COFFEE 26 Case Study –

Harvard Case
Format
 THE
PROBLEM
The Coffee 2016 case study revolves around the coffee supply chain and
explores ways to equalize returns across various stakeholders. The case
draws a parallel between coffee and wine, highlighting how both beverages
encourage connoisseurship. However, only wine growers reap a premium
for their efforts to ensure quality.

The current coffee market faces several challenges. Coffee growers

worldwide often work at a barely subsistence level, with one bad harvest or
a sudden decline in commodity prices pushing them below subsistence.
Specialty coffee, which represents a small portion of the overall market,
has made strides in transforming the industry. Third-wave roasters have
built cafes and brands around origin-based beans, offering unique stories
and occasionally eye-popping premiums for growers. However, new trends
like coffee-based drinks and single-portion coffee in pods have shifted
more value towards roasters without necessarily benefiting growers.
 THE PROBLEM…
CONTINUED…
To address these issues, Andrea Illy, CEO of a global premium
coffee company, envisions a “virtuous circle” that brings together
growers, roasters, baristas, and customers. By improving growers’
knowledge of the market, they can work on enhancing their crops
or experimenting with new varieties. Roasters and preparers can
educate customers about the qualities of different beans, roasts,
and preparations. In turn, customers will be willing to pay more for
high-quality beans, creating a premium that flows back up the chain
to support further quality improvements.

While the transformation of the coffee market is an ongoing

process, it is essential to ensure fair compensation for growers and
promote sustainable practices throughout the supply chain.
VIEWPOINT
The Coffee 2016 case study examines the coffee supply chain and
explores ways to equalize returns across various stakeholders. It
draws a parallel between coffee and wine, highlighting how both
beverages encourage connoisseurship. However, only wine growers
reap a premium for their efforts to ensure quality.

Andrea Illy, the CEO of a global premium coffee company, envisions

transforming the coffee market into something akin to the wine
market. He dreams of a market where connoisseurs discuss the fine
points of various origin coffees and blends, customers are willing to
pay a premium for the finest examples of the coffee-making art, and
growers, roasters, and baristas are fairly compensated for their
expertise.
 VIEWPOINT…
CONTINUED…
Unfortunately, the current coffee market differs from this ideal. Coffee
growers in most parts of the world work at a barely subsistence level. A
single bad harvest or a sudden decline in coffee prices can push them
below subsistence to hunger. While specialty coffee roasters have made
efforts to build cafes and brands around origin-based beans sold directly
to roasters without reference to commodity prices, specialty coffee still
represents only a small portion of the overall market. New trends like
coffee-based drinks and single-portion coffee in pods have shifted more
value-added towards roasters without providing a premium for growers.

The case study highlights the need for a “virtuous circle” that brings
together growers, roasters, baristas, and customers. Growers with better
knowledge of the market can work to improve their crops or experiment
with new varieties. Roasters and preparers can educate customers about
 VIEWPOINT…
CONTINUED…
the qualities of various beans, roasts, and preparations. In turn,
customers can be willing to pay more for the best beans, creating a
premium that is sent back up the chain to pay for even more quality
and variety.

While there have been positive signs in this direction with third-wave
specialty coffee roasters emphasizing origin-based beans and building
cafes around them, challenges remain. New trends like coffee-based
drinks and single-portion coffee in pods have shifted more value-
added towards roasters without providing a premium for growers. A
consolidation is also taking place among mass roasters that could lead
to greater uniformity with even less emphasis on origin-based, direct-
traded coffee.
TIME FRAME
The worldwide coffee business had severe difficulties in the 1990s
and the early 2000s, especially for coffee producers who frequently
battled to make ends meet by working at or just over the subsistence
level. As specialty coffee gained popularity at this time, the coffee
landscape started to change. Some roasters began emphasizing the
value of origin-based beans, showcasing interesting tales, and
rewarding growers who produced high-quality coffee with premiums.
The specialty coffee segment had significantly advanced the
industry's transformation by the middle of the 2000s. Third-wave
roasters started to develop, creating brands and cafes centered on
the idea of origin-based beans. In addition to offering consumers a
distinctive and flavorful coffee experience, this strategy gave growers
the chance to receive greater profits on their investments. Likewise,
the popularity of coffee-based beverages increased, adding diversity
to the coffee market.
TIME FRAME …
CONTINUED…
Fast forward to 2016 when the Coffee 2016 case study was conducted, which
shed light on the inequalities within the coffee supply chain. Andrea Illy, the
CEO of a prominent global premium coffee company, envisioned a "virtuous
circle" to create a fairer distribution of returns across all stakeholders in the
coffee industry. This circle aimed to empower growers with better knowledge of
the market, enabling them to improve crop quality and explore new varieties.
Simultaneously, roasters and preparers could educate consumers about the
distinct qualities of various beans, roasts, and preparations. As consumers
grew willing to pay more for top-quality beans, the resulting premiums could
flow back up the supply chain, further supporting quality improvements.
However, the coffee market continued to face difficulties after 2016. Fair
remuneration continues to be a problem for growers, especially those outside
the specialty coffee segment. The mechanics of value distribution were
transformed by new trends, such as the popularity of single-portion coffee
pods, which frequently favored roasters over producers. The ongoing
transformation of the coffee market was marked by initiatives to advance
sustainability and fair pay for all participants, stressing the requirement for the
sector to advance further.
OBJECTIVES
Objective:
The main goal is to address the critical problems facing the coffee sector and build a
more just and sustainable supply chain. This entails putting both short-term and
long-term strategies into action. It seeks to raise the standard of living for coffee
farmers while increasing consumer appreciation for fine coffee.

Must Objective (Immediate Action):

To lessen the effects of the issue, the "Must Objective" necessitates prompt
attention. It includes a number of crucial initiatives, such as giving money to
struggling coffee growers, promoting specialty coffee in the current market, and
increasing supply chain transparency. These actions are crucial for giving growers
immediate relief and ensuring their continuing involvement in the sector.

Want Objective (Long-Term Solutions - 2 to 3 years):

The "Want Objective" describes the industry's long-term goals. It aims to bring about
long-lasting change by getting rid of the issue's underlying causes. These goals
include switching to sustainable agricultural methods, teaching and training growers,
informing customers about the quality of coffee, fighting for just remuneration, and
spending money on research and innovation. These initiatives seek to change the
industry so that everyone who is involved—from producers to consumers—benefits
and that coffee production has a more equitable and sustainable future.
 AREAS OF
CONSIDERATION
 SWOT
ANALYSIS
Strengths
SO Strategies
Opportunities
1. Expand and market locally as a
home-grown coffee brand.
2. Explore growing segment of
coffee drinkers and enthusiasts who
want to try the products.
ST Strategies
1. Invent extra innovation that is
convenient for your target
Threats
consumers.
2. Maintain the product being
superior to consumer demands.
Weaknesses
WO Strategies
1. Explore lower cost suppliers, to
lessen high initial cost.
2. Advanced training to workers to
provide high quality products to
consumers.
WT Strategies
1. Have unique features in their brand
because there are a lot of popular
coffee shops in the area.
2. Imported coffee beans and other
supplies may see an increase in price.
Thus, explore possible substitutes.
ALTERNATIVE COURSE
OF ACTION

1. Competitive Pricing Strategy

This is when competitive pricing, often known as establishing prices based
on competitors, becomes one of the most common pricing techniques.

2. Switch Your Approach From Reactive To Proactive

Usually, talent acquisition teams have adopted a reactive approach to
recruiting, sourcing and hiring just as needed. As a result of this technique,
recruiting schedules are extended and candidate experiences are inconsistent.

3. Provide Great Customer Service

Providing excellent and memorable customer service is a wonderful
approach to earn customer loyalty and set yourself apart from the competition.
PLAN OF
ACTION
 FALLBACK
POSITION
The study highlights the current state of coffee growers around the
world, who often work at a barely subsistence level. Factors such
as climate change and fluctuations in coffee prices can significantly
impact their livelihoods. The case study also explores the vision of
Andrea Illy, CEO of a global premium coffee company, who dreams
of transforming the coffee market into something akin to the wine
market. This transformation would involve connoisseurs discussing
origin coffees, customers paying a premium for high-quality coffee,
and fair compensation for growers, roasters, and baristas.

The case study mentions that there have been positive signs of
change in the coffee market. Specialty coffee roasters have built
cafes and brands around origin-based beans, providing growers
with occasional eye-popping premiums for their beans. However,
FALLBACK POSITION…
CONTINUED…
trends like coffee-based drinks and single-portion coffee in pods
have shifted more value towards roasters without necessarily
benefiting growers. A consolidation among mass roasters is also
taking place, potentially leading to greater uniformity and less
emphasis on origin-based, direct-traded coffee.

To make the coffee industry more equitable for growers, various

initiatives have emerged. For example, the Aspen Institute
organized an MBA case competition challenging students to
develop innovative ideas to improve grower livelihoods and
increase coffee connoisseurship.
FALLBACK POSITION…
CONTINUED…
Additionally, organizations like the Coffee Coalition for Racial Equity
are working towards a racially diverse and equitable coffee industry.
Efforts are also being made to address issues such as child labor
and unacceptable working conditions through projects like
Cooperation On Fair, Free, Equitable Employment (COFFEE).

While progress has been made, achieving equity throughout the

entire coffee supply chain remains a complex challenge. Initiatives
like the Verified Living Income model aim to equalize power
dynamics between buyers and producers while addressing
economic sustainability at origin5. These efforts strive to ensure
that more of the retail price of coffee reaches growers who depend
on it for their livelihoods.
THANK
YOU
Group Leader: Antonino D.
Ferrer

Members:
Abdul Yasser Solaiman
Alvin Dimasacat Saet
Princess Mae Ferrer