The coffee industry has existed since ancient times, and it has never been a better time to invest in it.
Coffee originated when the Ethiopian goat herder Kaldi noticed his goats having extra energy after eating coffee fruit. Subsequently, Europeans fell in love with it in the 17th century. They made it a business that would later become a multimillion industry.
With the long production process, coffee generates a lot of jobs. Brazil produces the most coffee in the world, creating around eight million jobs for the population with over two million tons of coffee produced.
While coffee takes a long time to harvest and produce in order to be consumable by people, the flavor makes it worth the wait. Sipping it is both the perfect way to wake up in the morning and a great way to unwind.
We all love taking a sip of coffee at Starbucks, but how has coffee become such a huge industry that dominates the beverage market?
Coffee as an Industry
We all love coffee shops. People are used to seeing coffee shops as a place to meet with family and friends, have meetings, enjoy a relaxing time, and even more. When the afternoon arrives, we often crave a cup of coffee to get us through the rest of the day. Most people don’t underestimate the market power of Starbucks or Peets when considering the beverage landscape.
However, coffee shops are only a small fraction of pie- mass-production of coffee for home consumption makes up a huge chunk of the market. Bulk and retail coffee are lower margin than cafe coffee, but make up for it in volume. People are used to getting up in the morning and having their daily dose of caffeine and that won’t stop anytime soon.
The newest trend in the coffee industry is single origin coffee. Single origin coffee takes even longer because the harvest comes entirely from one specific region. Single origin coffee is also often more expensive than mass-produced coffee, but allows for specific flavor notes to be identified because of its traceability. With the general trend of people taking greater care in what they consume and looking for a new experience in every bite or sip, single origin coffee stands to make tremendous market-share gains.
The Benefit of Caffeine Addiction for the Investor
Coffee is physiologically addictive due to the caffeine content. This dynamic works out great for cafes as it produces extremely loyal customers. Addictive goods that aren’t illegal or are societal ills are few and far between. This dynamic makes for a unique investing opportunity.
Investors looking to diversify with a staple good with substantial upside should look into the coffee industry. Between the addictiveness of caffeine and the growth of trends like single origin coffee, the coffee industry has potential to be an extremely prudent investment.
How Is Coffee Produced?
As we noted before, coffee takes a long time to produce, and the production of it is a fascinating process. There are many ways to produce coffee, each country having its own preferred method depending on the climate.
Here, we’ll take a look at coffee production more generally and the many steps required in order to make the end product we’re used to consuming. If you plan on investing in coffee, you’ll want to be familiar with the process so that you’ll have an idea how various climatological, labor, or even geopolitical conditions could affect the coffee supply chain.
Growing the Seeds
Coffee only grows in certain countries due to the climate conditions. It is predominantly from South America and Africa, where the climate is warm.
The coffee tree usually grows its fruit after three to four years of being planted. This means that a single tree takes a long time to produce coffee beans. But after the tree starts producing coffee cherries, it can stay productive for sixty years.
Coffee doesn’t come out of the tree in a bean form. It grows as a cherry which contains the seed inside.
When the cherries are ripe and mature enough, they hand-pick each one, choosing the ones that are a deep red color. After they harvest the cherries, the workers take them to a station where a grader weighs and selects the best ones.
The drying process is perhaps the most important part of the coffee production, as it is where the grain dries so it can be roasted properly. Every country does this differently; some of them dry the grain itself while others dry the whole cherry.
Drying the whole cherry gives the coffee bean a more fruity flavor. It takes longer to dry, but the result is the tastiest. This process is around three or four weeks until the cherry is completely dry.
In Africa, they put the cherries on a drying mat that is woven or made of mesh so that the air flows freely. This process has to be closely monitored because drying the cherries can make them ferment and grow mold. Workers must rotate them constantly, even moving the cherries to different drying places.
Extracting the Seed
After the cherries are completely dry, they are transferred to a dry mill. In this station, they run the fruit through a hulling machine.
This machine uses friction to remove the fruit from the seed and the parchment layer. After the process is completed, the result is a beautiful grain with a green color due to its drying inside the cherry.
When the bean is dried alone, it tends to have a brownish color and a less fruity flavor.
After the seeds are extracted, they are packed into sacks awaiting shipment. After shipment, the coffee goes to production to be roasted and packed for consumers.
The packing of the beans is vital to avoid exposure to the air and other elements. Aluminum is a particularly good option for optimal protection.
The coffee industry is unique for several reasons. It has low seasonality, generates a huge number of jobs, and is an addictive staple that many love. With cafes continuing to generate tons of business and trends like single origin coffee continuing to grow, coffee could be an industry worth looking into.