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LANSING – Connoisseurs of specialty coffees seem willing to pay a lot more for their cup of joe if they know the beans come from farmer cooperatives.
How much of a premium for a 12-ounce cup? Customers say they would pay $1.31 more for what otherwise would be a $2.51 cup, according to a newly published economics study done at an independent specialty coffee shop in Lansing.
Why that willingness to open their wallets wider for java?
“Consumers are becoming increasingly aware of the ethical implications of their food, as well as the production processes and people behind their food,” the study said. At the same time, “specialty coffee shops are growing as consumer preferences for high-quality coffee become more complex.”
Specialty coffee shops exclude international chains such as Starbucks and regional chains such as Biggby, although they also sell some specialty coffees.
“We weren’t expecting to find that kind of premium, said Michigan State University professor David Ortega, who did the study with two doctoral students in the Department of Agricultural, Food and Resource Economics.
The Lansing research site was a specialty shop that uses the “pour over brewing method,” which offers a “more balanced flavor profile and reduces the risk of over-extraction,” said the study of 134 customers.
Overall, the study said, 59% of coffee drunk in the United States is specialty coffee, most of it certified as organic, fair trade – complying with strict standards that promote environmental sustainability and ensure farmers are treated and compensated fairly — or single origin, meaning from only one country.
What’s the appeal of farmer cooperatives as sources of the beans, given that they don’t affect taste or aroma?
“From a consumer perspective, cooperatives can help promote the farmers responsible for producing the coffee, making specialty coffee consumption a more human or community-oriented experience,” according to the study published in the journal Food Research International. “There is evidence that farmers may benefit more from cooperative labeling that fair trade certification.”
Previous research into consumer demands for coffee certified as fair trade and organic shows them willing to pay “significant premiums” for ethical and sustainable labels, the study said.
In addition to farmer cooperative labeling, Ortega said the Lansing study gave customers pricing options for coffee from different countries of origin.
It found customers were willing to pay more for coffee labeled as coming from Ethiopia (66 cents more per cup), Rwanda (52 cents), Peru (52 cents) and Brazil (38 cents).
Those were smaller premiums than that for farmer cooperative-labeled brews, it said.
Ortega said most coffee shops charge the same price for a cup regardless of its country of origin. By contrast, “when we buy wine, wines are priced differently depending where they’re coming from,” a differential that in part reflects differences in where a wine is from and its labor costs.
“Why don’t we price-differentiate coffee?” he said.
One lesson from the study is that “the consumer is a dynamic person,” Ortega said. “Preferences are always changing. We see consumers are caring about the social aspects. This is all part of sustainability.”
As for members of the coffee cooperatives, “these farmers are not making a lot of money,” he continued. “Smallholder farmers often are very poor, and we have to look out for the well-being of the sector or they will abandon their farms. We have to put the farmer at the center of the discussion because they’re the ones responsible for providing the product.”
Even so, he noted, “very, very little” of the extra price would go back to the farmers.
Provided to City Pulse by Capital News Service.