Single-serve coffee is a tremendous success story, with widespread adoption in Europe and the US, but a French study suggests that new modes of consumption have reduced farmers’ already limited ability to profit from growing coffee
A study undertaken by Commerce Equitable France, Max Havelaar France, the Rethinking Value Chains Network and Basic has raised some important questions about consolidation among roasters and retailers and the new formats in which they now offer coffee to consumers.
Christophe Alliot, founder and head of research at Basic (Bureau d’Analyse Sociétale) told C&CI that the research that formed the basis of the report highlighted the growing disparity in value creation by roasters and retailers at a time when farmers are suffering from the effects of historically low prices for the coffee they grow.
In France, he explained, coffee sales have doubled in value since 2003 thanks to new marketing strategies linked, in particular, to the emergence of single-serve formats such as pods and capsules, which are sold by all the leading roasters and retailers.
Consolidated industry benefitting
The increased revenue generated by this trend is benefitting an increasingly concentrated, consolidated industry: the three primary coffee players in the French market, Nestlé (34 per cent), JDE (30 per cent) and Lavazza (17 per cent) now represent 81 per cent of the overall market, compared with 70 per cent in 2008. This concentration of dominant players is reinforcing their bargaining power throughout the supply chain, but the increased revenues they are generating from new formats such as pods is not trickling down to farmers. Even certified coffee sold in pods are problematic, Basic believes: Fair Trade enables producers to receive a greater share of the final price of coffee sold in packets, but this share greatly diminishes in the case of pods and capsules, where 85-90 per cent of the price goes to roasters and retailers.
Over the last 20 years, Basic found, roasters and retailers have reaped an additional €1.177 billion from annual coffee sales. Farmers and traders have earned just €64 million more. Over that period, the revenue obtained by producing countries has fallen, from 24 per cent of value in the mid-1990s to 16 per cent in 2017.
Mr Alliot agreed that new formats such as single-serve had helped the coffee industry reinvent itself and had been a tremendous success. He said other sectors of the food and beverage industry had taken note of the value creation in coffee as a result of the introduction of pods and wanted to replicate it, but unfortunately farmers are probably worse off as a result of this success.■ C&CI
This extract is from an article that first appeared in the July’19 issue of C&CI, click on subscribe now if you wish to read the article in full and other informative articles in the current and future issues of C&CI.