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Business

Losing Out in the Coffee Boom

Starbucks' chances in Germany look bright, according to the country's coffee experts. But the situation of the farmers providing them beans for their Latte Macchiatos remains miserable.

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Coffee farmers aren't getting a full cup of profits

It certainly took awhile.

Starbucks opened 5,400 stores in North America, Asia and the rest of Europe before arriving in Germany. One has to wonder why.

Germany is the second-largest importer of coffee behind the United States, according to the International Coffee Organization (ICO). The consumption here is high and gradually rising, with some 74 billion cups drunk in 2001 – almost 1,000 cups per German per year.

"The chances for going into the market are very good right now," Hans Georg Müller, of the German Coffee Association told DW-WORLD.

Coffee bars and shops are booming in Germany at the moment as part of a European-wide trend in coffee bars led initially by England.

"Someone asked me a couple of years ago, 'isn’t there a stage of market saturation? This can’t go on,' " said Martin Wattam, of the ICO in London. "But it doesn’t seem to have happened. It just keeps on going on."

There are currently 400 Starbucks-style coffee bars in Germany, but room for at least 1,000, Müller said. Current chains include Cafetiero, Caras and Frazer Coffee in Frankfurt. But their presence is relatively small and something Starbucks can easily surpass with its plans to open up at least 180 other franchises in Germany in the coming years.

"I think it’s good for the whole coffee shop market," said Müller, pointing to the chain’s recognition factor. "It will give a kind of push to the market."

Kaffeebohnen

Coffee beans

Farmers losing out in coffee bar boom

Farmers in Africa, Asia and Latin America hit hard by the reduced demand for coffee worldwide are likely to disagree. There is a current surplus of 10 million bags of coffee on the market. More coffee bars aren’t likely to reduce that count, because the typical coffee bar latte or macchiato has a low concentration of beans.

"It’s just a shot of espresso and a lot of milk," said Wattam.

Coffee retailers can stay afloat because they roast the coffee and turn a cheap commodity into something valuable. As a result, they have the freedom to mark up the prices when they begin selling the roasted beans.

Coffee farmers see none of that money, said Wattam in an interview with DW-WORLD. Less financial incentive means less of an effort to produce quality beans which explains why at least five percent of the coffee currently on the international market is of poor quality.

Reversing the downturn

Wattam’s organization hopes to reverse that trend by simply eliminating that five percent from the market.

To help the farmers survive, the organization is encouraging diversification in farming and introducing ad campaigns in countries such as India to increase domestic demand for a domestic product, Wattam said.

"One can’t stress enough the point of having a stable market," he said. "It’s not like we want farmers driving around in Rolls Royces, it’s a question of prices. It’s about sustainability and having a sustainable existence."

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