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Nescafe and International Trade Essay

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Nescafe instant coffee is one of the most successful products around the world. It is a global giant in the coffee industry. Starting in 1938, the Nescafe brand became famous among Israeli circles, because the brand name is equivalent to the Jewish phrase “miracle coffee”. Later, Nescafe became so famous that during the World War II, majority of the products they manufactured are supplied to the US military. In the present day, Nescafe raw materials are exported to manufacturers in 31 countries.

Then these manufacturers either distribute the finished product to their respective countries of location, or they export it again to another country where Nescafe has no manufacturing plant. In 2006, Nescafe released a new brand of coffee, the Partner’s Blend Fairtrade Coffee. What they did is that they acquired or imported coffee beans from two of the world’s most lucrative coffee sources – Ethiopia and El Salvador. Nescafe also helped the local planters with advanced tools and technology that will enable them to produce more coffee with better quality.

This also opened up many income opportunities to the people in the countries we just mentioned. After raising the required volume of raw coffee, Ethiopia and El Salvador export these materials to Nescafe manufacturers and packagers all over the world. It’s a win-win situation for international trade. In Ethiopia alone, the Partner’s Blend project benefited more than 40,000 people. These people include local villagers and coffee farmers, who not only used to struggle with producing very slowly, they are running out of buyers as well.

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When Nescafe opened its trade in Ethiopia, these local coffee farmers were provided advanced knowledge and equipment relevant to coffee production. More importantly, they obtained a guaranteed regular buyer as well – Nescafe. This export policy became very helpful to the national revenue of Ethiopia. Meanwhile, the production of pure Arabica coffee is one of El Salvador’s most important industries. The money that they gain from exportation of coffee goods comprises approximately 30% of the total value of their national revenue.

Lots of local farmers in El Salvador have no other crops to export, except coffee. By exploiting this advantage, Nescafe was able to import superior quality coffee beans at a cheaper price. Moreover, the exporters were able to gain financially as well. A recent study showed that coffee production and exportation produced approximately 135,000 new jobs for El Salvador, and that comprises 25% of the country’s overall agricultural sector!

While the exporting countries, El Salvador and Ethiopia, frequently gains from the coffee trade, it may not always be the same for the importing countries such as the United States. The first factor that comes into play is the law of supply and demand. As seasons change in the exporting countries, the amount of coffee production either decreases or increases. When the production increases, the price of coffee beans are relatively low.

However, during times when production decreases, the supply lessens and the coffee prices instantly go up! This price increase might not be too much of a problem for the exporters but it sure can be a headache for foreign traders and importers. Other factors that come into play are shipment fees and taxes at customs. These factors rely and depend on global transportation changes and individual nation’s customs policy Thus, Coffee importers cannot escape these expenses present in the global market.

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