CUZCO COFFEE

Second Cup

Second Cup

Introduction

Coffee is a beverage made from roasted and ground beans grown in tropical climates. Coffee's origins can be traced back at least as far as the 9th century to areas of Africa, where it was initially consumed for religious rituals. Coffee consumption spread rapidly throughout Africa, from Egypt to Yemen, reaching the Middle East by the 15th century. Coffee trade and consumption spread to Europe, particularly Italy, from where it was introduced to the rest of the continent. The British East India and Dutch East India companies, as part of colonization, extracted coffee from many Asian and African countries. Coffee came to America during colonization but did not become widely popular until tea became unavailable during the War of 1812. The popularity of coffee grew considerably during the Civil War, when new and improved methods of production and consumption became available. Thereafter, coffee became an everyday American beverage. Worldwide, more than 500 million cups of coffee are served.

Background of Second Cup

Second Cup Company has a different type of coffee flavors or beans but most common are Cuzco and El Toucan. Cuzco beans are generally considered to be of higher quality and superior taste. Both types of coffee grow in tropical climates. Cuzco is grown at higher altitudes, typically between 3,000 to 6,000 feet above sea level with temperatures between 59 and 75 degrees Fahrenheit year round, while El Toucan grows from sea level to 3,000 feet. El Toucan is more tolerant of heat, but both are extremely sensitive to rainfall and frost. Coffee requires roughly 60 to 120 inches of rainfall per year with a dry season during which the harvesting occurs. These conditions position prime coffee production along the equator in developing countries (Kolinsky, 2001).

Coffee Beans

Coffee is a tree crop, and the trees take 3 to 5 years to mature before they bear viable fruit. Coffee itself is the seed contained within the fruit from the coffee tree. The fruit is harvested then pulped to extract the seeds, which are then dried for export as green beans. The lag between planting and coffee production is one of the factors that often leads to price instability. When prices are high, growers have an incentive to expand production. However, prices can remain high for a few years before supply can be increased, as farmers plant additional trees and wait from them to mature. Given the high level of poverty and limited income opportunities in most coffee-producing countries, price increases provide strong incentives to increase output. When the trees mature, supply rapidly increases, and all else constant, price falls. On the other hand, when prices are low, many farmers can no longer afford to grow coffee. They begin to neglect the trees or even destroy them as they move to a new crop. This leads to a cut in supply, and a new cycle begins (Mark, 2000).

The composite price is constructed from daily averages of green coffee from the three leading global coffee markets: US, Germany, and ...