Thursday, April 25, 2019

Chocolate & Coffee

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Price elasticity of chocolate
Among consumers in the US, the demand for premium chocolate is less price elastic than for mainstream chocolate brands. Premium brands like Lindt exhibited less volume decline relative to mainstream brands like Hershey. For every 1% increase in pricing, Lindt experiences a 1% decrease in volume, while Hershey's volume decrease is more pronounced at 1.7%.

What are the main drivers behind people's chocolate choices? “Taste and good flavors” and “good quality” tops the list of reasons. “Low price” is less of a consideration which would favour premium players like Lindt.

Coffee bean – Record low prices with record high consumption (Link)
Although coffee has never been more popular, the price of coffee beans is at their lowest point in over a decade. Why? Factors include technological advances that have boosted production and the collapse in the currency of the world’s largest coffee producer, Brazil.
Today, the Brazilian Real is 60% less valuable against the USD than it was in 2011, and has depreciated over 12% in just the last year. Since Brazil’s currency is so cheap, so is the coffee that Brazil sells in US dollars to the rest of the world. These unsustainable low prices are sending coffee farmers out of business.
However, these low coffee bean prices have not translated into cheaper cups of coffee at your local café. The average cup at many major cities around the world is close to $3. Coffee prices remain high due to strong demand and rising costs of producing the drink, alongside things such as rent, overheads, labor, milk and sugar.