Coffee. Fragrant, strong and desirable. Its aroma is unmistakable, evoking memories of seven different blends swirled around the understated offices of the International Coffee Organization.
It was the late nineties. The global coffee market was oversupplied and prices were falling as quickly as you could say 'single-shot decaff latte.' The ICO, a coffee OPEC if you will, was on the verge of intervening in the market – it was brewing a plan to 'retain' or take excess coffee off the market in a bid to support flagging prices.
Commodity reporters, myself included, were waiting for the news to break and had precious little to do except read the newspapers, chat and, well, drink coffee. In fact the running joke was that the ICO hoped us reporters would drink up part of the global glut. We did slurp our way valiantly through everything from Ethiopian to Vietnamese blends. But we didn't see prices drop ... appreciably.Make Mine A Double Latte
Fast-forward to the commodity boom of today and the picture has changed considerably. Consumption is growing and supply is expected to dwindle in some producer-nations such as Brazil, hurt by dry conditions. The coffee market is big business.
Coffee – the other black gold – as a source of foreign exchange, is the second most valued commodity for developing countries, according to the ICO. According to www.the-infoshop.comand Euromonitor, Japan, China and ASEAN countries guzzled US$6 billion (retail value) worth of coffee in 2006. Japan alone accounts for 73% of this figure – that’s over $4 billion the Japanese spent on coffee. Anyone want to work out how many cuppa of Joes that translates into?
But there are no prizes for guessing where future demand growth will be here in Asia. China is the bull in the coffeeshop. "Asia’s, and in particular China's, rising disposable incomes plus an acquired taste for coffee could spur consumption leading to explosive demand," according to Chartwell Partners.
And though China spent a mere $240 million on coffee last year, can you imagine what the demand for coffee will be like if you could persuade just half of the over one billion Chinese to switch from tea to coffee … I can see Starbucks’ executives drooling over their double tall Americanos.