This article was contributed by Gianni Assam, a barista at Cartel Coffee Lab. Thanks to him for the contribution! By Gianni Assam There is a fairly new term involved with the coffee industry worldwide. The term specialty coffee refers to a specific part of the retail side of the coffee industry and with growing support is affecting the coffee market and specifically the individual farms that grow the coffee. The term specialty coffee is specific to companies that focus on the continuing quest for better quality coffee. A good question then is what is quality in terms of coffee and how does it affect the coffee market. Quality in coffee starts with the coffee plant at the source. There are around 70 different countries in the world that produce coffee and many of them rely on it as one of their main sources of export. This means that there is a wide range of different coffees on the market. When specialty coffee companies look for different coffees they are looking for a small percentage of the coffee market. Large companies like grocery stores and chain coffee shops do around 90 percent of the coffee produced and sold on the retail market, even though specialty coffee is working with a low percentage of the market they are making a big impact on the people who the coffee is produced by. Similarly enough around 90 percent of the coffee is produced in developing countries and most of the consumption is in industrialized countries. So how does specialty coffee affect this market? First it drives up prices by using quality as an incentive for farms to produce the highest-grade coffee possible. It also sets an example for the retail market especially in the United States and creates an image of higher standards. Large companies are forced to follow these standard because of the growing popularity, just a few months ago Target just bought a coffee from Bolivia that won the National award for Cup of Excellence. This is not a cheap coffee and surely is not what Target is used to buying. It is clear that if the market continues to follow this trend then the coffee market could very well be compared to that of fine wines, where the farmers could also make money along with retailers. Coffee farming is much like most farming where there are periods of growing, cultivating and harvesting. Each country for the most part has different harvesting times and during this time the coffee is processed and then sold through auctions. As stated before most of the coffee is bought up and is not of very high quality, and then there is somewhat of a medium grade coffee that is bought up by larger chains like Starbucks and other large chain coffee companies. The last tier of coffee is purchased by import companies that sell to small independent roasters; these companies are looking for the highest quality possible. A term mentioned previously is the Cup of Excellence award; this is an international organization that holds somewhat of a competition in the top coffee producing countries. A series of tasting and grading takes place to rate the top coffees produced that year by various farms in that country. Most of the coffee producing countries in South America and around the world participate in the Cup of Excellence. Some of the highest rated coffees sell for over thirty-to-forty dollars a pound and sometimes even higher. When farms see that these kinds of prices are being given it gives incentive to focus on quality and craftsmanship of their coffee. This also is good for specialty coffee companies who are willing to pay more as long as the quality is there. This supply chain shows how the market and the use of incentives can be used to make all of the participants happy and successful, from the consumer who get the best tasting product to the retailer who can sell some coffees for high prices and the farmer who can make larger margins on his crop. This sounds like a great system and it is, but a lot of work still needs to be done. The coffee market reached an extremely low price in 2001 of around 45 cents on the dollar and slowly climbed for a few years after, now just last month in November of 2010 the average composite price of coffee reached a new high of a dollar and 73 cents a pound. This is nearly four times the average price in 2001, this may seem like a small margin form 45 cents to $1.73 but when your talking about the worlds second largest traded commodity under oil were talking big numbers. An estimated twelve billion pounds of coffee is consumed around the world a year. When you have and increase of $1.28 that is just over 15 billion dollars more added to the coffee market from 2001 to 2010. This money gets dispersed throughout the supply chain and helps continue to grow the coffee industry with more focus on research and development of farming and processing techniques as well as retail and marketing options. With continuing growth and support for the specialty coffee community the market will also grow because it will always follow the trends. We already have large companies and corporations using some of the lingo and techniques of small specialty coffee companies because of the growing popularity and dollar power in that market. What are important to recognize are the effects on the whole market and on the vast global supply chain of the coffee production. How these rise in prices cannot only benefit those selling to consumers but also the producers and farmers in developing nations that are currently making very small percentages of the overall chain of exchanges. The coffee farming industry could, for some countries, be what takes them out of poverty and help them build infrastructure in their towns and cities across the world to better their standard of living. What’s in your cup? This article was contributed by Gianni Assam, a barista at Cartel Coffee Lab.