1. PORTER'S FIVE FORCES MODEL
An Industry is defined as a group of companies of suppliers of products or services that are close substitutes for each other. Close substitutes are products or services that meet the same basic consumer needs.
the-analysis-of-the-coffee-industry-in-mexico-under-the-model-of-the-five-forces-of-michael-porterThe challenge for managers is to analyze the competitive forces of an industrial environment in order to identify the opportunities and threats facing an organization. Michael Porter of the Harvard School of Business Administration developed a theoretical framework to assist managers in conducting this analysis. Porter's theoretical framework, known as the five forces model, concentrates, as its name indicates, on the five forces that generate competition within an industry: 1) the risk of the new entry of potential competitors; 2) the degree of rivalry between established companies within an industry, 3) the bargaining power of buyers, 4) the bargaining power of suppliers, and 5) the proximity of substitutes for an industry's products.
1.1 Rivalry between Competing Companies
The strategies that a company follows are successful only to the extent that it provides a competitive advantage over the strategies applied by rival companies. Changes in a company's strategy are dealt with through counter actions such as lowering prices, improving quality, adding features, delivering services, extending warranties, and increasing advertising.
The intensity of rivalry between competing firms tends to increase as the number of competitors increases, as competitors become similar in size and capacity, as demand for the industry's products decreases, and as price reductions become common.. Rivalry also increases when consumers switch brands easily, when barriers to exit the market are high, when fixed costs are high, when the product is perishable, when rival companies have different strategies, origins and cultures, as well as mergers and acquisitions are common in the industry. As rivalry between competing firms grows more intense, the industry's profits decline,in some cases to the extent that the industry itself becomes unattractive.
1.2 Potential Entry of New Competitors
Whenever new companies enter a particular industry with ease, the intensity of competition between companies increases; However, among the barriers to entry are the need to achieve economies of scale quickly, the need to obtain specialized knowledge and technology, lack of experience, strong customer loyalty, strong brand preferences, the requirement of a large capital, lack of adequate distribution channels, government regulatory policies, tariffs, lack of access to raw materials, possession of patents, unattractive locations, berthing of established companies, and potential market saturation.
Despite various barriers to entry, some startups enter industries with high-quality products, low prices, and significant marketing resources; Therefore, strategy work is to identify new companies that have a chance to enter the market, monitor the strategies of rival new companies, fight back if necessary, and capitalize on existing strengths and opportunities.
1.3 Potential Development of Substitute Products
In many industries, companies compete closely with the manufacturers of substitute products from other industries. The presence of substitute products places a cap on the price charged before consumers switch to a substitute product.
Captive pressures arising from substitute products increase as the relative price of these products declines and as the cost of switching customers decreases. The competitive strength of substitute products is best measured by the advances they make in market share, as well as the plans companies have to increase their capacity and market penetration.
1.4 Bargaining Power of Suppliers
El poder de Negociación de los proveedores afecta la intensidad de la competencia en una industria, sobre todo cuando existen muchos proveedores, cuando sólo hay algunas materias primas sustitutas adecuadas o cuando el costo de cambiar las materias primas es demasiado alto. Tanto los proveedores como los productores deben ayudarse mutuamente con precios razonables, mejor calidad, desarrollo de nuevos servicios, entregas a tiempo y costos de inventario reducidos para mejorar la rentabilidad a largo plazo.
Companies must follow a backward integration strategy to gain control or ownership of suppliers. This strategy is effective especially when providers are unreliable, too expensive, or unable to consistently meet the needs of a business. Firms typically negotiate more favorable terms with suppliers when backward integration is a commonly used strategy between rival firms in an industry.
1.5 Bargaining Power of Consumers
When customers are concentrated in one place, are large or buy by volume, their bargaining power represents a major force that affects the intensity of competition in an industry. Rival companies offer extended warranties or special services to win customer loyalty, as long as the bargaining power of consumers is significant. The bargaining power of consumers is also greater when the products that are acquired are standard or little differentiated. When this occurs, consumers negotiate sale price, warranty coverage, and additional packages to a greater degree.
2. Analysis of the Coffee Stations Industry
2.1 Bargaining Power of Consumers
Responsible consumption
In recent decades, consumers have seen their purchasing power systematically decrease, frequently being forced to purchase goods and services of lower quality and at prices set by large self-service stores and other intermediaries.
At the same time, we are the consumers who have in our hands the ability to influence our environment. One way to begin to exercise this capacity is through conscious consumption or responsible consumption, which implies making informed decisions regarding what products we buy and what the social and ecological repercussions of said purchases are.
Each of us has the ability to influence our environment in different ways, some of which can favor the conservation of biodiversity and improve the standard of living of the country's peasants, and others that promote a market logic where the only thing that matters is to increase the profits of large companies regardless of the social and ecological consequences they may cause.
When buying any good or service, the consumer delivers a specific amount of money, which is used by the production company to start a new cycle of production, increasing the profits obtained during the previous cycle. Thus, the "profits" obtained from our everyday purchases can be used to encourage practices that promote social justice and ecological conservation or practices that harm the environment and reinforce various practices of human exploitation. In this section we will talk about these points in relation to responsible consumption or conscious consumption.
Current context
The responsible consumption movement arises from the economic, ecological and social repercussions that neoliberal policy has brought with it, which is characterized by the opening of markets, the predominance of capital and the exaltation of consumption.
We are currently facing a global scenario in which "high-income countries, with only 14 percent of the world's population, account for 75 percent of world GDP"; and the 50 largest TNCs in the world have sales figures greater than the GDP of the 150 poorest countries on the planet »*.
This situation is favored by various governments that grant greater facilities to TNCs with regard to fiscal support, few (or no) environmental and labor obstacles, and so on. Numerous studies indicate that if these accelerated levels of production and consumption are maintained, the massive destruction of the environment, the levels of poverty and labor exploitation, as well as the growing migration to cities and developed countries will be further aggravated.
Responsible Consumption vs. Consumerism
Consumerism is based on the logic of accumulation and competition, in which the cult of the individual image is promoted and that has been developing true generations accustomed to "use and throw away." In addition, the promotion of a product or service is done using a careful selection of the information that is presented to the consumer, highlighting real and imaginary qualities of the products, while hiding other types of information, such as some environmental repercussions (pollution) or agroindustrial processes (as in transgenic corn, for example).
To counteract this phenomenon, responsible consumption starts from the premise that when we make an informed choice about the products and services we purchase, we can influence the market, that is, in new consumer trends that are permanently monitored by many small and large companies.
This means that from our individual purchase exercise and the gradual formation of a culture of responsible consumption, it will be possible for us to contribute to the protection of the environment and to the improvement of the living and working conditions of thousands of people, by deciding who we give you our money. This is possible because by being increasingly informed, we will have more elements to prefer an article produced with responsible practices over others that seek to reduce costs with practices and technologies that are harmful to humans and to the planet.
Cause Related Marketing (CRM) or Cause Related Marketing
The decision that certain companies are concerned about the products and services they provide can be explained as a concrete step within a broader strategy known as "Cause Related Marketing" (CRM) or cause-related marketing.
On the other hand, it should be noted that, although this strategy is aimed at increasing sales with the use of non-commercial arguments, especially within a particularly loyal market segment, it is also characterized by strict inspection by third parties, who certify publicly, through a logo, that companies actually comply with what they offer to consumers through the sale of a product, such as a better payment to coffee growers for their grain, the elimination of the use of products that are harmful to the health or the environment, etc., while ensuring that the ultimate beneficiaries of such actions are actually those whom they claim to support.
Among the results obtained by companies with the use of CRM in developed countries we find that:
- It enhances the image of the company in front of consumers, who for that reason might prefer this and other products of the same company over those of the competition and; They have the strong support of the media, which inform consumers what is fair trade and where can you buy such items. Finally, it is necessary to point out that the wide dissemination of the company's CRM activities, including its specific objectives as well as their beneficiaries, will play a vital role in the impact and duration of any campaign within fair trade.
Responsible product stores and points of sale:
Here is a list of stores and points of sale that offer responsible products in the Federal District:
Organic and whole foods.
Laura 83, Col. Villa de Cortés; CP. 03500, México, DF Tel: (55) 5579 2525
Sierra Madre Group.
Prado norte 324, Col. Lomas de Chapultepec; CP 11000, México, DF Tel: (55) 5520 8820 [email protected]
Friends of the UNAM Botanical Garden
Exterior University Circuit, Ciudad Universitaria, Col. Coyoacán; México, DF Tel: (55) 5550 9304 Fax: 5622 9046
Coffee from our land.
Álvaro Obregón # 100; Col. Roma; CP 06700
Coffee, health and hiv - Cappsida.
José Antonio Torres # 618; Col. Vista Alegre; CP 06860. Very close to the Chabacano metro (Line 2).
Papalotl Cafeteria.
Commerce and administration # 40; Col. Copilco University.
Café Villa - Self-managed project of the Cerezo Committee, Av. Panamericana s / n, esq. México 68, in the Social Center of the Pan-American Village, Coyoacán Delegation. Open from Sunday to Friday from 4:00 p.m. to 10:00 p.m.
Moa Cultural Center.
Insurgentes sur # 659 esq. Maricopa; Col. Naples; Tel. (55) 5543-1021 and 5543-1062.
Dandelion.
Iztaccíhuatl Square # 36 B; Col. Ex-Hipódromo Condesa; CP 06410; Tel. (55) 5264-6587.
Ecored
Petén 477-B, Col Narvarte; CP 03020, México, DF Tel: (55) 5605-9485.
Organic Farm.
Av. San Fernando # 765, local 4-C; Loreto and Peña Poor Ecological Park.
Fun and coffee.
Plaza Mayor corner Plutarco Elías Calles, one block before Rojo Gómez. Tel: (55) 5115-7650 (Raymundo or Claudia)
The house of papalotl bread.
Av. San Fernando # 765, corner of Insurgentes Sur; Loreto and Peña Poor Ecological Park; CP 14010; Tel. (55) 5528-2041
The most natural.
Prado Norte 351, Col Lomas de Chapultepec; CP 11000, México, DF Tel: (55) 5520-3037
Mother Earth.
Pasaje Parián, Local 13 Álvaro Obregón 130, Col. Roma, México DF 06700. Between Jalapa and Orizaba
Momo coffee Countess.
Tamaulipas 66; Col. Condesa, between Michoacán and Montes de Oca. Tel.: 04455-2571-3606 (Frida and Ánglel).
Faces and Voices - fair treatment.
Mérida 109 local D corner with Álvaro Obregón, Col. Roma, México DF 06700. (Entrance by Alvaro Obregón) Tel. (55) 5514-8453 Fax: 5514-6539. Next reopening!
The green corner.
Mazatlán 81, local 1-2; Col. Condesa; CP 06140; Tel. (55) 5286-3939 and 5286-7275.
Cellular store of Tianguis Tláloc.
Tlaloc # 40-3, Col. Tlaxpana; (Near the Normal Metro) Tel. (55) 5535-0325.
In general terms we can say that the bargaining power of consumers is high due to the amount of options that exist between the different coffee stations, such as location, price, quality, furniture, exclusivity, additional services (such as home delivery), products additional (such as pastries or food) tradition, etc. So those responsible for coffee stations must be clear about the needs of their market.
Although nowadays the stores and points of sale of responsible products are not part of the most competitive, the trend for the natural and healthy suggests that in the not too distant future there will be greater awareness among consumers and this ideology will have greater fruits for responsible product sellers.
2.2 Bargaining Power of Suppliers
The Production and Marketing of Coffee in Mexico
Coffee is a product that has been linked to the international market for several centuries. In the seventeenth century its consumption began in Europe, which became popular until the eighteenth and nineteenth centuries. Production has traditionally been established in developing countries, which were under colonial regimes; and on the other hand, industrialization and most of the consumption is concentrated in the developed countries.
Every year around 100 million bags of 60 kilograms of green coffee are consumed in the world, which are produced in the countries of Latin America, Asia and Africa.
In recent years, the international coffee market has gone through two different situations: a regulated trade scheme between producing and consuming countries, and a free trade scheme.
The controlled market scheme operated from 1962 to 1988. After several crises of overproduction of coffee, in 1962 the International Coffee Organization (OIC) was created, which is a multinational body that operates within the framework of the Organization of the United Nations, having its headquarters in the city of London. Almost all producing countries and the 25 main importing countries participate in the ICO; Producers and consumers have equal participation in the decision-making of the organization.
Under this scheme, the market was controlled through a set of agreements established in an International Coffee Agreement (signed in 1962 and renewed in 1968, 1976 and 1983) and in which the economic clauses of the same had the objective of achieving a reasonable balance between supply and demand, on a basis that will guarantee consumers an adequate supply of coffee at fair prices, and producers a secure market for the bean at adequate prices.
GLOBAL PARTICIPATION OF MAIN CONSUMERS
This objective was achieved through the distribution of exports among the signatory countries, so that the text of the agreements indicated a quota per country, with which it was achieved that in the period from 1983 to 1989 prices remained at the same level. level of 120-140 cents per pound. In this sense, international regulation had all the objectives of a cartel: market sharing and non-competitive pricing.
On July 3, 1989, when the agreements on economic clauses were broken due to pressure from the United States by importers and from Mexico by exporters, the operation of the world coffee market began under a market regime. free. The reason given by the United States was that in the non-quota market, the producers sold cheaper coffee to the socialist countries; for its part, the government of Mexico considered that the quota it had assigned was much lower than its production level, and that the coffee produced (classified in the group of “other milds”) would have greater demand in the international market.
The immediate consequence was an indiscriminate and disorganized export of grain stocks owned by producing countries, which caused an oversupply of the product and a severe drop in prices. In fact, international prices lost 40% of their value between June and August 1989 and continued to fall from that date until the middle of 1994, when the decrease in the harvest in Colombia due to the grain borer and a severe frost in the producing areas of Brazil, moved the market to the upside.
The behavior of coffee prices in the international market reached historical levels of 48 cents per pound, reached in August 1992, it meant the critical point that showed that the free market was manipulated by large corporations beyond the rules of the supply and demand.
| BUSINESS | VOL. COMMERCIALIZED
(THOUSANDS OF BAGS) |
PART. IN THE MARKET
(%) |
| Rothofos AG | 9,000 | 12.6 |
| DE & F. Man | 5,000 | 7.0 |
| Volkart | 4,000 | 5.6 |
| Cargill | 4,000 | 5.6 |
| J. Aron | 4,000 | 5.6 |
| Rayner | 4,000 | 5.6 |
| Bozzo | 3,500 | 4.9 |
| Sueden | 3,000 | 4.2 |
| Total 8 Companies | 36,500 | 51.4 |
| World Total | 71,000 | 100.0 |
With regard to the marketing of roasted coffee, the process of capital concentration becomes even more acute, when this process is monopolized by 4 roasting companies, which process almost half of the coffee of the OECD member countries.
| GROUP | SUBSIDIARIES | SALES
(MILLIONS OF DOLLARS) |
PROCESSED COFFEE (MILLIONS OF BAGS) | PARTICIPATION IN THE OECD MARKET (%) |
| Philip Morris | Jacobs-Suchard General Foods | 14.3 | 12.0 | twenty |
| Nestle | Nestle | 17.5 | 9.5 | 16 |
| Procter & Gamble | Folger's | 14.2 | 3.7 | 6 |
| Sara lee | Dowgbe egbert | 8.1 | 3.3 | 6 |
As can be seen, the international coffee market does not have a free competition behavior, and in the absence of the economic clauses of the International Coffee Agreement, prices are not determined only by supply and demand, but also by the oligopolistic power of international corporations.
Regarding the situation in Mexico, Mexican coffee growing underwent few changes until the Cardenista era, when the large estates of the central zone of the country are distributed among the peasants. However, this does not create a decrease in productivity, but on the contrary, agricultural production grew at relatively high rates (2.4% per year) and the social framework was established within which the great productive expansion of Mexican agriculture would take place between 1940. and 1965.
Subsequently, from the seventies, the Mexican government began a process of promoting cultivation in large areas of the mountainous areas of the southeast of the country, which results in that currently 82% of the area dedicated to coffee corresponds to smaller lands of 5 hectares and 69% to lands smaller than 2 hectares.
Of the total coffee produced in Mexico, 45% is obtained by producers with farms smaller than 5 hectares and 66.3% by producers with farms smaller than 10 hectares.
On the other hand, while the quota system lasted in the international market (1962-1989), the main volume of exported coffee was carried out by the Mexican government itself, through the Instituto Mexicano del Café (Inmecafé). There is only a small group of private initiative marketers and exporters.
Mexico is a federal republic that is divided into 32 states. Coffee production in the country is concentrated in 12 states, the main producers being 5 of them: Chiapas, Oaxaca, Veracruz, Puebla and Guerrero.
| STATE | PRODUCTION | % OF THE NATIONAL |
| CHIAPAS | 1'573,390 | 32.8 |
| VERACRUZ | 1'392,381 | 29.0 |
| PUEBLA | 820,247 | 17.1 |
| OAXACA | 490,220 | 10.2 |
| WARRIOR | 202,747 | 4.2 |
| OTHERS 7 | 321,915 | 6.7 |
| TOTAL | 4'800,900 | 100 |
In Chiapas, however, the finance structure is still in force in much of the state territory; to a large extent the hacienda (large farms) are closely linked to coffee production. On the other hand, peasant farmers, traditionally focused on subsistence, as a result of contact with the plantations based on work as agricultural laborers, little by little introduced coffee into the system of family gardens, which when expanded led to a link between subsistence agriculture (corn and beans) with commercial agriculture (coffee), in which the conditions of competition were extremely disadvantageous for peasant agriculture.
During the seventies and eighties, the growth of peasant coffee farming presented a great leap and made Mexico the fourth largest coffee producer in the world. Likewise, coffee represents 2.6% of total exports and 36% of agricultural exports between 1985 and 1991.
When the process of disincorporation of Inmecafé was announced at the beginning of the Salinista administration, this process of disincorporation also happened when the Mexican government had struggled to undo the economic clauses of the International Agreement that governed the International Coffee Organization (OIC), and that established regulatory mechanisms for the aromatic market, thereby releasing the price and the commercial process. Due to the above, the price level falls below 50% of what it had, thus beginning an unprecedented crisis in the sector.
Coffee Policy in Mexico
Since 1949 a boost has been given to coffee growing in Mexico with the creation of the National Coffee Commission. It seeks to increase the areas dedicated to cultivation and provide advisory services in production, but leaving the task of commercializing the grain to the large private companies. But since 1973, state participation in Mexican coffee growing has increased, with the restructuring of the Instituto Mexicano del Café, better known as Inmecafé.
From then on, this body had legal powers to intervene in the financing, the beneficiation of the grain, the international commercialization, in addition to having the responsibility of agricultural research and the development of technology, of producing industrial machinery, of ensuring the supply internal to the national roasting industry and even to organize the producers.
Government action around coffee growing in Chiapas revolves around the organization of small groups of coffee growers in coffee-growing municipalities in the so-called UEPC's (Economic Units of Production and Marketing), which without having a legally recognized figure, represented the operating mechanism Through which Inmecafé developed its policy towards the cultivation and commercialization of grain.
These Units grouped the coffee growers of each locality and to them the Institute allocated the resources to finance production, provide technical advice and collect the coffee in the form of parchment; and they were the mechanism through which a technological package based on monoculture and the use of chemical inputs was promoted for the control of weeds, pests and diseases and for soil fertilization. The institution's premise was that it was possible to have high-production areas to be destined for the export market, but under the framework of state control of the collection, processing and marketing tasks.
By the mid-1980s, the National Indigenous Institute began to carry out technical advisory activities and improvement of the productive infrastructure in some indigenous areas of the State of Chiapas. This work takes place within the framework of the formation of Community Planning Committees (CoCoPla), where groups within indigenous communities meet to carry out community diagnoses and promote development projects. As a large number of communities allocate large areas to coffee cultivation, the INI begins to develop a program of attention to cultivation.
From here, projects arise to improve the coffee production and transformation process for various communities, such as the provision of pulping machines, construction of drying patios and the construction of warehouses and dry mills.
Despite the fact that coffee as a crop and product is closely linked to the market and that small producers have suffered significantly from the effects of market liberalization and the concentration of capital, a series of alternative actions have been promoted and developed to be able to survive the new conditions, and even to be able to continue taking advantage of coffee production as an engine of community and regional development. Some of the promoted processes are the following:
- a) Organic Coffee Production
Since 1986, coffee production under the organic system has been promoted with good results. This system represents a rescue of several elements of traditional agricultural technology that allows that with the inputs available from the plot itself and carrying out soil and water conservation practices, cultivation can be carried out without using chemical inputs. The result is that producers obtain yields of 15 quintals per hectare on average, in addition to maintaining biodiversity and natural resources. When the product is internationally certified, it can be sold at a premium, thus maintaining a better standard of living for the peasant family.
Currently, about 8,000 small producers in Chiapas and about 20,000 throughout Mexico are producing organic coffee and carrying out organic work towards other crops such as corn and vegetables.
In addition to the economic benefits, greater independence is achieved since the necessary inputs for production are obtained from the same plot and do not have to be purchased outside the community; on the other hand, progress is being made in the consolidation of food self-sufficiency, since in the organic certification process it is requested that there be jobs in the production of basic foods using the same system.
- b) The “Fair Trade” system
Since 1989, an international fair trade system has been in operation, in which a more direct relationship is sought between small producer organizations and final consumers. In this commercial exchange scheme (where coffee was the initiator and the best-selling product), the starting point is the need to set a minimum price with which the producer and his family can have a more dignified life. Taking into account the production costs of coffee, the minimum price for this product has been set at 126 USD per 100 pounds, regardless of the price of coffee on the New York Stock Exchange.
Other advantages offered by this system, which is now known as FLO (Federation of Seal Users) is that it allows organizations to obtain pre-financing of up to 60% of the value of the contract, at the time of signing, to facilitate the process of collecting the product.
In addition, $ 5.00 USD is obtained for each bag of exported coffee that must be used in community development projects, so that the sale of coffee supports other activities and services within the community or region.
Fair trade is, on the one hand, the mechanism through which small coffee growers are supported to reduce the structural dependence in which they have lived for many years, through obtaining better conditions for the production and sale of their coffee. coffee. On the other hand, fair trade acts as a bridge that gives the producer a clear idea of the interests and needs of a specific market segment, making him see the importance and impact of his productive activity in the large urban centers of developed countries.
The fair trade mechanism is set in motion by giving small coffee growers a guarantee price for their product, also fostering long-term relationships based on understanding and satisfying the needs of both producers and purchasing companies: for the former, a stable price for their coffee, the possibility of accessing opportune credits under favorable conditions or obtaining, in some cases, technical assistance to improve some stage of the production process or for community development programs; for the latter, the certainty of receiving a product with constant characteristics at the agreed time, which allows them to satisfy the demand of a fast-growing and loyal market niche.
It is also important to point out that fair trade is a way for small producers to add value to products such as coffee, since the mainly social considerations on which it works, allow creating more stable commercial relationships with consumers from developed countries, who are willing to purchase these types of products, although they are often more expensive than other similar goods from multinational companies.
It is common that the sale of coffee within the fair trade system also offers the advantage of requiring fewer economic resources than other ways of adding value to the aromatic, such as the transformation of a plantation to an organic crop or the complete industrialization of the parchment coffee bean. to roasted and ground coffee in a half-kilo presentation in a self-service store.
Private companies (importers, roasters, retailers, restaurants, etc.) have played a key role within the fair trade system since its inception, as they have identified a market niche that demands products that contain, in addition to traditional characteristics, new values social, ecological, economic, etc., that respond to specific personal interests, such as the conservation of biodiversity, the fight against environmental pollution or support for disabled children, among many others. Thus, by responding to these interests, such companies attract new customers, increasing their sales.
This phenomenon can be easily observed in countries like Canada, where companies of all sizes have entered the fair trade system, from the small artisan roaster to companies like AL Van Houtte or Starbucks. Which apply the strategy of "Cause Related Marketing" (CRM) or marketing related to a cause.
- c) Promotion of the Organization of Small Producers through Networks
In Mexico, most of the small producers belong to a first or second level association. These organizations, during the first years of the nineties, integrated networks that allowed them to have better access conditions to international markets or financing, as well as to define public policies regarding coffee growing in our country.
The most important trade union organization is the National Coordinator of Coffee Organizations (CNOC), which was formed in 1989 and currently groups more than 70,000 small producers from 7 states of the republic. Along with the CNOC are some others such as the CIOAC (Central Independent of Agricultural Workers and Peasants), the National Union of Agricultural Workers and others.
These groups have the common characteristic of being independent from the government and that they seek above all to obtain benefits for the production, marketing and services for coffee producers.
- d) Promotion of Domestic Consumption
Mexico is one of the main coffee producers in the world, and yet coffee consumption in our country is one of the lowest globally. This implies that the greater quantity of coffee produced has to be exported, which produces a great vulnerability due to the dependence on market conditions, which is increasingly influenced by causes external to simple supply and demand.
To reduce the dependence of coffee producers on the conditions of the international market, which is controlled by an increasingly smaller number of large transnational corporations, work has been carried out in Mexico to promote domestic coffee consumption, which allows in the medium term to place a greater volume of coffee in our country.
The idea is to be able to increase consumption, which is currently less than 600 grams per person per year, to a level similar to that of Brazil, which is 3 kilograms. This situation would lead to about 30% of the exportable coffee no longer being sold abroad, thereby obtaining better sales conditions for producers.
- e) Retention of Exports and Destruction of Poor Quality Coffee
When neoliberal governments tell us that the market is the only regulator of production in the world, small producers in Mexico have responded with mobilizations and proposals to force the Mexican government to participate more actively at the international level with actions that allow for somehow influence the prices and consequently the income levels of coffee producers.
In this sense, it was proposed to participate in the meetings of the Association of Coffee Producing Countries (as observers because the FTA prevents Mexico from being a member of trade union organizations at an international level), and there defend the proposal of the retention of 20% of exports to balance prices. In addition, the proposal to eliminate stocks of poor quality coffee was promoted in order to reduce global stocks and be able to drive prices up.
Although these measures have not yet shown total success, their very discussion and agreement have shown that in the face of a supposed free market that seeks to increase profits for a few at the cost of the impoverishment of the majority of the population, measures promoted by the social organizations that even oblige governments to participate in them.
- f) Quality Improvement
While the Mexican government agencies and the large transnational companies have promoted an increase in the quantity of coffee produced, and the decrease in prices, social organizations have fought to increase the quality of our product and the sale prices.
Increasing quality implies offering our best product and thus maintaining a healthy relationship with consumers. But at the same time, it represents the possibility of demanding better prices or additional prices to allow a better standard of living.
Thus, while the World Bank can finance programs to increase coffee production in Vietnam to make it the second largest producer in the world, with which the price falls to levels not seen in the last ten cycles; Small producers say that we do not need more coffee surface area, but more quality coffee at a good price. The resources that Latin American countries commit to the World Bank or other organizations can be used in training programs and local capacity building for quality improvement and control.
External Marketing
During the 1990s, Mexico ranked fifth as a producer country in the international arena, participating for the 1997/98 cycle with 4.9 million bags after Brazil, which produced 23.5 million, Colombia 11.9, Indonesia 7.2 and Vietnam with 6.6. Its main shipping points are Nuevo Laredo by land (3,225,528 60 kg bags in 1996/97), and by sea, the ports of Veracruz (1'079,175 bags) and Salina Cruz (216,489 bags). However, in order to reach this position, it has had to go through, in addition to what was seen above, various commercial problems.
Among these problems, one of the most important is the fall in international coffee prices. Thus, in July 1989, our country's coffee reserves were approximately 3.5 million bags, which in December 1990 had been sold, reaching the (unprecedented) figure of 4'359,000 exported bags. Despite the fact that in the 1989-1990 cycle, the year in which Mexico entered the market that had already been released, the volume of its sales increased by more than 600,000 bags, the collection of foreign currency in said cycle decreased by 20%, a phenomenon that continued in 1990-1991 by deteriorating 33% with respect to 1989.
| Period | Harvested area (ha.) | Volume produced (thousands of 60 kg bags) | Exported volume (thousands of 60 kg bags) | Value of exports (thousands of dollars) |
| 1984-85 | 460,664 | 4,087 | 2,982 | 447,600 |
| 1985-86 | 495,361 | 4,822 | 3,693 | 861,661 |
| 1986-87 | 495,146 | 5,232 | 3,843 | 572,900 |
| 1987-88 | 495,050 | 5,012 | 2,549 | 401,855 |
| 1988-89 | 560,343 | 5,440 | 3,739 | 530,891 |
| 1989-90 | 560,217 | 5,150 | 4,359 | 422,954 |
| 1990-91 | 558,415 | 4,586 | 3,506 | 384,545 |
| 1991-92 | 558,500 | 5,159 | 3,119 | 266,030 |
| 1992-93 | 559,891 | 4,421 | 3,061 | 271,585 |
| 1993-94 | 592,565 | 4,116 | 3,150 | 437,200 |
| 1994-95 | 615,516 | 4,159 | 3,257 | 678,043 |
| 1995-96 | 615,516 | 5,400 | 4,579 | 663,832 |
Once the crisis stage was overcome, and until 1997, Mexican gold coffee exports have been increasingly directed towards the United States, which on average received 80% of the total, while the countries of the European Union consumed 17% in the same period. The explanation for this phenomenon is found in the fact that domestic producers, when faced with an increasingly competitive and demanding European market, have chosen to withdraw and reorient themselves towards the United States market, closer and above all less demanding than the United States. European. In addition, the 4% tariff that European countries apply to our coffee makes it less competitive compared to the grain of other countries such as the members of the Lomé Pact.This must be negotiated by the Mexican government in order to eliminate this tariff and give greater advantages to the national grain. However, until May 1999, the Mexico-European Union negotiations had not addressed this issue.
It should be noted that the repercussions of the Free Trade Agreement on the commercialization of coffee are not and will not be substantial with respect to exports, since our main buyer does not apply any tariffs to Mexican imports of this product.
Finally, we must point out that the problem of complying or not with the quality standards established by international markets is observed in the prices that buyers from other countries set for our coffee. In most cases, Mexican coffee is punished for its price. For this reason, the certification of products arose, which is nothing more than the verification that the purchased coffee meets the specifications established in international quality standards. Thus, coffee certification will allow the Mexican product to have an added value, recognized in international markets, as well as being a tool to negotiate better prices.
In this regard, Fernando Celis, advisor to the National Coordinator of Coffee Organizations (CNOC) maintains that these penalties are intentionally generated so that the price of our coffee is lower for US buyers.
Internal Consumption
Despite the fact that Mexico is the fifth most important country in terms of world coffee production, the consumption of the bean in our country is extremely low, between 400 and 530 grams. per capita per year. Of its total production, Mexico exported around 70% for 1994/95 with specifications on the quality of the product (green or gold coffee). The remaining 30% is consumed by the national industry that produces caffeine, soluble, roasted and ground coffee.
Thus, the industrial plant absorbs an average of 1.6 million bags (60 kg) of green coffee per year, of which about 45% was used in the past decade for the manufacture of soluble coffees; 18.3% to roast and 36.7% became roasted and ground coffee mixed with sugar. This coffee is the remnant of export coffee and its supply in the national market depends on international prices: if they are high, a greater quantity is exported, if they are low, there is more coffee for the national market.
It should be noted that in most of these industries the quality of the grain is not taken care of, since the demands of the Mexican consumer are not reflected in the manufacture of roasted, ground and soluble coffees. In addition, the legal regulations do not establish any requirement, on the contrary, it allows the inclusion of adulterants in the production. The main raw material, green or gold coffee, aimed at the roasting industry, does not have any standard, therefore it is the worst quality from its origin. "Stain" of natural coffees is consumed, with different degrees of damage, since during industrialization they are mixed with good coffees and the flavor and body of the damaged coffee are muffled.
For its part, the retail market consumes two types of products, soluble coffee and roasted and ground coffee, which in 1990 represented, respectively, 79% and 21% of the market value. Likewise, two types can be distinguished within roasted coffee: pure roasted coffee, which represents 26% of the value of roasted and ground coffee, as well as mixed roasted coffee which represents the remaining 74%.
The soluble coffee market is dominated by the Nestlé company, which in the Valley of Mexico area dominates about 84% of the market; its main product is Nescafé, which represents more than 42% of this market. Second is General Foods; after this, no company has a significant stake. In the roasted coffee market, the company Café El Mar with its Legal mixed coffee occupies 72.2% of the market in the Valley of Mexico; The other roasters are far behind, as Mexican fine coffee and International extra-fine coffee occupy the second and third place respectively with 7.1% and 6.9%. The rest of the roasters participate with less than 3.5% in this market.
With the aim of maintaining their share of the market and their competitiveness, companies such as Nestlé, Sabormex, Café Internacional de Córdoba, etc., periodically import very low quality coffee to produce some of their products. This situation is mainly due to the fact that imported coffee (mainly from Indonesia and Brazil) is of lower quality and therefore cheaper than Mexican coffee, which has as two of its main consequences the possible entry of new pests into the country. that the depression in the prices paid to the Mexican producer can be caused. Thus, although this type of action reduces the costs of large companies, it is putting the Mexican coffee field at risk, which normally has production surpluses, in addition to being free of numerous pests that exist in other latitudes.
The recent opening to international coffee trade could be used to increase exports of the industrialized aromatic and its caffeine, although it is also possible for coffee produced abroad to enter the country, even when the strong devaluation of the Mexican peso has restricted consumption of imported products. Thus, during the 1994-1995 cycle 1,196 tons of soluble coffee and 5,400 tons of roasted and ground coffee were imported, not counting the imports of low quality coffee by some large companies.
To this situation we must add the fact that as of 2003, tariff barriers will be totally released for all types of coffee imports, with the consequent effect on the economy of Mexican coffee growers, in case the culture is not modified. exporter.
The world coffee business represents approximately 55 million dollars, and the income to the producers is only 5 million dollars. With this, he observes that the bulk of the profit of coffee is not in production but in marketing and that is where large companies do not complain, that the price is very low, they are enjoying these very good profit margins, justifiably accrued, since they are the ones who have made the campaigns that are made in China, in Russia, they transform the product, distribute it, give credits, financing, have advertising and promotional campaigns. They have been concerned about the coffee product, for example, the Starbooks company, which has around ten thousand coffee shops in the world, they have been concerned about giving coffee an image, different from the one it had been given.They are the ones who have designed cappuccino coffee, prafelatte with milk, mixed, espresso, etc. They worry about designing the machines that make them, they have sold it with a marketing character with an added value, that is, they have generated the elements for the great profit margin. On the other hand, the producers have not dedicated themselves to this task, which can be one of the great solutions to the coffee problem.
2.3 Potential Development of Possible Substitutes
COCA COLA
Soft drinks have become the main competitor of the coffee industry, practically sweeping the beverage market. Coca-Cola is a carbonated drink that dates back 100 years and at the beginning, it was everything except soda. It was introduced as an exotic medicine, containing cocaine from coca leaves and caffeine from cola nuts. Coca leaves were the favorite stimulant of Bolivian Indians who chewed them while working. Products, Beverages from brands: Almdudler, Aquarius, Bonaqua, Bum, Cappy, Coca-Cola, Fanta, Kinley, Krest, Lift Apfelsaftschorle, Mezzo Mix, Minute Maid, Nestea, Powerade, Qoo, Rómerquelle, Sprite. With Sales (2002): 19,600 million euros and Profits (2002): 4,000 million euros, and a Workforce of 600,000 workers.
Headquarters: Atlanta (Georgia, United States). Coca-Cola is the most widely understood word in the world and the value of the Coca-Cola brand is estimated at $ 68 billion - that is, more than three times the multinational's sales. In more than 200 countries, people quench their thirst every day more than a billion times with products from Coca-Cola. In total there are 90,000 million liters a year.
BEER
Beer is a natural drink with a low calorie content (approx. 42 Kcal. Per 100 ml), it does not contain fats or sugars and does contain a significant amount of carbohydrates, vitamins and proteins, so its «consumption in moderation »Is beneficial for human health and clearly recommended for any balanced diet.
It is a product with a moderate alcohol content between 4 and 7º C, although there are "special" beers with a higher alcohol content. In fact, beer is the lowest alcoholic beverage compared to other alcoholic beverages.
Comparison of caloric intake between beer and coffee in 325 ml.
| Energy
Kcal / Kg |
Grease
g / Kg |
Cholesterol
g / Kg |
|
| Coffee | 594.75 | 41.60 | 0.00 |
| Beer | 146.25 | 0.00 | 0.0 |
Source: Grupo Modelo
Today 348 thousand points of sale are recognized in the country, served indistinctly by the two existing brewing groups. Modelo® has 697 distribution agencies and sub-agencies to serve the market it has been conquering, in 492 it exercises direct control, and in the remaining 205 it maintains a traditional link with private dealers. In addition, distributors control establishments where Modelo® products are sold exclusively: Círculo Extra and Modeloramas convivial stores, among others.
In 1999, Grupo Modelo achieved a 54.91 percent share in the domestic market, with volumes of 26.9 million hectoliters. With 22.8 of those millions, Corona Extra beer consolidated as the leading brand in the National Beer Industry, occupying the fifth place among all beers that are marketed in the world. That same year, the Group's net sales amounted to 24 thousand 576 million pesos, 76 percent corresponding to the domestic market and the remaining 24 percent to the export market.
FAST-FOOD RESTAURANTS
MC DONALDS
It is clear that the fast food sector advances without brake around the world, where each company seeks a niche in the market and McDonalds has its own in all parts of the world.
Curiously, the product that Mc Donalds sells is basically the same all over the planet, without adapting the offer to the tastes of each country, so it seems that we are not so different in culture or tastes. Today the "Big Mac", the company's most famous hamburger, triumphs on all five continents and the inhabitants of the planet become a common point.
Some interesting facts:
- 26,000 establishments worldwide 14 billion meals sold per year Five new establishments open every day 145 hamburgers sold per second Million and a half employees The production of the product is subject to rigorous controls First Coca-Cola customer Employees who always smile at the customer The customer is attended in a maximum of 90 seconds Quality surveillance by the parent company, inspecting premises An own burger study center.
Everyone already knows the Happy Meal, that "happy meal" that McDonalds has made famous among children around the world. Well, behind each box there are many hours of research to arrive at the ideal product.
All over the world, all its establishments offer a standard menu, although special products are developed in each culture that adjust to the taste of each community. For example in some restaurants in Germany beer, wine is offered in the French.
Oriental noodles are served in some of the restaurants in the Far East. In Canada, the menu includes cheese, vegetables, sausages, and pizzas. And currently it is including several types of coffee in its menu
# 1 in fast and unique food service among the Top 10
# 1 in Overall Ranking among Students
# 1 in General Ranking in the Categories «Customer Service» and «Business Ethics»
# 1 in fast and unique food service among the Top 10
# 1 Fast food in all Categories: Quality of products and / or services, Customer Service, Pricing Policy, Honesty and Transparency, Trajectory, In Mexico it has a presence in all 32 states with 288 restaurants
TGI FRIDAYS
Then TGI Fridays arrived, settling in with the same successful formula as in the United States: music + a good Yankee menu: hamburgers, pork ribs, Mexican food, etc. In Mexico it has 5 restaurants, including Cancun and Puebla
SANBORNS
Sanborns is a restaurant, tea room, soda fountain, gift shop, pharmacy, sweets and with time the bookstore, magazines and the offer of music and cigars were added.
It was not until 1985 that Sanborns became a 100% Mexican company when Grupo Carso acquired it with 31 stores in different cities of the Republic. Today, after 17 years, there are more than 100 stores from Tijuana to Cancun with 18,500 employees and 4 factories that are responsible for developing their products and standardizing their quality.
Administration Integral de Alimentos, SA de CV, which operates the Sanborns Café since 1995. And the Operadora de Cafeterías de Grupo Sanborns, SA de CV, established on April 22, 2002, is the holder of a group of companies dedicated to the purchase and sale of coffee bars under the names of The Coffee Factory and Café Caffé. It currently has 34 “Sanborns Café” restaurants, and 28 bar coffee establishments with the names of “Café Caffe” and “The Coffe Factory”
OTHER RESTAURANTS
The main restaurant chains that compete in this area are Vips, Wings, Toks, California and El Portón. And the strongest competitor is Vips with a presence in 29 states of the republic, of which the State of Mexico has 33 restaurants and the DF 85 restaurants; these being the states with the largest number of restaurants.
2.4 Rivalry between Companies
The latest statistics that have been made in Mexico regarding coffee consumption have revealed very interesting data: in 1997, per capita coffee consumption consisted of 743 grams, in the latest studies, for which the same methodology of calculation, indicate that the per capita consumption was 1.2 kg, which indicates an increase of 60% in the last 6 years, resulting in an annual increase in coffee consumption of 10%.
Although the figures seem encouraging, they are not so encouraging, since Mexico being a producing country, it should have a slightly higher consumption, as in Brazil the cpc (per capita consumption) is 4.7, in Costa Rica 3.6 kg, and not say as in coffee importing countries like Finland with 11.3 kg., Belgium 9.6 kg. and Norway of 8.9 kg. among others.
For some years now, the Mexican Coffee Council has been carrying out an arduous Comprehensive Promotion and Consumption Campaign, "Let's go for the Second Cup" which is supported by the Federal Government. Some of the actions that this campaign intends to motivate greater consumption among the population are:
- Improve Quality from the bush to the drink in a cup, so that new consumers find their foray into consumption pleasant.Proceed greater accessibility of the product, so that it is just as easy to acquire or prepare a cup of coffee, than to buy a soft drink, or any beverage that competes with coffee for consumer preference. Disseminate the characteristics, attributes and benefits of the product. (its relationship with the environment, its social impact, its qualities as a drink and its positive effects on health) Use forums, events and spaces in which coffee as the protagonist has a lot to show the general public, such as Case of EXPOCAFE Carry out active advertising campaigns both generically (Café de México) and individually, promoting private brands.
The challenge to be overcome is to achieve an increase of at least 2 kg. per capita, which would mean that Mexico would allocate around 75% of its production to the domestic market and the remaining percentage would be channeled to very high-quality markets abroad. Currently, domestic consumption is 2 million 60 kg bags. of coffee and export consumption is approximately 2.4 million bags per year.
In addition, it is also intended to increase the% of the producer's profit per cup of coffee sold, which is currently 6% of the final value, a frankly minimal sum for the production of the aromatic grain considering an average sale price of $ 15 pesos per cup.
Likewise, another part of the campaign consists of publicizing the benefits that coffee provides, this endorsed by an international program called Positivity Coffee or Posititiva Café, in which these benefits are constantly and deeply studied.
Regarding the arrival of franchises and transnational companies such as Starbucks Coffee to Mexico René Ávila Nieto, Coordinator of International Affairs and Commercial Promotion of the Mexican Coffee Council, commented for Restaurants in Mexico:
«It is good that not only Starbucks but also several coffee franchises enter Mexico, since regardless of the price at which they sell the product, they promote the consumption of coffee, offering consumers very attractive, different and varied presentations of coffee, in addition to providing information of the product you are consuming.
It is beneficial for the coffee industry, which both national and international franchises see Mexico as a potential consumer of coffee, and although not all of them consume only Mexican coffee, in the end it is better to open coffee businesses and not businesses that somehow or other compete with him. "
Some international franchises that have entered Mexico with Starbucks Coffee, Coffee Factory, and Gloria Jean's among others, and of the national ones we find Finca Santa Veracruz, El Cafecito, Finca Santa Cruz Gourmet and Café Moretto among others.
Those with the cheapest prices because they are cooperatives of national producers are La Selva and Primer Café, who, in addition to offering variety and excellent quality, offer their products at more attractive prices than the competition.
Cafe La Selva
Mission
It is intended to consolidate Café La Selva as the best option to taste gourmet coffee in Mexico, maintaining the highest quality in products and services, and expanding its presence in new markets.
Work in conditions of environmental sustainability with the indigenous communities of the Chiapas jungle
The company
Initiative of indigenous communities that, through the integration of processes, seeks new distribution channels that offer a better price for their coffee
Value is added to the product by transforming it into organic, which today has international certification.
La Selva Café in association with Vinculo y Desarrollo have an unprecedented alliance in Mexico, in which farmers, investors and workers come together to improve the living conditions of producers.
Today it has 18 branches, 400 workers, annual sales of 360,000 USD per branch, and serves nearly two million customers a year.
The proposal seeks to expand the number of branches from 18 to 22 through an investment of one million dollars. He also has 7 years of operating experience in the industry.
The management team has more than 15 years of experience in project development. His academic training is professionals with a master's degree. It is necessary to strengthen the areas of: human resources, marketing and systems.
Trajectory
Market characteristics
- Potential growth in cup consumption Entry of national and international chains Direct sale of cup coffee as the only alternative to the international drop in the price of coffee Growing demand for organic products that do not harm the environment and guarantee a better quality of life
Competitive advantages
- Best prices Origin and social commitment (Fair Trade) Quality: excellence in service It is the only chain among the competitors that has international certificates of organic production
It ranks as the chain with the greatest national identity. It is the second place in the mind of the consumer in Mexico in the central area of the country. It has more than 30 varieties of cup coffees, 11 beans and a great variety of light foods.
The coffee that is sold in the coffee shops is the same that is exported to the United States, Canada and Europe, it is an export quality coffee. La Selva Café is a space open to culture, it has temporary exhibitions, offering new artists a space for dissemination
Implementation Strategies
Expand the service area to the west of the country, with four branches. They are estimated between 500 thousand to 1 million potential consumers. Project an average of one hundred daily diners per branch until reaching four hundred in the third year. Reach 30,000 consumers the first year and 160,000 from the third year in that area.
The West also represents a highly attractive market for the sale of coffee beans through channels such as public and private offices, which could represent 25% of total billing.
Expansion Strategy
By withholding the profits generated in the first two years at 100% and at 30% in subsequent years. With the reinvestment of profits it is sought to extend the presence to neighboring cities.
Coffe Factory
Antonio Hidalgo is currently the CEO of The Coffee Factory.
Currently The Coffee Factory has 18 points of sale in operation of which one half are its own stores and the other, franchises. The business has been in operation for around five years and its growth, relative to other companies in the same field, has not been the fastest or the slowest.
Antonio Hidalgo says that they are satisfied with this evolution because to date they consider that they have a solid operation and a good service towards the franchisee and the final consumer.
Therefore, the growth possibilities in an increasingly competitive market are encouraging, but at the same time mark a limit because the important points of sale that exist in Mexico can be exhausted due to the economic levels that are handled in the country are not the same as in the United States, where they basically take the example. "The market is not virgin, but it does have room for some growth and to maintain us, or to raise the levels of acceptance that we have had."
By the beginning of 2004, The Coffee Factory already had 15 own branches and 20 franchises in the Mexican Republic.
The Coffee Factory SA de CV, is a Mexican company, owner and developer of the brand "The Coffee Factory", made up of human capital and 100% Mexican resources.
Since January 1994, the date the first branch was opened. The Coffee Factory is recognized by its visitors as the best gourmet coffee establishment in Mexico.
The Coffee Factory's reputation and leadership are based on the sale of products with the highest quality and excellence in service.
The business of The Coffee Factory is that of Gourmet coffee, providing service through the concept of coffee bars where you can find prepared drinks in all varieties and types of coffee, also selling coffee beans as well as imported items for domestic use, specialized equipment and accessories for coffee and tea.
Within the Coffee Factory menu you can taste a wide variety of foods such as: baguettes, croissants, sandwiches, empanadas, bagels, salads, all of them made with top quality ingredients. We also have select pastries sharing spaces with well-known brands in the market, such as: Garabatos, Mrs. Field's.
The image projected by The Coffee Factory is that of an elegant and modern establishment where raw materials of the highest quality are handled, with notorious cleanliness and excellent service.
It is worth mentioning that due to their quality, The Coffee Factory mainly handles Mexican coffees (varying in regions and roasts) which are carefully selected for their characteristics, which meet the strictest quality standards in export criteria; as well as imported coffee from the main and most recognized producing regions in the world.
The Coffee Factory has created and perfected the conditions of installation, supply, operation, marketing and image to apply and comply with the high quality standards that are established, an additional advantage for new franchisees.
That is why, having standardized the operation, now The Coffee Factory SA de CV has designed a new plan for the granting of franchises throughout the Mexican Republic and also for the export of franchises to other countries.
Franchises are individual, granted to individuals or legal entities for the operation of a branch in a specific place. Master franchise development programs for specific cities, states or countries are also available.
Cafe Moretto
The mission of this cafeteria is to develop the most important chain of cafeterias / outlets in the Mexican Republic, through independent people, who, as small entrepreneurs, seek their growth under the franchise business scheme, as well as benefit the agro-producers of the Mexican coffee, with higher consumption of gourmet coffee at competitive prices.
Its objective is to provide the Mexican population with a cafeteria / outlet near their home or workplace, that is reliable and safe, and that offers quality products at fair prices, promoting the consumption of Mexican coffee nationally and internationally.
On the other hand, the vision they reflect is to maintain a constant growth in the number of cafeterias / outlets, creating a variety of high-quality services and products and supporting them with cutting-edge technology.
Its corporate structure is made up of the following:
Managing Director
Agroindustrias exportadoras y Cafés Andrade SA de CV
External audit- Consulting services
Finance, operations, purchasing, and expansion management
Department of: auditing, accounting, sales, promotion and advertising and franchise service management
Pilot unit, Branches and Café Moretto (franchises)
Starbucks
One year after entering Mexico, it is about to reach the goal of its first expansion stage: 20 stores.
In September of last year Starbucks Mexico opened its first store in Paseo de la Reforma, a fact that made many coffee shop chains tremble, especially franchises. The commercial alliance between Starbucks Coffee and Grupo Alsea, announced very strong competition.
At this time there are 17 establishments in various parts of Mexico City and the metropolitan area. It mainly caters to the segment of young people who dabble in their taste for coffee; especially the lattes and cappuccinos and the famous Starbucks frappuccino.
On the other hand, it also offers career plans for young people, through a scrupulous system of training and in-store training.
Starbucks is considered one of the biggest commercial successes for specialty coffee; Last year, sales exceeded US3.49 billion, with approximately 18 million customers who drink coffee in their stores weekly worldwide, said Gerardo Rojas, CEO of Starbucks Mexico.
Coffe Stations
It is a 100% Mexican concept that opened its doors on November 22, 1994 in Col. Condesa in Mexico City and as a result of the success obtained, the second was inaugurated in February 1995 in the Polanco neighborhood.
Currently Coffee Stations has 61 units. The points of sale are strategically distributed in main avenues, shopping centers, corporate buildings and institutions of great importance.
The demand for services and franchises has led to coffee stations, not only to establish themselves in Mexico City. Currently, it has establishments operating successfully in cities such as León, Torreón, Toluca, Veracruz, Guadalajara and Puerto VALLARTA.
Sanborns Cafe
The restaurant business in Mexico is highly fragmented. It consists of national chains, chains in Mexico City, and some independent restaurants. Vips (of Walmart de México), represents the most significant competitor for Sanborns. Customers view Vips and Sanborns as equivalent substitutes, even though many Vips restaurants have stores and their decor and menus vary. Other competitors in this segment include Wings, Toks and California.
The Sanborns Café, have an average of 191 seats per restaurant. In the metropolitan area of Mexico City there are 15 Sanborns Café and the rest are located in another 11 cities in the country. The Sanborns Café offer the same menu at the same prices as the restaurants in the Sanborns Units. In addition, the Sanborns Cafes offer a limited selection of impulse purchase products.
2.5 Entry of new competitors
Betting on drinking more coffee, Mexico is an important coffee producing country, Mexicans would also be great coffee drinkers. This, however; It is not the case. Per capita consumption is estimated at 0.75 kg. Some companies are now betting that they can change consumption patterns in the country. Starbucks, under its main concessionaire, Grupo Alsea, arrived in Mexico in September 2002. So far they have opened 19 stores, with a goal of reaching 180 stores in 2007. Not wanting to miss an opportunity, Grupo Carso, looking for Not only selling coffee at its Sanborn's restaurants, it first acquired Caffe Café and then took a 60% stake in The Coffee Factory. These two giants aren't the only ones competing for what they see as a growing market.There are a large number of small chains on the market. The concept is essentially the same, which means that essentially they are competing for market share based on price.
Currently there is more supply than demand, due to many factors such as overproduction, great growth in certain markets and the incorporation of Asian producing countries such as Vietnam, among others. The growth of these markets, and the greater weight of Asian producing countries, is due to the great credit facilities granted by world banks. This began 5 or 6 years ago with a very myopic vision of world banking, whose main objective is to reduce poverty in the world and they thought that one of the sectors would be the production of coffee, without considering that they would distort supply and demand, they calculated that growth would be between 5 to 12% per year, and it has only grown by 3%,So with this situation the Association of Coffee Producing Countries decided to take the initiative a year ago to retain part of the aromatic.
At the world level, a production of 118 million bags is estimated with a consumption of 103, a maximum of 110 million bags, in view of this and with a third year of crisis, the inventories that exist in both consuming and producing countries translate into a carrying 19 to 15 million extra bags, in addition to overproduction, so the price problem that exists in the New York Stock Exchange is not a problem with the possibility of being corrected in the short and medium term, and that places everyone serious producing countries in a very difficult situation, that is why the Association of Coffee Producing Countries designed a retention program that has been put into practice. Around seven million bags have been withheld from all participating countries, but there is no mechanism that can be used to punish countries that do not comply,So at the meeting held in London, England, all the figures were reviewed and countries that have not met their withholding quotas were given an opportunity to do so.
It is considered that there are important captive markets such as China and Russia, which they call emerging countries and present a very attractive consumption potential. However, the case of China is special because there are 1,600 million inhabitants and they only consume 400 thousand bags, which more or less represents 10% of what Mexico produces, actually doubling that consumption does not mean much in the world, although the effort it is recognized. During this conference we discovered some figures, the world coffee business represents approximately 55 million dollars, and the income to the producers is only 5 million dollars.
Côte d'Ivoire states that their income and trade balance depend 40% on the sale of coffee, and it has been deteriorating, they are also producers of robusta and their price is around 27 - 28 cents a pound, so that in these countries that depend on two or more products, the fall has been brutal. It has been offset a bit with cocoa because its price has recovered.
The world outlook is not very good, it is estimated that in two three years prices will continue, if not in decline, in a depressed state as they are at the moment, and that will not allow us to function very well. The coffee sector is operating around 20, 30%, since the cost of production is 70, 80 cents per pound and the markets are at 59 cents in line with London today in the morning, so it is operating below production cost
The International Coffee Organization in its annual session makes an analysis of programs for promotion, production, administration, etc. and in the end approved the resolution of the coffee withdrawal program. It is about taking out the cheapest coffee that exists in each producing country, and deposit it so that it can be given other alternative uses. In Guatemala there is a technology that uses it as a substitute fuel for cement plants, in Colombia they compost it by means of a bacteria, and that fertilizer is sold expensive and is reused in coffee crops, that is, there is alternative consumption for coffee crops but not for human consumption, which would allow a balance between supply and demand.
The last census dates from 1992, the figures of 700 thousand producers are from that year and the cultivated hectares also. There have been more changes in the structure of the sector, there is more production, fewer hectares, in short, with the census program, which is a very advanced program, we are contacting INEGI, CEA, ASERCA, etc., and what we want to know it is how much, where and how we produce it. We have many coffee producing areas that are below 600 meters above sea level, being that genetically it is not a coffee that gives a good cup, it is low quality coffee regardless of the technique or crop that we are applying, since this height has to do with the biochemistry and genetics of coffee, that is why we call it high altitude coffee. In Guatemala for example they are above 2,300 meters,the ideal situation is above 700 meters up to 1,800 meters is the ideal range for cultivation, although it occurs in much higher places. In Jamaica, the famous blue mountain coffee reaches 3,200 meters above sea level, due to the climatic conditions of the place.
3. CONCLUSIONS
The technological modernization actions initiated in 1995, both in the coffee field and in the agroindustry, have the fundamental purpose of improving the productivity and quality of the product that is marketed, in order to maintain the competitiveness required by a globalized market.
The promotion of production systems highly conservative of the environment and of the natural resources used in the process, will allow the sustainable development of human settlements located in the coffee growing regions of Mexico, where this crop is the most profitable economic alternative.
In the medium term, a decrease in the area cultivated with coffee is expected, as a consequence of the diversification of other crops in non-optimal areas, with a substantial increase in optimal areas, this makes it possible to project a sustained increase in coffee production, with which is intended to be more competitive within the framework of the Free Trade Agreement with North America.
Likewise, the development of the domestic market is of greater importance, especially in the youth population, to at least double domestic consumption in the coming years.
In addition, the formulation of the Mexican Green Coffee Quality Standard should be promoted, which accredits a standard of international recognition and the current penalties are eliminated, and allows to start the granting of denominations of origin that are already recognized in the world market.
One of the alternatives to strengthen this sector is to support the National Association of the Coffee Industry and the Mexican Coffee Council in the design of a promotional campaign and a self-financing mechanism that promotes the expansion of the national and international market. Whose financing design should be adjusted to the needs of the coffee sector, in order to reactivate the aromatic production and incorporate the largest number of small producers. In addition to promoting the renewal of plantations with improved varieties, complementing it with technical assistance.
4. BIBLIOGRAPHY
- MEXICAN COFFEE COUNCIL Prospects for coffee growing in Mexico, 2002. David F. Concepts of Strategic Management, Prentice Hall, Mexico, 2003. Hill and Jones, Strategic Management, McGraw-Hill, Colombia, 1996.http: //www.cm cafe.org.mx / COMUNI / FORMAC ~ 1 / COMERC ~ 2 / SITUAC ~ 2.PPT –http: //www.jornada.unam.mx/2004/ago04/040830/eco-c.htmlhttp: // www. cmcafe.org.mx/cmc_sagarpa/Norma_certi.html#0
* OXFAM; Change the rules. Trade, globalization and the fight against poverty; Oxfam International, 2002; P. 7.
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