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The CPG Supply Chain Explained – Coffee from Plant to Cup
11-05-2018

The Consumer Packaged Goods (CPG) supply chain is described as the journey of a product from procurement to consumption. It is an intricate network of processes that transform the raw material to finished goods and carry it to the retailer’s shelf. The supply chain in the CPG industry is often a long and disjointed process with gaps that cause a delay in bringing the product to the retailer. We bring you the journey of one such CPG – coffee –from the plantations around the world to the consumer’s cup and the unique challenges that accompany it.

The Story of Coffee

Coffee is cultivated in tropical climates and harvested during the dry season. Flavors of the beans vary depending on the region in which it is grown and the climatic condition of that region. Strains of coffee are often named after the area from where they are sourced. Each variety has a distinct flavor for which it is well known. Makers of the product either source the beans directly from the place of cultivation and prepare their blends by mix-roasting beans from multiple sources, or purchase roasted beans from roasters who do much of the same thing.

Milling

Coffee plantations bear fruit after three to four years of planting. Planters, therefore, plant one area of the land each year to deliver an annual yield. Coffee grows in pods, which once plucked must be deseeded. There are two ways of doing this. The dry method – also called dry processing – involves drying the pods for a month before deseeding and cleaning. The wet process uses mechanical equipment to squeeze out the pulp and wash, clean, and dry the beans. The wet method is faster and produces better quality seeds and is, therefore, the preferred method. Milling is done either by the plantation owners themselves or by professional hullers and millers.

Beans are then sorted by size, color, and density. This process is manual and the processing time depends on the volume of the produce and the amount of labor involved.

The Coffee Supply Chain

The coffee supply chain involves the planters who produce the crop at one end and the retailers at the other. Along the line, there are hullers, exporters, importers, logistics companies, roasters, marketers, and wholesalers.

Apart from the usual challenges of any CPG supply chain, the coffee supply chain has an added risk factor as the raw material is heavily dependent on weather conditions. Further adding to this risk is the fact that roasted beans retain their flavor for a short time, making the shelf life of the product shorter than other CPG products.

The Unique Challenges of the Coffee Supply Chain

Production

Coffee planters bear the highest risk along the supply chain as their livelihood is dependent on the crop. Since cultivation is climate-dependent, unfavorable conditions even for one year may result in substantial losses.

Transportation

Coffee is an internationally traded commodity. Its transportation involves conveying the cherries from the farms to the processors and from the processors to the exporters. From the exporters, the beans travel by ship to the importers and from there to the roasters, marketers, and coffee shops. Transportation cost is therefore considerable. Also, if there is a high demand for beans from a particular source, it is likely to impact the transportation cost of that specific variety.

Inventory

Inventory management in the coffee industry is of particular concern for the following reasons:

  •    Beans are graded and branded depending on the source.
  •    Mix-roasting several varieties of seeds produce many blends of the product.
  •    Green beans retain flavor better than roasted beans.
  •    If the crop from even one source fails to deliver because of hostile climate, it can impact multiple brands.
  •    Roasters and marketers are, therefore, challenged with maintaining inventory levels that are low enough to retain the flavor and yet high enough to allow for crop-failure.

The CPG Supply Chain

Not only coffee, but many CPG products such as spices, grains, condiments, and other food products are dependent on weather and the sourcing of raw material for supply. Coffee is unique in that a demand exists for produce from specific origins. This factor makes the coffee supply chain far more fragile as compared to other CPG products. Building strong links along the chain, retaining suppliers, and efficiently managing the inventory are a few ways in which enterprises can meet the CPG supply chain challenges.

Meet the Author

Rajendran headshot

Rajendran Nair

Chief Marketing Officer
Rajendran has over two decades in enterprise software in roles ranging from development to product management to marketing. He was most recently at Rootstock, the leading ERP for Manufacturing on the Salesforce platform. At Rootstock, he was responsible for driving topline, streamlining sales and marketing operations, and substantially increasing market awareness including favorable positioning in four major analyst reports.
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