Coffee is a commodity

At Starbucks they obviously need coffee. To insure that they get the coffee at a good price, Starbucks has chosen to buy the coffee fields, rather than pay an advanced contract price for the coffee beans. Just think it's Starbucks was buying coffee from Cuba, and that hurricane that came through Cuba two months ago destroyed all the coffee beans, in this case Starbucks cannot sell you your Latte. That would really piss you off. Starbucks knows that if they piss you off; you may never come back again. Also if Starbucks kept raising and lowering the price of coffee they sell in the store you might get upset. But since the coffee is a commodity, the price would fluctuate. And Starbucks knows since they buy so much coffee, that they would have to guarantee they have the coffee, and then they would have to pay a premium price for the contract for coffee.

Mr. Schultz the founder of Starbucks, a former Chicago boy and commodity trader knows that with the volume of coffee it's Starbucks sell, if they entered into contracts to buy the coffee in advance then they would also be raising the price of the commodity itself. Now Starbucks the seller to the end user owns 23 percent of all the coffee plantations in the world. Are they manipulating the commodity, sure they are. But if they fail to manipulate the commodity of coffee and sell retail the large volume of coffee they do, then they would have decreased margins of profits. That would hurt shareholder value, quarterly profits and there is no way Starbucks would have reported a 37 percent gain in profits in the fourth quarter of 2001. Not to mention the exponential growth in stores and profits since their original IPO. You should not be surprised, that Starbucks has been able to do this.

You should not be surprised that Folders coffee and other name brand coffees have increased their prices in the stores. Its Starbucks owns 23 percent of all plantations of coffee in the world then that leaves 77 percent. Now those other companies are vying for that 77 percent since the total production of coffee available to the commodities exchange is 23 percent less. Therefore simple supply and demand in the irregularities of weather, which limits output of a plantation, will tend to drive the price and upward direction. It's Starbucks does not need all the coffee for its own stores, it can now sell its coffee beans on the open market to other companies at wholesale level. That is of course before the coffee beans actually get branded Starbucks. At that point they are just the commodities of coffee beans.

"Lance Winslow" - If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs

---

Does Your Morning Coffee Cause You Pain or Discomfort?

Does your morning coffee cause you pain? Are you frustrated... Read More

Choosing A Coffee Maker - Tips On Finding The Right Features

Choosing a good coffee maker is not a decision to... Read More

Coffee ?Nectar of the gods

About 850 A.D it is said that a lone shepherd... Read More

La Minita Coffee ? It?s in the Green Beans

La Minita; Spanish for "The Little Gold Mine" says it... Read More

Starbucks Coffee History

To summarize something as phenomenonally successful as Starbucks coffee history... Read More

Coffee Is A Historic Beverage, And It Makes For A Great Gift

Ahhhhh, coffee... a fantastic dark beverage that wakes us up... Read More

History of Arabian Coffee

Arabian coffee is the quintessential coffee of the world. Arabia... Read More

Starbucks Product Review

Have you had the pleasure of tasting Starbucks new less... Read More

Caffeine - I Bet You Didnt Know This! Health and Nutrition!

What exactly is caffeine? It is a colorless, somewhat bitter... Read More

6 Delicious Coffee Recipes

Do you love coffee? Most of us do. In this... Read More

Factors to Consider When Choosing an Espresso Machine

Buying an espresso machine is an important decision ? choose... Read More

Coffee Makers

If you are a gourmet coffee drinker, you may want... Read More

Coffee - How to Buy, Store, and Grind it for the Perfect Cup

In the early days of the coffee craze, before the... Read More

Coffee and Alzheimers Disease

With the American population aging rapidly, diseases that affect the... Read More

English Coffee

With English Tea being a very familiar term, English coffee... Read More

The Coffee Culture in the USA

It wasn't until I moved to the US that I... Read More

How Is Kona Coffee Different?

Like much of Hawaii, Kona offers ideal climate conditions for... Read More

Does Coffee Make You Fat or Help with Diabetes?

Who the heck knows?According to two studies published in the... Read More

Those Elusive Coffee Beans!

With the spread of various coffee beans into our lives,... Read More

Coffee Roasting: Learning the Fundamental Art of Making Coffee Can be Fun

Coffee roasting from light to very dark, is an art... Read More

Brewing the Perfect Cup of Coffee

Do you remember your first experience with coffee? I'm sorry... Read More

Who is Juan Valdez?

Juan Valdez is a fictitious character who was created in... Read More

Is Caffeine a Hero or a Villain in Your Life?

Many sober, law abiding people who would never dream of... Read More

The History Of Coffee

Coffee - THE Drink of ChoiceDid you know coffee is... Read More

History of the Coffee and Espresso Machine

A large percentage of the population loves to drink both... Read More

Brazilian Coffee

Adultery, deceit and politics, all the makings of a modern-day... Read More

Heating Vegetable Oil to Frying Temps Forms Toxic Compound

New research by a University of Minnesota professor and a... Read More

Coffee For Your Health

Many of us rely on coffee to get us going... Read More

Woman Dies from Caffeine Overdose and Expert Calls for Action in New Book and FDA Petition

An autopsy released this week has found caffeine to be... Read More

Make the Switch! Coffee to Tea

Having a hard time giving up your 4 cups of... Read More

Pure Kona Coffee

Pure Kona Coffee is gourmet coffee grown only on the... Read More

How To Clean A Coffee Maker

Ever wonder how to clean a coffee maker the right... Read More

Coffee Commodities and Starbucks

If we look at commodity trading from a purely conceptual... Read More