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Market Analysis of a specific commodity - Essay Example

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Market Analysis of Coffee Name: Institution: Introduction Holihan (2008) explains that, in economics, the term commodity specifically entails goods. A commodity is a product is a marketable item that is difficult to differentiate from other products of the same type that are from other manufacturers or producers…
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Market Analysis of a specific commodity
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Download file to see previous pages The class of commodity goods includes products with high market demand, but that are supplied to the market without qualitative differentiation e.g. from the taste of coffee, one cannot easily differentiate that it is from Brazil or Ethiopian highlands or if the coffee is a product of Nestle or Sara Lee companies without careful study of the brand. However, even though the commodity products are considered equal to one another, they are not exchangeable if they do not meet the market standards. For example, sugar as a commodity product, there is no company that has a higher chance of controlling its market supply or price level than other companies since to a consumer it is difficult to differentiate the taste of sugar (Holihan 2008). Based on the economic perspectives and arguments of commodity markets and commodity products, this research paper aims to analyze the market of coffee (as a commodity product): and the players in the coffee market. The analysis will encompass description of the coffee market structure, companies or players involved, market share, market size, major players, coffee demand and supply, competition and market dominance. Commodity market: Coffee Market The product coffee Often, people depict coffee as a homogenous product. However, this is not right because there are different types and forms of coffee in the market. According to ICO (2002), the two main types of coffee are Robusta and Arabic: Arabica is the largest, covers almost over 70% of the worldwide coffee trade, and exports while Robusta constitutes the remaining percentage of lower than 30% of the world market. ICO (1995) listed 70 coffee producing countries worldwide with Brazil and Colombia leading in coffee production. The Coffee Market Coverage In reference to Fridell (2007), coffee is not just a drink to enjoy; it is a global commodity and influences world economy. The commodity coffee has a global market and occupies a higher position in the world commodity markets. Fridell (2007) explains that the product has been an important international commodity for trade since 1800s. Coffee is the world’s most widely traded agricultural commodity. Research shows that many, including the world’s renowned historian Mark Pendergrast, have describe coffee as the second most legally traded world commodity after oil. Coffee has cemented its position in most world stock and securities exchange as an essential exchange commodity (Kirsten 2009). As a global product, Fridell (2007) notes that coffee follows a long market chain before its final consumption. On one, hand, the market of coffee constitutes net producers and net consumers while, on the other hand; there are net exporters and net importers in the world. Research shows that most producer countries are net exporters and not net consumers (Kirsten 2009). In addition, large multinational corporations that roast and retail the coffee to final consumers dominate the coffee market. Holihan (2008) says that the international trade has essential significance in global marketing and distribution of coffee. In the global market, international dealers, traders or international trade houses purchase coffee from the exporting countries. Roasters in Europe tend to purchase their coffee from international trade houses or specialized import agents with contracts of exporters in producing countries. While large roasters-corporations prefer ex-doxy purchase of coffee, small roasters prefer purchase of small lots ...Download file to see next pagesRead More
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