TRENDS IN COFFEE MARKET

Each day nearly 2.5 billion cups of coffee are consumed

A coffee crisis in producing countries with a

trend towards lower prices, declining incomes and profits affecting millions of people in the world’s poorest countries.

A coffee ‘boom’ in consuming countries with rising sales and profits for coffee retailers and roasters.

A widening gap between producer and consumer prices only partly offset by the influence of Fair Trade in the coffee industry.

The Coffee Paradox

Nature of the product Availability of the substitute Price level of coffee Income of the consumers Taste and Preferences Prices of the related goods

Factors affecting Demand of Coffee

Elasticity of demand is an important variation on the concept of demand.Demand can be classified as elastic, inelastic or unitary. An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small. A unitary elasticity demand is one in which the

elasticity coefficient is equal to one.

Elasticity Of Demand

  Price elasticity of demand(PED or Ed) gives

the percentage change in quantity demanded in response to a one percent change in price (ceteris paribus, i.e. holding constant all the other determinants of demand, such as income). 

Price elasticity of demand

PRODUCT ELASTICITY OF DEMAND

COFFEE 0.25

Source: Economics: Private and Public Choice, James D. Gwartney and Richard L. Stroup, eighth edition 1997, seventh edition 1995.

PRODUCT ELASTICITY OF DEMAND

COFFEE 0.50

Source : price elasticity of demand of fair trade coffeeMaster thesis in economics by Niina Niemi,2009. HELSINKI SCHOOL OF ECONOMICS

The Marshallian elasticities, answer the question of “what is the effect of price change on coffee consumption?

Source: COMMITTEE ON COMMODITY PROBLEMS, A DEMAND ANALYSIS FOR THE TEA MARKET,2012.

Cross elasticity of Demand is defined as :The degree of responsiveness of demand for commodity X on account of a change in the Price of Commodity Y .

Exy = ( ∆Qx/∆py)(Py/Qx)

Cross elasticity of Demand

COMMODITY BLACK TEA GREEN TEA

COFFEE 0.066 0.0325

Cross elasticities for India

Source : Committee  on commodity problems, Intergovernmental group on tea. Twentieth session. Columbo , sri lanka, 30th jan-1 feb 2012 – a demand analysis for the tea market

Income elasticity of demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good, ceteris paribus.

EY = (DQ/Q)(DY/Y)

Income elasticity

Indians consume a tiny 0.1 kilograms per year. But a “quiet cafe revolution is sweeping urban India,” the BBC reported in 2002.

The income elasticity of demand for coffee in India has

been estimated to be 0.4

Source: https://gsbapps.stanford.edu/cases/documents/IB53.pdf