Microeconomic Analysis - Consumption of Coffee

Running Head: MICROECONOMIC ANALYSIS
MICROECONOMIC ANALYSIS
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Author’s Note

MICROECONOMIC ANALYSIS
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Table of Contents
Discussion.............................................................................................................................................2
Market Overview..............................................................................................................................2
Characteristics of the coffee industry:...............................................................................................3
Porter’s five forces............................................................................................................................3
Drivers of Demand and Supply in the Coffee industry......................................................................7
References...........................................................................................................................................11
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MICROECONOMIC ANALYSIS
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Discussion
Market Overview
Coffee, a brewed drink, is equipped from heated and roasted coffee beans, is the most
demanded beverage in today’s world. It is a drink that is consumed by almost everyone on a daily
basis to overcome stress and boost the level of energy. Consumption of coffee has seen major increase
in the last decade and is being accepted worldwide. It is the most transacted agricultural commodity in
the world. Production of coffee is mainly done in the developing countries and then exported to
developed country. Over $20 billion coffee is exported, contributes to the integral source of economy
for the countries like South America, South Africa and Asia. In the year 2018, the global market of
coffee valued at $150.11 billion. The market of coffee is expected to grow at a compounded annual
growth rate of 5.5% globally for the period 2019-2024 (Bravo-Monroy, 2016). The forecasted coffee
market is expected to reach $203.85 million by the year 2024.
Figure 1: Growth in Global Coffee Market
Characteristics of the coffee industry:
1. Monopolistic Competition: In a monopolistic competitive market there are number of firms
offering similar products and services. Coffee industry experience monopolistic competition
as this industry consist of many brands that produce similar products such as Nescafe,
Starbucks and many more (Asiimwe, 2013). These brands create barriers for the new firms
and restrict their entries in the industry.
2. Ruling the beverages market: Coffee does not only provide caffeine but also is becoming one
of the favourite beverages for the working community such as students, employees and
others. Coffee is a source of refreshment from the hectic busy schedule (Janissen, 2018). As a
result the demand for the product is rising year after year leading the coffee industry to grow
drastically.
In USD Billions