Article Review

What is the article about?

The article draws attention to the problem of relationships between the changes in coffee prices and its influences on a food and beverages company’s business; in particular, the author refers to the issues of how higher coffee prices significantly affected the declining value in Kraft Foods Group’s total profit. It tells us that the price of coffee has been through a drastic change for the past few months. It rose up to 22% during September went low in the following month and rose again by 10% before it declined by 12% and maintained at the price of $1.76 per pound by the end of the November (note that this is 2014 article and coffee’s price of $1.76 per pound at that time are considered high). Based on the article, the major cause of the volatile coffee price at that time is the uncertainty regarding supply. This happened because most supply for coffee industries have gone through hard times. For instance, Central American countries, which produce 10% of the world’s coffee, have been hit simultaneously with droughts and a fungus that has destroyed crops. A drought in Brazil, which supplies a third of the world’s supply, led to pessimism regarding the coffee supply during that year. Based on the article, Brazil is expecting an 8% reduction in coffee production that year. The expectations of reduced supply had led to buyers bidding up the price of coffee. The beverages business is important for Kraft, as it contributes nearly 12% of the company’s value. Kraft’s beverages business consists mostly of coffee sales, so coffee prices play an important part in determining the costs for this division. Overall, this article talks about how changes in coffee prices impact of Kraft’s business and its profit.

Do you agree or disagree with the author’s main points? Why and why not?

I have to agree with the author’s point, at least to the extent that higher coffee prices will have a huge impact to a food and beverages company like Kraft Foods...