Coffee: a favorite beverage with a complex supply chain

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Coffee: a favorite beverage with a complex supply chain

Coffee is one of the most common drinks around the globe – more than 400 billion cups are consumed each year. Just in the United States, Americans consume more than 450 million cups of coffee every single day! It's easy, practical and at a certain level, addictive. The ease of consuming coffee in today’s world has re-defined the way we work, socialize and have our daily routine altogether.

Being able to consume coffee on a daily basis is the result of a complex operational and global effort. More than 50 countries contribute to the production of coffee by growing, harvesting and processing the coffee beans thanks to the work of approximately 25 million farmers worldwide, from South America, Central America, Asia, Africa and the Caribbean.

The supply chain built around coffee is very unique as there is a high level of variation in demand in the coffee industry. Overall the supply chain can be broken down into a few high-level domains to understand the characteristics of the whole journey of how single coffee beans become the fuel of our daily routine.

  • Nature: where it all begins. With the correct climate, temperature and method, it takes on average four to seven years for a coffee seed to become a fully grown tree and produce the first crop, red cherries. Considerable amount of labor is involved as those red cherries are usually hand-picked by the farmers to make sure that they are on the right level of maturity. The beans in the red cherries get removed so that they can be dried out in the sun.
  • Intermediaries: players that make things move. Once the coffee beans are dried out, those are handed over to third-parties that have logistical access to the region. Those third-party companies gather large volumes of beans to be able to supply the required global demand. Depending on the nature of the demand, there might be one or more intermediary players in the supply chain that carries the responsibility to collect, organize, export/import and transport the coffee beans to the correct destinations. They are crucial, and their ways of operation have a big impact on the overall cost and quality of coffee being served in many coffee shop chains.
  • Roasters and retailers: places where coffee is available. Roasters in today’s world wear multiple hats. Some of them have the sole responsibility to roast the coffee beans imported from the desired farmers and then deliver the products to different retailers, like famous coffee shop chains, cafes/restaurants, grocery stores and hotels. The methods of roasting vary depending on the demand of their retailers. Some not just roast the coffee beans, but also sell those as end-products to their consumers without the involvement of any other third-party players. Retailers receive the roasted coffee beans, can brand the product as their own and then sell it to their own customers. While most big-chain retailers dominate the acquisition of the coffee bean industry, when it comes to coffee-related products there is also a considerable amount of small-scale players all around the world. Check out this awesome video to get more information about the whole journey of the coffee beans!

Today’s global world allows big retailers to have different strategies of managing their own supply chains to make sure that they have enough volume of coffee products for their customers’ constantly growing demand. While most small retailers and coffee shops rely on the ever changing supply dynamics to maintain a successful relationship with their supplies, bigger companies like Starbucks make the decision to get involved in every single step of the life cycle of the coffee to make sure that they have the end-to-end control over their products before they deliver to everyday consumers. Having an integrated supply chain approach like this has its own benefits, such as cutting down the number of intermediary players and thus the cost, and having the final say on the way the product is grown, processed and roasted. Other companies, like Keurig, also make sure that with their own Supplier Relationship Management (SRM) system they are in constant communication with the coffee bean suppliers to maintain a high-level of trust and communication.

Regardless of the differences in the supply chain structure, small and large retailers share one common purpose: delivering the right coffee-induced product to their consumers with a high-level of consistency and reputation. While the convenience of consuming coffee is taken for granted by many of us, it doesn’t change the fact that the supply chain management behind our everyday coffee is very complex. With today’s global standards, the coffee industry is definitely worth keeping an eye on as it may change to ensure that the growing number of consumers all around the world remain happy.

 

Discussions

Kadir Celik
- 4月 03, 2020 at 11:29午前
Thank you very much Ilyas for such an insightful article! Now I know where my coffee is coming from, what process it goes through etc. Can't wait to read your next blog!
Can Ucgoz
- 4月 12, 2020 at 9:45午前
Wow! What an interesting read, thanks Ilyas.

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