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The net result has been growth in the industry averaging 2.9% over the period of analysis (U.S. Department of Commerce).
Segmentation Analysis This has been accomplished primarily through the use of process efficiency strategies including BPM and BPR, in addition to creating more consolidated supply chains. Despite the manufacturers gaining a greater degree of control over their profitability, mass merchandisers are re-defining coffee pricing structures. The adoption of fair trade coffee has been ironically a strong contributor to the industry's profitability despite the higher prices it requires be passed on.
First from product segmentation perspective, the coffee industry is dominated by roasted bean products (75%) followed by ground and specialty coffees and tea (11% each). Specialty teas are a market niche at 3%. Figure 1, Product Segmentation of the Coffee Industry, graphically shows the share of market attributable to each product type.
Figure 1: Product Segmentation of the Coffee Industry
Source: (U.S. Department of Commerce)
Product/Services
Share
Roasted bean coffee
Ground and specialty coffees
Tea
Other tea
In terms of distribution channels, grocery wholesalers (73.2%) dominate the distribution channel strategies of nearly every manufacturer to an extent. This is attributable to the fact that mass merchandisers including Safeway, Tesco, Wal-Mart and other chains with significant influence on manufacturers' ability to competitive price their products. In addition the reliance on coffee futures trading also is significantly changing the pricing structures of products and therefore modifying their margin structures for distribution (Mohan, 1000-1002). Figure 2: Distribution Channel Segmentation of the Coffee Industry (U.S. Department of Commerce) graphically illustrates the market-making role of grocery wholesalers.
Figure 2: Distribution Channel Segmentation of the Coffee Industry
Source: (U.S. Department of Commerce)
Market Segment
Share
Grocery wholesalers
References
Danny Pimentel Claro, Priscila Borin de Oliveira Claro. "Coordinating B2B cross-border supply chains: the case of the organic coffee industry. " the Journal of Business & Industrial Marketing 19.6 (2004): 405-414. ABI/INFORM Global. ProQuest. 10 Jan. 2009
Alain d'Astous, Suzanne Mathieu. "Inciting consumers to buy fairly-traded products: a field experiment. " the Journal of Consumer Marketing
25.3 (2008): 149-157. ABI/INFORM Global. ProQuest. 9 Jan. 2009
Sushil Mohan, James Love. "Coffee futures: role in reducing coffee producers' price risk. " Journal of International Development 16.7 (2004): 983-1002. ABI/INFORM Global. ProQuest. 10 Jan. 2009
U.S. Department of Commerce, STAT-USA Internet Applications. 2009. U.S. Department of Commerce. 12 Jan 2009 http://www.stat-usa.gov/.
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