J&A Industry Report: Coffee Value Chain: From Crop to Cup
Jahani and Associates Industry Report
Coffee Value Chain: From Crop to Cup
The coffee production process can be broken into three key phases: farming, processing, and retailing. Within these phases, the coffee product is harvested in its original form (a cherry-like fruit), then processed, dried, roasted, ground, and finally turned into the final product we drink every day. This article breaks down the coffee value chain within these phases from crop to cup. Lastly, we review the price of a coffee bean from its original cherry form to the final cup, analyzing its evolution, and the justification for a 10,000% price increase across the chain.
Green beans to roasted beans: After the fruit is harvested and taken to a processing plant, the fruit undergoes refining and drying steps to turn it into a green bean. These green beans are then roasted to become the beans consumers are familiar with from stores and coffee shops. This roasting step is what creates a light or dark roasted coffee. Prior to roasting, there is no difference between light and dark roasts. Additional steps in this process include wet processes such as pulping, demuxing, washing, sorting, coffee parchment drying, storage, threshing, sorting, cupping, and packing. Dry processes include storage, threshing, and sorting.
Once the coffee is harvested, dried, processed, and roasted, it is distributed to the end consumer or retail store where it is then ground and brewed. Roasted coffee can be modified into a variety of products such as soluble coffee, decaffeinated coffee, coffee liqueur, extracts and essences, or pure caffeine.
Opportunities to Increase Quality
Each step in the process brings opportunities to increase quality, and are summarized below.
Farming: Altitude and Shade
- Shade-grown coffee and coffee grown at high altitudes create higher quality beans compared to those grown in direct sunlight.
- Fertilization techniques can also affect quality by impacting the soil.
Processing: Wetness, Temperature, and Fermentation
- The wet process produces higher quality coffee with a cleaner and more consistent flavor than other methods.
- The fermentation process within the wet phase makes flavor profiles more intense or sweet.
- The best way to store green beans during the dry phase is in a contamination-free warehouse with average relative humidity of 10.5-12% and a temperature of 26°C.
- Roasting green beans at a lower heat produces coffee that releases more distinct scents, aroma, and volatile oils. These roasting differences are mostly appreciated by specialty coffee consumers.
Pricing: Increasing Value by Over 10,000%
Farming ($2 – $3 per kilogram)
Farming raw fruits is the least expensive step in the coffee value chain. This is driven by many factors, including a high amount of supply, low labor costs, some unfair practices against farmers to maximize profits, and pricing wars among farmers themselves. It is not within the scope of this report to analyze the political and economic dynamics the coffee industry has on less wealthy nations.
Processing ($3 – $30 per kilogram)
Processing to generate the green bean is usually done near the farm. Green beans have a stable shelf life of nearly a year. Roasting green beans can be done anywhere in the world, and usually takes place nearer to the end consumer. Throughout the world local roasteries order green bean coffee from a variety of international locations and then sell that coffee to regional shops, stores, and consumers.
Retailing ($150 – $200 per kilogram)
Retailing is the phase of the coffee value chain that is most sensitive to marketing and consumer behavior. Companies like Blue Bottle Coffee have built large enterprises on high-quality coffee, careful marketing, and premium retail locations to command a price premium in the market. Blue Bottle Coffee was purchased by Nespresso in 2017.
FIGURE 3: Differentiators by Region
From Crop to Cup: An Evolution of Price and Product
The coffee value chain can be broken into three steps to promote high-quality products across the world. America and Asia use the wet processing method, compared to Africa, which uses the natural drying method. The use of different processing techniques determines coffee’s quality, aroma, and flavor. These characteristics add value and set the final cost in the global market. Coffee pricing increases dramatically as it moves away from the raw product and into the consumer’s cup.