Starbucks lattes nearly half cheaper in Latin America than Jamaica

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Mavis Bank, Jamaica–An independent study on Starbucks chains found that it costs nearly 50 per cent more to buy a latte in Jamaica than in other major coffee growing nations in the region, Colombia or Guatemala.

It costs US$3.30 in Jamaica but the same latte costs US$2.04 in Colombia and US$2.86 in Guatemala. All produce coffee, so why the disparity.

Colombia, formalised a policy which forced Starbucks to buy its coffee locally. As such all the coffee consumed in Starbucks Colombia comes from various coffee regions in Colombia. Jamaica does not have such a policy and this influences the pricing of coffee, as it imports all its beans. In fact Caribbean Coffee which holds the  franchise for Starbucks in the island admitted that even the Jamaica Blue Mountainconsumed in Starbucks locally is reimported. Additionally, within a Starbucks in Jamaica, the cheapest origin branded beans are actually from Guatemala for roughly one-third the cost of Jamaica Blue Mountain. Cost conscious consumers gravitate to the cheaper product.

Finder, a non-aligned comparison platform and information service, curated the index, and ranked Jamaica at 43 among the 76 countries surveyed. It ranked Guatemala at 61 and Colombia as the third cheapest in the world.

A latte is made of one-third espresso and two-thirds milk with light foam on top.

The study itself has two components: a coffee cost comparison and a GDP valuation index. In Jamaica, the index showed that a latte is being sold at 6.01 per cent less than the expected coffee cost based on the country’s GDP per capita. In Colombia it found that the coffee is being sold for one-third more expensive than it should, when matched  against its GDP per capita.

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Denmark offered the most expensive location for a latte at US$6.05 versus Turkey the cheapest at US$1.78. Geographically, Europe offered the most expensive cup of coffee, followed by Asia and the Americas.

In Jamaica, as Starbucks cafes get more packed, the locals which traditionally do not drink coffee are being weaned on lattes and caps and flat whites. What of the local farmer. Its not likely to change anything as the demand is for cheap quick coffee rather than the luxury provided from the Blue Mountains.

Consequently, the actual benefit of Starbucks in Jamaica is the subsidised Guatemala coffee and other blends. These imports are likely to affect the coffee trade balance in Jamaica as exports have flattened. But that’s the focus of a different article.

The Starbucks index is an informal way to measure the strength or weakness of local currencies for a common item against other countries. It’s supported by research that excludes variances that affect the cost of a coffee, like prices of raw beans, local labour costs and taxes.

 

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Starbucks Jamaica to follow Colombia’s lead

Starbucks plans to consider opening a coffee store in Jamaica.
When Jamaicamocha spoke to Jamaica Blue Mountain farmers on the implications most had a mixed bag of views.
Some say it will benefit the local industry provided the local authorities force Starbucks to follow the lead of Colombia.

Others say it will hurt the local cafe sector, still burgeoning and still educating the public on how to drink brewed coffee. Remember that this luxury coffee producing nation generally drinks tea and imported instant coffees.

Those who want Starbucks to buy local also acknowledge another problem: How can Starbucks sell coffee at a similar price-point as in major markets while using expensive Jamaican coffee?

A solution involves using cheaper Jamaica low mountain beans but also allowing the giant to import commodity beans for blending as Jamaica Blue Mountian blends.

Even this solution would likely result in farmer protests and calls by other cafe players of favoritism.

Let’s see what brews.

Starbucks opened its first store in Colombia in 2014 and now has 11 stores. Medellin its latest, opened last September. But the chain wants to open 50 in that coffee producing country.

Starbucks now has over 1,000 stores in Latin America since entering Mexico in 2002. The new store, located in Medellín’s Milla de Oro on Poblado Avenue, is designed to honor Colombia’s rich coffee heritage while celebrating the city’s eclectic vibe.

“Since opening its first store in Colombia, Starbucks stores in the country have served 100 percent locally sourced and roasted coffee for in-store beverages to honor the country’s coffee heritage and the company’s 45-year history of sourcing premium arabica coffee from the region,” confirmed Starbucks on its press pages. “Customers can explore different varieties of Colombian coffees including Starbucks single-origin Colombia Nariño, Colombia Espresso, Colombia Espresso Decaf and the medium-roast Colombia coffee.”