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Coffee Industry in Brazil

Essay by   •  November 23, 2012  •  Case Study  •  757 Words (4 Pages)  •  2,091 Views

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Introduction and History

The purpose of this research is to review the coffee industry, evaluate the market and measure the possibility of investing.

Brought by French settlers from Ethiopia and planted in the north of Brazil in the 1700's, the coffee occupied a lot of Brazilian land replacing the sugar cane which used to be the main player in the farming industry, by the early 1800's the coffee frenzy took over brazil and by the mid 1800's Brazil became the biggest coffee exporter of the world.

The industry

Brazil, the 7th biggest economy worldwide, with $37 billion net FDIs, ranking the 2nd after China, and an increase of 50% in the exports of goods during the last 5 years only, all that spreads the way for a fertile business environment.

A $7.8 billion industry, with a 5.6% increase since last year, making up 30% of the world production and 10% of the total exported goods of the country, are factors that makes it hard to ignore the influence of coffee in Brazil, a product that once decided how politics went in the South American nation, with a steady increase in production as shown in Fig. 1-1, the industry shows great potential and is of utmost importance to the country leaders'.

If you think the world consumption is a tempting reason for Brazil to produce, you need to look at the national usage of coffee, named the "most consumed product in Brazil", coffee just never fails to attract investors in this country, to get the picture why Brazil has a competitive advantage, let's do a quick comparison, a kg of coffee is LE 30 in the local Brazilian market, it costs more than double of that in Egypt.

Porter's diamond model

Factor conditions:

-Perfect Climate

The ideal weather to grow the coffee bean is around 70 Fahrenheit with plenty of rainfall, and that matches the Brazilian weather which averages around 71 or 72 Fahrenheit.

-Labor

Whether the industry like it or not, but coffee is an agriculture product, and that ties it to traditional producers all over Brazil, and as a result entails lack of awareness or unwillingness to cheaper more advanced farming method, that if controlled, can bring the production costs a lot less turn Brazil to an even more competitor player, but the social effects must also be taken into consideration, like the employment rate as more than 3.5 million Brazilian work in the coffee field.

-Knowledge

The knowledge obtained by Brazilian farmers due to the long standing history of the industry is an essential strength for the country

Demand conditions:

Considering the local and global consumption discussed above, the demand for coffee in Brazil is ever rising and not seeming like it'll slowdown in the near future.

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