Coffee - The Supply Chain
A Nestlé case study

Page 1: Introduction

Today, a jar of instant coffee can be found in 93 per cent of British homes and increasingly consumers are trying out different types of coffee, such as cappuccino, espresso, mocha and latte. The expanding consumer demand for product choice, quality and value has led to an increase in the coffees being made available to a discerning public. 'value' is the way in which the consumer views an...
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Page 2: The Supply Chain

The supply chainis the sequence of activities and processes required to bring a product from its raw state to the finished goods sold to the consumer. For coffee, the chain is often complex, and varies in different countries but typically includes: growers - usually working on a very small plot of land of just one or two hectares. Many do some primary processing (drying or hulling...
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Page 3: Growing and Proccessing coffee

Coffee grows best in a warm, humid climate with a relatively stable temperature of about 27°C all year round. The world's coffee plantations are therefore found in the so-called coffee-belt that straddles the equator between the tropics of Cancer and Capricorn. Processing Coffee from the tree goes through a series of processes to end up with the saleable product - the green coffee bean. 1...
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Page 4: Price - Balancing Supply And Demand

Coffee prices are determined day-to-day on the world commodity markets in London and New York and with so many intermediaries standing between the producer and the consumer, how can we ensure that coffee growers receive a fair reward for their labours? Is the answer - as some believe - for coffee manufacturers to cut out the intermediaries, buy their coffee direct from farmers and guarantee a...
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Page 5: Nestle´s Trading Methods

Nestlé is a pioneer in purchasing coffee direct from growers. A growing percentage of the company's coffee is bought direct from the producer and it is now one of the world's largest direct purchasers. In countries where this is not possible Nestlé operates in a way that takes it as close to the growers as possible.
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Page 6: Buying Direct

In coffee-growing countries where Nestlé also manufactures for export or local consumption, it has a policy of buying coffee direct from the farmers. The company offers a fair price to the farmers, and so ensures regular supplies of guaranteed quality for its own factories. Higher quality commands a higher price - a premium that Nestlé is happy to pay, since good quality raw...
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Page 7: Buying From Dealers

In countries like the UK it is simply impossible for companies like Nestlé to buy from the hundreds of thousands of farmers who ultimately supply the company, and so the coffee is bought from dealers using the international market. However, Nestlé visits and gets to know as many people as possible in the supply chain. The company oversees the relationship between the dealer and...
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Page 8: Conclusion

Creating wonderful cups of coffee is not only Nestlé's business, it is the business of everyone involved in the supply chain. It is in everyone's interest - the farmers' and Nestlé's - that farmers receive a fair income from their coffee. This ensures that they will continue to grow coffee, and to invest in increasing their yield and quality, and this in turn guarantees the supply of...
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