The health and economics of coffee

“If this is coffee, please being me some tea. But if this is tea, please bring me some coffee”

– Abraham Lincoln

 

Few commodities invoke emotion like coffee. 62% of Americans drink coffee every single day – each one gets through 3.1 cups on average.

The most important source of supply for our global coffee fix is Brazil, which produces more than 37% of global production. Unfortunately, Brazil has been hit by lower-than-expected temperatures, drought and even some frost – which are hurting its coffee crops and output. Ethiopia, which accounts for about 4% of global production, is also seeing supply disruptions as the escalating civil war, that has seen schools close and rebels take control of some towns, continues. Ongoing shipping bottlenecks are also playing their part.

So, considering that wholesale prices have doubled, you’d be forgiven for worrying that the price of a grande double-shot hazelnut latte is about to double as well – that’s unlikely.

That’s because the cost of the wholesale coffee itself typically makes up only a tiny proportion of the total, according to a 2019 UK study from the Financial Times and Allegra Strategies. The cost of the actual coffee is usually only around 4% of the cost of a typical cup, which in the study worked out to about £0.10. That proportion is probably even lower for an order like a hazelnut latte, which will have sweeteners and more milk than a typical cup.

The data is from 2019, and just in the UK. It gives a good sense of how complicated the coffee supply chain is. The coffee roaster usually accounts for most of the cost of the actual coffee, while exporters, transporters and processors take their cuts, leaving the actual grower with around just 10% of the coffee cost. In this study that worked to be just one penny from a typical £2.50 cup of coffee.

With prices rising, that number might be a little higher than in this example, but it’ll remain just a fraction of what it costs you, even if you order a simple double-shot espresso.

The ambience, experience, branding, physical room of a coffee shop takes up 88p of the £2.50. The staff wage costs account for another 63p.

 

Price you pay:  £2.50.

 

Where it goes: –

– Shop / Rent: £0.88

– Staff & Wages: £0.63

– Tax: £0.38

– Profit: £0.25

– Cup, Napkins and stirrers: £0.18

– Milk: £0.10

– Coffee: £0.10

 

Then if we take that 10p for the coffee, that is broken down as follows: –

– Roaster costs & margin: 8p

– Exporter: 0.2p

– Transporter: 0.35p

– Processor: 0.45p

– Grower: 1p

 

So much for economics. What about health?

Mostly neutral, for cardiovascular disease and cancer, if you stay within 3 or 4 cups a day, maximum.

 

Mental health: The UK National Health Service advises that avoiding coffee may reduce anxiety. Caffeine, the major active ingredient in coffee, is associated with anxiety. At high doses, typically greater than 300 mg, caffeine can both cause and worsen anxiety. For some people, discontinuing caffeine use can significantly reduce anxiety.

 

Parkinson’s disease: Meta-analyses have consistently found that long-term coffee consumption is associated with a lower risk of Parkinson’s disease.

 

Type II diabetes: In a systematic review and meta-analysis of 28 prospective observational studies, representing over one million participants, every additional cup of caffeinated and decaffeinated coffee consumed in a day was associated, respectively, with a 9% and 6% lower risk of type 2 diabetes.

 

 “Coffee should be black as hell, strong as death and sweet as love”

– Turkish proverb

 

 

James Neophytou