Global Value Chains in Latin America: Experiences of Transformations by Pablo Pérez Akaki & Marisol Velázquez-Salazar & Gilma Sabina Lizama Gaitán

Author:Pablo Pérez Akaki & Marisol Velázquez-Salazar & Gilma Sabina Lizama Gaitán
Language: eng
Format: epub
ISBN: 9783031331039
Publisher: Springer Nature Switzerland

8.2 Conceptual Framework

From a Commodity to a Differentiated Product

The end of the International Coffee Agreement in 1989 gave rise to a new type of conventional market characterized by volatile prices and the empowerment of speculators (Valenciano-Salazar et al., 2023), where producing countries have little or no control over price formation. In addition, it is estimated that about 80% of the coffee sold in the world is made in this type of conventional market. In these markets, coffee is traded as a commodity, as a raw input for another highly added-value product, so it is mainly bulked and sold at the lowest possible price (Quintero & Rosales, 2014). Under this scheme, coffee producers act as final price takers, while price formation occurs in the final segments of the chain. Hence, coffee producers are exposed to prices that often do not cover their production costs in a conventional market. This situation discourages investments in coffee plots, increases rural unemployment, and is a source of poverty, crime, and immigration (Valenciano-Salazar et al., 2023).

Alternative market forms emerge as a response to a disadvantageous commodity market. These alternative value chains look for fewer intermediaries, less complexity in the distribution system, and a better flow of information. Specific literature calls these types of chains as Short Food Supply Chain (SFSC). Even though there is not a unified definition for SFSC, it means a close relationship between producers and consumers and specific focus on cultural and social values around the traded product (Maas et al., 2022). In the case of a shorter coffee value chain, the traded product is sought to be appreciated for its characteristics and production context and not by an offered volume. Differentiated coffee markets are a type of alternative market (Canet & Soto, 2017), under which there are a wide variety of presentations in response to final consumers’ requirements regarding quality (taste and aroma) and environmental concerns. In this niche market, there is a commitment to addressing these consumers’ concerns.

To address consumer concerns and desires, coffee producers should have enough information about the tastes and preferences of the final consumer. Differentiated coffee markets arise as a new and more dynamic alternative market by responding to the wishes and concerns of a specific consumer. According to the International Coffee Organization (IIC) and the Specialty Coffee Association of America (SCAA), they have an annual sales growth of 5 to 10% (Escamilla, 2007; FAO, 2012; Perez & Ubeda, 2013).

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