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 organisation’s product in comparison with competitive offerings. So how does coffee get from growing on a tree perhaps 1,000m up a mountainside in Africa, Asia, Central or South America, to a cup of Nescafe in your home, and in millions of homes throughout the world?
This case study explains why Nestlé needs a first class supply chain, with high quality linkages from where the coffee is grown in the field, to the way in which it reaches the consumer.
The Supply Chain
The supply chain is 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) themselves
- Intermediaries – intermediaries may be involved in many aspects of the supply chain. They may buy coffee at any stage between coffee cherries and green beans, they may do some of the primary processing, or they may collect together sufficient quantities of coffee from many individual farmers to transport or sell to a processor, another intermediary, or to a dealer. There may be as many as five intermediary links in the chain
- Processors – individual farmers who have the equipment to process coffee, a separate processor, or a farmer, co-operative that pools resources to buy the equipment
- Government agencies – in some countries the government controls the coffee trade, perhaps by buying the coffee from processors at a fixed price and selling it in auctions for export
- Exporters – they buy from co-operatives or auctions and then sell to dealers. Their expert knowledge of the local area and producers generally enables them to guarantee the quality of the shipment
- Dealers/brokers – supply the coffee beans to the roasters in the right quantities, at the right time, at a price acceptable to buyer and seller
- Roasters – people like Nestlé whose expertise is to turn green coffee beans into products people enjoy drinking. The company also adds value to the product through marketing, branding and packaging activities
- Retailers – sellers of coffee products which range from large supermarkets to hotel and catering organisations, to small independent retailers.