiopia. Promotion campaigns can be very successful, as in Brazil,
which now consumes almost 40% of its production. However, they are also
costly and time-consuming and can take a long time to show results.” (Bitter or
Better Future for Coffee Producers?)

“Organic certified and fair-trade certified coffees are high-profile examples of

specialty coffees, yet combined they make up just under 1% of the market.
Production and sale are growing, but even if doubled or tripled in a number of
years from now, these niches will still be relatively small.” (Bitter or Better Future
for Coffee Producers?) Production of Coffee will differ from today in the future,
The ICO is trying ot implement protocals that will restrict lower blends of coffee
from the market and will promote higher quality of blends. The end result would
be a better cup of coffee for the consumer and higher value for the farmer and
the exporter.
 Bibliography

The History of Coffee. Retrieved May 2, 2008,

http://www.telusplanet.net/public/coffee/history.htm
Coffee Culture. Retrieved April 29, 2008,
http://blackcoffeemovie.com/coffeeculture.html

Coffee History (2004), Retrieved May 2, 2008,

http://www.decentcoffee.com/CoffeeHistory.html

Coffee History (2006), Retrieved May 1, 2008,

http://humboldtcoffee.com/History.htm

Black Gold, Retrieved April 29, 2008,

http://www.pbs.org/independentlens/blackgold/economics.html

What’s Special About Specialty Coffee? Retrieved April 29, 2008,

http://www.scaa.org/pdfs/Press-What-is-Specialty-Coffee.pdf
Wake-Up Call – The Coffee Industry, Retrieved April 29, 2008
http://www.acdi-cida.gc.ca/CIDAWEB/acdicida.nsf/En/NIC-42713435-N2F?
OpenDocument
Fair Trade Coffee, Retrieved April 29, 2008
http://www.uberculture.org/fair_trade_coffee

Fair Trade Coffee (2005), Retrieved April 29, 2008

http://www.fairtradetoronto.com/products/coffee.html

Coffee Consumption Statistics in the United States, Retrieved April 29, 2008
http://www.coffeeresearch.org/market/usa.htm

Why Do Americans Drink Coffee: The Boston Tea Party or Brazilian Slavery?,
Retrieved April 29, 2008
http://www.drclas.harvard.edu/files/Why%20We%20Drink%20Coffee.doc

Coffee Futures and Options. (2007). Retrieved April 28, 2008

http://www.infinitytrading.com/coffee_futures_options.html

Coffee Consumption Report (2008). Retrieved April 27. 2008

http://www.top100espresso.com/coffee_consumption_statistics_report.html

Bitter or Better Future for Coffee Producers? (2004). Retrieved April 27, 2008,
http://www.tradeforum.org/news/fullstory.php/aid/675/Bitter_or_Better_Future_for
_Coffee_Producers_.html