Regulation of Coffee Retail Market in the USA

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Regulation of Coffee Retail Market in the USA
The coffee retail market supports both independent shops and large retailers. (coffee in coffee image by Maria Brzostowska from Fotolia.com)

Coffee in the United States is viewed as an everyman's type of beverage--something that many need to wake up in the morning and get the job done. The retail market for coffee in the U.S. is regulated by consumers who dictate supply and demand and government organisations that monitor bean quality and ensure fair competition.

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National Coffee Association

The National Coffee Association was founded in 1911 and was the first trade association for the coffee industry in the United States. The association is both a lobbying arm of the coffee retail market--representing roasters, corporations and non-profit organisations--and is a scientific research centre publishing its annual national survey, National Coffee Drinking Trends since 1950. This publication enables members to chart trends in the coffee market, plot courses of sales and create marketing campaigns based on real data of what consumers are drinking.

Monopoly and Competition

The coffee retail market is governed by U.S. antitrust laws as any other industry. The Federal Trade Commission Act bans unfair methods of competition, such as misleading information or deceptive business practices. This is aimed at keeping each coffee retailer, regardless of whether it sells coffee, honest with the information it provides to consumers about its products. The retail market is also protected from interlocking directorates by the Clayton Act. This practice involves a board of directors being in position to make decisions for competing companies working under the same corporate banner. Interlocking directorates can occur when companies are purchased by competitors and a board of directors is removed.

FDA

The Food and Drug Administration monitors all coffee products sold in the U.S. and inspects them to ensure no potentially harmful ingredients are present. FDA approval of a coffee product or a warning against it can greatly affect sales. An example of this happened in June 2010 when the FDA issued a consumer warning for the product Magic Power Coffee. The government organisation discovered through testing that the product contained an active ingredient that could lead to dangerously low blood pressure.

Imported Coffee

The FDA examines all coffee brought into the country. A minimum of six bags is investigated per 100 lots as part of an import field examination. This physical inspection of the beans allows inspectors to determine if any insects, excrement or other potentially harmful materials are present. The coffee retail market depends greatly on the FDA to maintain consumer confidence levels that only products that are safe for consumption are being offered for sale.

Cost Versus Price

Every coffee shop operates differently when it comes to its costs versus the price it charges for a cup of coffee. The market for large coffee retail chains and shops is vastly different than that of an independent coffee shop. According to Espresso News and Reviews, the profit margin for a cup of coffee for major retailers in the U.S. is roughly 14 per cent. Independent retailers do not have the administration and marketing costs that larger retailers have, which may allow independent shops to charge less than big chain stores.

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