Visualizing the Economics of Coffee in One Chart
Connect with us

Agriculture

The Economics of Coffee in One Chart

Published

on

The Economics of Coffee in One Chart

Can I share this graphic?
Yes. Visualizations are free to share and post in their original form across the web—even for publishers. Please link back to this page and attribute Visual Capitalist.
When do I need a license?
Licenses are required for some commercial uses, translations, or layout modifications. You can even whitelabel our visualizations. Explore your options.
Interested in this piece?
Click here to license this visualization.

Breaking Down the Economics of Coffee

What goes into your morning cup of coffee, and what makes it possible?

The obvious answer might be coffee beans, but when you start to account for additional costs, the scope of a massive $200+ billion coffee supply chain becomes clear.

From the labor of growing, exporting, and roasting the coffee plants to the materials like packaging, cups, and even stir sticks, there are many underlying costs that factor into every cup of coffee consumed.

The above graphic breaks down the costs incurred by retail coffee production for one pound of coffee, equivalent to about 15 cups of 16 ounce brewed coffee.

The Difficulty of Pricing Coffee

Measuring and averaging out a global industry is a complicated ordeal.

Not only do global coffee prices constantly fluctuate, but each country also has differences in availability, relative costs, and the final price of a finished product.

That’s why a cup of 16 oz brewed coffee in the U.S. doesn’t cost the same in the U.K., or Japan, or anywhere else in the world. Even within countries, the differences of a company’s access to wholesale beans will dictate the final price.

To counteract these discrepancies, today’s infographic above uses figures sourced from the Specialty Coffee Association which are illustrative but based on the organization’s Benchmarking Report and Coffee Price Report.

What they end up with is an estimated set price of $2.80 for a brewed cup of coffee at a specialty coffee store. Each store and indeed each country will see a different price, but that gives us the foundation to start backtracking and breaking down the total costs.

From Growing Beans to Exporting Bags

To make coffee, you must have the right conditions to grow it.

The two major types of coffee, Arabica and Robusta, are produced primarily in subequatorial countries. The plants originated in Ethiopia, were first grown in Yemen in the 1600s, then spread around the world by way of European colonialism.

Today, Brazil is far and away the largest producer and exporter of coffee, with Vietnam the only other country accounting for a double-digit percentage of global production.

CountryCoffee Production (60kg bags)Share of Global Coffee Production
Brazil64,875,00037.5%
Vietnam30,024,00017.4%
Colombia13,858,0008.0%
Indonesia9,618,0005.6%
Ethiopia7,541,0004.4%
Honduras7,328,0004.2%
India6,002,0003.5%
Uganda4,704,0002.7%
Peru4,263,0002.5%
Other24,629,00014.2%

How much money do growers make on green coffee beans? With prices constantly fluctuating each year, they can range from below $0.50/lb in 2001 to above $2.10/lb in 2011.

But if you’re looking for the money in coffee, you won’t find it at the source. Fairtrade estimates that 125 million people worldwide depend on coffee for their livelihoods, but many of them are unable to earn a reliable living from it.

Instead, one of the biggest profit margins is made by the companies exporting the coffee. In 2018 the ICO Composite price (which tracks both Arabica and Robusta coffee prices) averaged $1.09/lb, while the SCA lists exporters as charging a price of $3.24/lb for green coffee.

Roasting Economics

Roasters might be charged $3.24/lb for green coffee beans from exporters, but that’s far from the final price they pay.

First, beans have to be imported, adding shipping and importer fees that add $0.31/lb. Once the actual roasting begins, the cost of labor and certification and the inevitable losses along the way add an additional $1.86/lb before general business expenses.

By the end of it, roasters see a total illustrated cost of $8.73/lb.

Roaster Economics($/lb)
Sales Price$9.40
Total Cost$8.73
Pre-tax Profit$0.67
Taxes$0.23
Net Profit$0.44
Net Profit (%)7.1%

When it comes time for their profit margin, roasters quote a selling price of around $9.40/lb. After taxes, roasters see a net profit of roughly $0.44/lb or 7.1%.

Retail Margins

For consumers purchasing quality, roasted coffee beans directly through distributors, seeing a 1lb bag of roasted whole coffee for $14.99 and higher is standard. Retailers, however, are able to access coffee closer to the stated wholesale prices and add their own costs to the equation.

One pound of roasted coffee beans will translate into about 15 cups of 16 ounce (475 ml) brewed coffee for a store. At a price of $2.80/cup, that translates into a yield of $42.00/lb of coffee.

That doesn’t sound half bad until you start to factor in the costs. Material costs include the coffee itself, the cups and lids (often charged separately), the stir sticks and even the condiments. After all, containers of half-and-half and ground cinnamon don’t pay for themselves.

Factoring them all together equals a retail material cost of $13.00/lb. That still leaves a healthy gross profit of $29.00/lb, but running a retail store is an expensive business. Add to that the costs of operations, including labor, leasing, marketing, and administrative costs, and the total costs quickly ramp up to $35.47/lb.

In fact, when accounting for additional costs for interest and taxes, the SCA figures give retailers a net profit of $2.90/lb or 6.9%, slightly less than that of roasters.

A Massive Global Industry

Coffee production is a big industry for one reason: coffee consumption is truly a universal affair with 2.3 million cups of coffee consumed globally every minute. By total volume sales, coffee is the fourth most-consumed beverage in the world.

That makes the retail side of the market a major factor. Dominated by companies like Nestlé and Jacobs Douwe Egberts, global retail coffee sales in 2017 reached $83 billion, with an average yearly expenditure of $11 per capita globally.

Of course, some countries are bigger coffee drinkers than others. The largest global consumers by tonnage are the U.S. and Brazil (despite also being the largest producer and exporter), but per capita consumption is significantly higher in European countries like Norway and Switzerland.

The next time you sip your coffee, consider the multilayered and vast global supply chain that makes it all possible.

Subscribe to Visual Capitalist
Click for Comments

Agriculture

Which Countries Produce the Most Wheat?

Global wheat production is concentrated in just a handful of countries. Here’s a look at the top wheat-producing countries worldwide.

Published

on

Visualizing Global Wheat Production by Country (2000-2020)

Wheat is a dietary staple for millions of people around the world.

After rice and corn (maize), wheat is the third most-produced cereal worldwide, and the second-most-produced for human consumption. And considering wheat’s importance in the global food system, any impact on major producers such as droughts, wars, or other events, can impact the entire world.

Which countries are the largest producers of wheat? This graphic by Kashish Rastogi visualizes the breakdown of 20 years of global wheat production by country.

Top 10 Wheat Producing Countries

While more than 80 different countries produce wheat around the world, the majority of global wheat production comes from just a handful of countries, according to data from The Food and Agriculture Organization of the United Nations (FAO).

Here’s a look at the top 10 wheat-producing countries worldwide, based on total yield in tonnes from 2000-2020:

RankCountryContinentTotal yield (tonnes, 2000-2020)% of total (2000-2020)
#1🇨🇳 ChinaAsia & Oceania2.4 B17.0%
#2🇮🇳 IndiaAsia & Oceania1.8 B12.5%
#3🇷🇺 RussiaAsia & Oceania1.2 B 8.4%
#4🇺🇸 U.S.Americas1.2 B 8.4%
#5🇫🇷 FranceEurope767 M 5.4%
#6🇨🇦 CanadaAmericas571 M 4.0%
#7🇩🇪 GermanyEurope491 M3.5%
#8🇵🇰 PakistanAsia & Oceania482 M3.4%
#9🇦🇺 AustraliaAsia & Oceania456 M3.2%
#10🇺🇦 UkraineEurope433 M3.1%

China, the world’s largest wheat producer, has yielded more than 2.4 billion tonnes of wheat over the last two decades, making up roughly 17% of total production from 2000-2020.

A majority of China’s wheat is used domestically to help meet the country’s rising food demand. China is the world’s largest consumer of wheat—in 2020/2021, the country accounted for approximately 19% of global wheat consumption.

The second-largest wheat-producing country is India. Over the last two decades, India has produced 12.5% of the world’s wheat. Like China, India keeps most of its wheat domestic because of significant food demand across the country.

Russia, the world’s third-largest wheat producer, is also the largest global exporter of wheat. The country exported more than $7.3 billion worth of wheat in 2021, accounting for approximately 13.1% of total wheat exports that year.

Russia-Ukraine Impact on Global Wheat Market

Because Russia and Ukraine are both significant global wheat producers, the ongoing conflict between the two countries has caused massive disruptions to the global wheat market.

The conflict has had an impact on adjacent industries as well. For instance, Russia is one of the world’s major fertilizer suppliers, and the conflict has led to a global fertilizer shortage which could lead to food shortages worldwide.

Continue Reading

Agriculture

Timeline: The Domestication of Animals

This graphic shows a timeline of when 15 different animals became domesticated, based on archaeological findings.

Published

on

Timeline: The Domestication of Animals

While dogs weren’t always our docile companions, research indicates that they were likely one of the first animals to be domesticated by humans. In fact, genetic evidence suggests that dogs split from their wild wolf ancestors around 33,000 years ago.

When did humans domesticate other animals, and why? This timeline highlights the domestication period of 15 different animals, based on archeological findings.

Because exact timing is tricky to pinpoint and research on the topic is ongoing, these estimates may vary by thousands of years.

Defining Domestic

The domestication of animals is a particular process that’s done through selective breeding. Generally speaking, domestic animals follow most of these criteria:

  1. Genetically distinct from their wild ancestors and more human-friendly as a genetic trait.
  2. Dependent on humans for food and reproduction.
  3. They’re extremely difficult or impossible to breed with wild counterparts.
  4. Show the physical traits of domestication syndrome, such as smaller skulls, floppy ears, or coat color variations.

Domestication is not the same as taming an animal, which is when humans condition wild animals to live in captivity.

While some research suggests that domestic animals can prosper in the wild, domestic animals are typically more susceptible to predators since they lack some of the advantages, instincts, or traits that help their wild counterparts survive in nature.

Key Reasons for the Domestication of Animals

Humans domesticate animals for a number of reasons: some have been domesticated for food, work, companionship, or a combination of all three.

After dogs, livestock animals such as sheep, cows, and pigs are thought to have been some of the first animals to become domesticated by humans. This was around the same time that humanity shifted from a hunter-gathering lifestyle to an agricultural society.

Domesticated AnimalPrimary TypeEstimated Domestication PeriodOrigin
DogPet13,000–34,000 BCEEurasia
SheepLivestock9,000 BCEMiddle East
GoatLivestock8,500 BCEMiddle East
PigLivestock8,300 BCEMiddle East
CowLivestock8,300 BCEMiddle East
CatPet7,500 BCEMiddle East
Zebu (Humped Cow)Livestock6,000 BCESouth Asia
LlamaLivestock4,000 BCESouth America
HorseWork3,500 BCECentral Asia
AlpacaLivestock3,000 BCESouth America
Bactrian Camel (two-humped)Work2,500 BCECentral Asia
ChickenLivestock2,000 BCEEast Asia/Middle East
Arabian Camel (one-humped)Work1,000 BCEMiddle East
TurkeyLivestock0 CENorth America
DuckLivestock1,000 CEEast Asia/Middle East

Horses are thought to be some of the first animals domesticated for work. Scientific research suggests that the modern horse originated in Central Asia, and were selectively bred for their exceptional back strength and overall resilience.

When it comes to domesticating animals, herbivores (like cows) are generally the easiest to convert because they’re easier to feed than animals that rely on meats or grains, which need to be sourced or domesticated themselves.

Domestication Has Shaped Modern Humanity

The domestication of species has helped create our modern society. Domesticating plants and animals created a world with stable food production, which enabled the human population to boom worldwide.

This is because agriculture meant fewer people could provide more food to humans on a mass scale, so people had more time to focus on other things like creative pursuits, scientific research, etc. This gave us time to create tools that helped boost efficiencies in farming and agriculture, leading to the world as we know it today.

Continue Reading

Subscribe

Popular