All I'm looking for is the price of a cup of coffee
Who Produces the Value of Coffee? Words by Jenn Rugolo; Illustration by Heedayah Lockman
Good morning and welcome to Vittles Season 5: Food Producers and Production.
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When people find out that you work in tea, often the first thing they do is make a joke about coffee as if you are life-long arch enemies, like cats and dogs. Customers would catch me drinking a filter coffee on the street or spot me in a café and would say with a wink ‘don’t worry, I won’t tell your boss!’ not knowing that he was also just about to go on his coffee break. The whole thing was a bit silly. Coffee and tea for me are bedfellows, ‘caffeine cousins’ as my boss is fond of saying, not adversaries. In fact, it was through tea, and the coffee obsessed people that came through the shop, that I ended up learning more about coffee than I had ever anticipated.
There were two things though that we in the tea world envied about coffee. The first was its sense of community; that, in the early days at least, all the coffee people were friendly with each other, recommended each other’s businesses, lent each other knowledge and resources. These were the halcyon days of Gwilym Davies’s disloyalty card, a wonderful idea that maybe someone should do with food newsletters? The tea world seemed insular, fragmented, unfriendly in comparison. The nearest place you’d ever recommend to someone would be in Malaysia.
The second thing was how quickly the coffee world had added value to their product. By this I mean the price people were willing to pay that went beyond the monetary value of the beans. In the late 2000s in London, it was possible to go into a cafe owned by a World Barista Champion, get coffee made with beans roasted by another World Barista Champion, and brewed by the UK’s brewer champion. This wasn’t just a cup of coffee; you were paying for an experience unrivalled in the world. How much wouldn’t you pay for that? Yes, the coffee world was talking more about sourcing, about provenance, about terroir and production, but the thing people were really paying for was latte art, competition winners and your favourite barista. And here we were trying to sell tea based only on the producer’s name!
While we were wondering when tea’s moment would ever come, trying to find ways of adding value to a product whose value was inherently determined by the producer, the author of today’s newsletter, Jenn Rugolo, was looking at that value chain and asking an even more important question: if the value of coffee is being produced by many different people, are they also being properly recompensed? If we know that producers are always underpaid, then does this not also stretch to the people we don’t traditionally consider producers, the producers of value? It’s the big question today’s newsletter hinges on.
As for tea, it took a while but we finally got people paying £5 a cup. It’s called bubble tea.
Who Produces the Value of Coffee? by Jenn Rugolo
Conflicting notions of coffee’s price and value seep into the oddest places. When you’re paying for it, coffee is ‘too expensive’. Used as a proxy for inflation and the cost of living, its price becomes a marker of how ‘affordable luxuries’ aren’t affordable anymore. (Coffee’s arrival in a neighbourhood, too, is often a sign of gentrification.) Yet the tables turn when the perspective shifts from ‘paying’ to ‘being paid’. ‘Please consider paying me for the work that I’m doing; all I’m looking for is the price of a pint or a cup of coffee once a month – that’s it’, beseeches podcaster Blindboy on a weekly basis. Heck, there’s even a platform dedicated to the connection: Ko-fi – literally pronounced ‘coffee’ – is a virtual tip jar that fans use to ‘buy their favourite creators a coffee’ to support their efforts, usually paying around £3. While the pervasiveness of coffee as a benchmark for price and value is clear, the origins of these notions are less so: where do our ideas of what coffee should cost come from? And why have they been so hard to shake?
While these examples suggest otherwise, there is no such thing as a single ‘price of coffee’; there are many – some intersecting, others seemingly unrelated. There is the ‘Price of Coffee’, with a capital ‘C’, of the New York International Commodity Exchange – this is the price that, when it goes up, causes journalists to warn of impending increases. This price, the ‘C price’, is not dictated by the cost of producing coffee, but by the trading and hedging of future contracts by traders who may never see the coffee they’ve bought and sold. Related as the sum paid for a pound of green (unroasted) coffee, the C price has always been marked by extreme volatility; graphs mapping the daily fluctuations over time look like the work of a toddler with a crayon, scribbling between highs ($3.39 in 1977) and lows ($0.42 in 2001). When there is a downswing in the C price – and there is always a downswing – the industry asks questions about coffee’s profitability, seeking new ways to reorient the price of coffee to the cost of its production and, more recently, to its value.
Our understanding of the relationship (or distinction) between ‘price’ and ‘value’ is important, if complicated. Perhaps billionaire Nick Hanauer described it best in his 2019 TED Talk: ‘[the] neoliberal economic assumption is that the price of something is always equal to its value . . . [but] people are not paid what they are worth; they are paid what they have the power to negotiate.’ This idea – that we don’t pay enough for our coffee – is not a new one, and people have tried to solve it in different ways.
Where commodity required homogeneity of the final product, despite production in vastly different circumstances, efforts arose in the Global North to tie distinctive attributes to price premiums based on their perceived value. ‘Specialty coffee’, a term first coined by American coffee trader Erna Knutsen in 1974, introduced the concept of quality premiums for differentiated – or ‘special’ – coffees, while certifications like Fairtrade, established in 1994, offered set percentage premiums in relation to the fluctuating C price. Shortly after, the notion of ‘direct trade’ sprung up in opposition to these ideas; it offered more flexible (and often larger) premiums tied to quality and long-term relationships.
When the C price fell below a dollar in 2018 (later bottoming out at $0.89 in May 2019), conversations again turned to the question of profitability. This time, industry investigation suggested a deeper root cause: inequitable value distribution. ‘These untenable commodity prices are juxtaposed against a roaster and retailer sector that is thriving’, a Price Crisis Response Initiative Summary of Work flatly states. Coffee is ‘valued’ in the marketplace – in 2015 it achieved US$200 billion estimated retail – but barely any of that value was returning to producers.
Coffee drips with socio-cultural significance. It phases, not just from solid to liquid, but from an agricultural product to an object of social, emotional, and aesthetic value. Because of this, only a fraction of the price paid at a café till for a flat white is allocated to coffee in its raw form. Even at a basic level, costs are variable from location to location: the difference in rent, services, and staffing is one simple explanation, but even a café’s choice of milk supplier, brand of compostable cup, or decision about how many stirring sticks to buy in a single order will impact the final price you pay. Average calculations, aiming to communicate how and where value is created and translated across the chain, vary widely – some estimate that roasted coffee accounts for only 4% of the total price paid, others 22%. Strip it back to green coffee costs – that is, what returns to the producers of coffee in its processed but unroasted state at the ‘farm gate’ – and the amount drops further, with averages suggesting anywhere from 0.04% to 4%, and everything in between.
What does this mean in pounds and pence? Using a World Economic Forum illustrative breakdown (built on a US specialty coffee industry benchmarking study), let’s translate the price of the last cup of filter coffee I paid for in London, a city with ‘middling’ coffee prices (at least, according to the World Coffee Index 2021): £3.20.
First, there’s the cost of growing, picking, and processing coffee cherries. Establishing a farm takes at least three years, the point at which coffee trees mature and begin producing fruit. The costs associated with this process include land purchase, ‘plantlets’ (seedling trees), three years of labour preparing the land for planting, then actually planting, and then maintenance (pest/disease management, weed control, and fertilisation). Once the trees have matured and begun producing, the labour and equipment costs expand to include harvesting, which is often performed manually by skilled labour. Only once the coffee cherries have been processed (removed of their skins and pulp, then dried) are they ready to move to the next stage. It’s estimated that 2.5% of the cost you pay for your cup of coffee goes to the coffee producer – or, in the case of my last coffee, £0.08.
Exporting – shipping, customs, warehousing, logistics, and export markup/import margin – accounts for £0.18 of my £3.20 (but £0.16 of this is attributed to ‘exporter markup’). Next comes roasting, which encompasses a whole host of costs: the labour associated with roasting and packing, for sure, but also packaging materials and shipping, as well as general business costs (administration, interest, depreciation, amortisation, and lease), plus any certification. Nearly £0.40 is attributed to this, and that’s without the ‘roaster markup’: an additional £0.05.
Finally comes the point of purchase: retail, or the café. A whopping equivalent of £2.48 is allocated to this stage of coffee’s production, but this shouldn’t come as a surprise. The café’s lease alone is responsible for £0.32; labour, £0.67. Administrative costs account for £0.48, and then cups, condiments, lids, and those flimsy wooden stirrers add up to approximately £0.27 – even if you don’t use them. Utilities, repairs, and marketing account for £0.24, before we introduce the idea of what the café supposedly made on my purchase (‘retail markup’, £0.50). But again, this is only illustrative, and I strongly suspect – based on personal experience – that this café’s hip London location accounts for far more (and the ‘markup’ far less) than estimated here.
This type of calculation reflects a common depiction of coffee’s value chain as a linear ‘seed-to-cup’ diagram. Oriented from left to right, the diagram usually follows six or seven ‘steps’, tracing a path from producer to consumer without ever naming them directly: planting the seed, growing the tree, harvesting the cherry, processing and milling, exporting the green coffee, roasting, brewing. The simplicity of this diagram suggests value is created and captured equally as coffee moves along the chain – which we now know isn’t true. A different visualisation is needed.
In 2019, a gathering of seventy-five stakeholders, with a heavy representation of smallholder coffee farmers from Central and South America, met in Brazil, tasked with identifying who – and what – was missing from the basic seed-to-cup diagram. Transportation, agrochemical companies, banks, and access to credit were readily identified. Although absence from the diagram could be demonstrative of an actor without power (farmworkers, for example) this wasn’t always the case: traders, who often provide technical assistance and access to credit, have quite a lot of power, but were missing – perhaps because it’s easy to oversimplify their role as moving coffee from one place to another.
The meeting’s end product was the Coffee Systems Map, a circular tangle of connections between twenty actors1 and their intersections across six central actions2 in the specialty coffee industry which, according to its creators, ‘illustrat[es] the complexity of this global value-generating ecosystem’. By outlining the production of value in the system, the map poses several interesting questions. Does this – technically – make all the actors producers? When we speak of ‘producers’, do we reference them in terms of raw material or value? Are they one and the same?
The coffee industry still tends to view the idea of ‘production’ directly in relation to the raw product rather than value creation, despite the fact we know this stripped-back definition is more complicated than it may seem. Although the Coffee Systems Map defines ‘producers’ as those who ‘transform land and sunlight into coffee (eg. farmers, washing station owners)’, the ‘farming’ action touches no fewer than fourteen of the twenty actors – and that’s before we get to ‘processing’, the second action required to produce green coffee (which touches fifteen).
In trying to explain the complexity of coffee’s chain, value and price, it becomes all too easy to focus on the idea that only a fraction of the value created by coffee goes to those working to bring its raw material into existence. This is true, absolutely and beyond doubt. But just as the oversimplification of an actor’s role in the diagram can belie their power, limiting our definition of what it means to produce coffee in relation to raw material can conceal other troubling dynamics. It suggests that all of coffee’s value is created at the early stages of its journey, obscuring all the other points in the system where others invisibly benefit by capturing more value than they create.
If we broadened our view of a ‘producer’ to include someone who produces value, would it help us to better notice where an actor’s relationship to value creation and its capture are lopsided? Much of what consumers value, even when it comes to specialty coffee, is rooted in what is closest to them – the café, or point of service. Just as coffee farmers and farmworkers see only a fraction of the value they generate, so too do independent cafés and baristas. A convenient location, a charming interaction, a beautiful space, that well-brewed and beautifully presented coffee in your compostable cup – the price we’ve established we’re willing to pay for these things rarely goes to those who make it possible. (In London, average barista wages sit at around £9/hour, more than £2 below the city’s living-wage benchmark.) As with so much of the hospitality industry, the independent businesses we choose to support make a lot less money serving us than the landlords from whom they rent the space.
And yet, even if our choices don’t reward the people we think they should, consumers hold an inordinate amount of power within the system. The most recent definition of specialty coffee suggests ‘a coffee or coffee experience recognized for its distinctive attributes’, further qualifying that these attributes achieve significant extra value in the marketplace.
Here, the notion of what it means to produce coffee is expansive, articulated across the entire spectrum of coffee’s phases: roasted, ground, liquid, experience. It also acknowledges the role of the consumer as a receiver – and translator – of value. It openly states what we, as industry actors, have known for years: value is realised by every hand that touches the coffee, including that of the consumer. The port worker reviewing and safely stowing a container’s bill of lading – the piece of paper that proves coffee’s identity, and thus its distinctive attributes – is an integral part of the value that coffee achieves when a customer reaches for their wallet at a café till. So, too, is the motorbike driver, quickly transporting heaving sacks of ripe coffee cherries to the local mill, or the local exporter, who extended additional access to credit so farmers could purchase much-needed (and, this year, exorbitantly priced) fertiliser. Further, it reaffirms that the idea of ‘price’ isn’t a passive number but an active site of co-regulation: a price is just a number if there isn’t someone on the other side to agree to pay it; the value generated isn’t realised until the transaction is complete.
It’s an overt, if somewhat uncomfortable, recognition of consumers’ power in the system to realise value as price. It’s also a chance to try and redress the way value moves throughout so many of the systems underpinning our food and drink. For me, it’s all about expectations: every time two actors interact in the system – usually as a buyer and a seller – the translation of ‘value created’ to ‘price paid’ is mediated by the buyer’s expectation of what they will receive. At each point, the buyer holds the power to agree (or disagree) with the proposition the seller makes. And, just like our complicated relationship with coffee’s price as a proxy, where each one lands on the spectrum of ‘too much’ to ‘too little’, it generally depends on whether they are purchasing or paying. By the time a cup of coffee – or any agricultural foodstuff, really – makes it into our hands, it will have gone through this process more times than you could imagine, each layer of expectation inadvertently chipping away at the power of the producer and the amount of value they created that they’re able to capture.
My hope is not just that we become more comfortable paying more for our coffee; that’d be too simple. (I’d much rather we question why we expect ready access to coffee whenever we want it.) But if more of us, upon feeling that creeping, familiar indignation at the thought of paying more for something so embedded into our daily lives, just stopped to question our expectations – if we just questioned our understanding of how, when, where, and by whom it was created – we might begin to shift the balance of power back to the producers of value, rather than its consumers; and all without asking for more work than they already do.
Jenn Rugolo is partner in playset.coffee and editor of 25, the Specialty Coffee Association's biannual publication. She'd like to thank Ever Meister, Kim Elena Ionescu, Julie Housh, Dale Harris, and Jonathan Nunn for discussions that enriched this piece.
The illustration is by Heedayah Lockman, a Glasgow-based freelance illustrator and graphic designer, with an architectural background. Inspired by still life and food, she enjoys exploring colour and different techniques by using grids and patterns that contrast the shapes of everyday objects. You can find more of her work on Instagram @heedayahlockman.
Many thanks to Sophie Whitehead for additional edits.
Allied industries, auditors, brokers, coffee drinkers, financial institutions, future traders, government agencies, insurance companies, the Intercontinental Exchange, media, mills, non-governmental organisations, producers, research institutions, retailers, skilled labour, standards and certifications, storage facilities, transportation companies, and waste.
Brewing, exporting, farming, importing, processing, and roasting.