The Coffee Value Chain
Almost all of the coffee consumed in the United States is imported from
abroad (a very small amount of premium Kona coffee is grown in Hawaii).
U.S. coffee manufacturers mostly purchase green coffee beans from
Brazil, Colombia, Mexico, and Guatemala. In the United States, two main
types of coffee are traded on the New York Board of Trade (NYBOT),
Arabica and Robusta. Arabica is more expensive, but is generally
preferred in terms of taste. Most U.S. supermarket coffees are a blend of
Arabica and Robusta beans.
Coffee manufacturers grind and roast the green beans and sell the packaged
product to supermarkets and grocery wholesalers. While most green coffee
beans are purchased by roasters under long-term contracts, large coffee
roasters also buy and sell on commodity markets. The prices observed on
these commodity markets are thus an approximate measure of coffee
roasters’ marginal coffee bean costs.
The major players in the U.S. ground-coffee market include well-known
manufacturers of consumer packaged goods. Procter & Gamble (P&G)
produces Folgers, Kraft produces Maxwell House and Yuban, and Sara Lee
produces Hills Bros., Chock Full O’ Nuts, MJB, and Chase & Sanborn.
P&G is the largest maker of household products in the United States, and
Kraft Foods is the largest maker of food products in the United States.
Sales of ground coffee are highly concentrated among those companies.
From 2000 to 2004, Folgers had a market share of 38 percent by volume,
Maxwell House had a market share of 33 percent, and the Sara Lee brands
had a market share of 10 percent. Private-label brands had a market share of
about 8 percent, by volume, in ground coffee. Folgers’ market share
increased from 37 percent in 2000 to 42 percent in 2004, while the Sara Lee
brands fell from 11 percent to 7 percent (Hoover’s Incorporated, 2006).1
The location of coffee-grinding production is highly centralized, based on
easy access to seaports. P&G produces most of its consumer-market coffee
in its New Orleans plant, and a smalle