What makes up the cost in the price of coffee?

The price of coffee is determined by multiple factors, starting at the country of origin where the coffee is grown all the way into your cup. In this article, we’re going to examine many of the variables that make up the price of your coffee.

·       Farming – At the farm level, producers are responsible for planting new coffee plants, which can take between three and five years to harvest the first fruits. They manage crops, fertilize and harvest, almost exclusively by hand in all countries except Brazil.

·       Processing – Farmers either process the recently harvested coffee cherries at their small farm or deliver it to a centralized processing station, such as the local coffee cooperative. There, the coffee is either washed of the cherry pulp, fermented in tanks and dried on patios, or, it will be dried whole in the natural process. There are a few more complicated processes that are becoming more popular today.

·       Milling – After the coffee is processed it will be milled of the outer parchment layers. This process is carried out generally in a centralized mill, sorted and bagged ready for shipping to the United States and the rest of the world.

·       Shipping & Storing – Coffee is shipped to the United States and will be stored in special climate controlled warehouses until it is purchased and delivered coffee roasters, such as Reverie Coffee Roasters.

·       Roasting – Coffee roasters will roast coffee for many uses. Roasters store, roast, grind, package and distribute coffee to all types of customers, such as coffee shops, grocery stores, offices and more.

·       Brewing – Coffee prepared in a specialty coffee shop is brewed by skilled professionals trained to prepare your coffee with great intention. Each cup or shot of espresso is ground with special grinders, brewed by hand or with highly technical equipment to produce great tasting coffee and espresso consistently every time.

As you can read, there are many steps in the process for making coffee, and even more when you intend to make great coffee. And each step involves people, some of which do backbreaking work for little to no incentive.

The price of the green coffee paid to farmers can range from at little as $1.00 to a few dollars per pound depending on a myriad of factors. It’s important to know that there are many times the cost for producing the coffee exceed the payment. Processing and milling operations could add another $.25 to $.50 per pound. Transportation costs can range in price from $.05 to $.20 per pound. The largest jump in price for coffee occurs at the roasting level where coffee prices convert from a $3.00 to $7.00 per pound up to a retail price ranging from $14.00 to $30.00 or more per pound depending on the quality and the price paid. And if the coffee goes to a coffee shop to be resold, there is more markup to cover the cost of the cup, lid, milk and whatever you may add to your coffee when you order your favorite drink.

At every step in the process you would expect there to be profit for each of the key players in the value chain. And though the prices seem to add up to a lot to make your final price in the cup, it’s important to know that the average coffee shop and coffee roaster don’t expect to earn beyond 7-12% NET profit after all expenses. And in each step in the process there is an expected gain.

So, the question is, what is fair and what is expected if profit isn’t met as it often isn’t? Coffee isn’t a lucrative industry for just about every step in the value chain. But by understanding what each step looks like, we begin to understand why a cup or bag of coffee may seem to be expensive.

There’s a lot of value you can discover in coffee and Reverie is committed to helping you discover this, whether in a bag of beans or in a cup of coffee. If you would like to start a conversation about the price of coffee, send us an email. We’d love to hear from you.