By David Hoyt, John McMillan
Stanford Graduate School of Business
February 19, 2004
In 2003, the 25 million international coffee growers faced a crisis. Prices for coffee beans were the lowest they had been (in real terms) in 100 years. The coffee growing business had historically been one of boom-and-bust. Several countries had to dominate the market and raise prices, only to attract new entrants that increased total production, resulting in oversupply and price collapse. An international cooperative agreement had been attempted in order to stabilize prices, but that effort failed. At the same time as growers were struggling to survive, a small number of roasters dominated the world market. Specialty coffee companies were also thriving. The case examines coffee supply and demand. It discusses efforts by governments, non-governmental organizations (NGOs) and roasters to help farmers earn enough money to support themselves and sustain their farms. It asks what changes in the market, or actions by governments, can help to correct the existing market problems.