The Research On The Relationship Between Business Model Of Multinational Coffee Companies And Coffee Industry Value Chain In Latin America

In August2014, the weighted average price of Brazilian Arabica beans is183.32cents/lb, while if the price of a12.17-oz.①cup of latte is assumed to be$5, then it means the price from product procurement to end consumerincreases as45times as much. Under this assumption, only the most commonand popular latte is involved. If we expand the assumption to include thespecialty coffee produced in Latin America, the terminal sales price will behigher. So in the Latin America coffee industrial chain, its value is mostlyreflected in the downstream, and the downstream is dominated bymultinational coffee companies. Multinational coffee companies has opened upa new way for the coffee industry with advanced business model, which makescoffee not only relate to people’s daily lives, but also to culture and lifestyle.Therefore, it is necessary to study business model of multinational coffeecompanies, coffee industry value chain in Latin America and the relationshipbetween them.To begin with, this paper analyzes business model of multinational coffeecompanies. It includes three major distinctions: First, from final products pointof view, relevance to coffee products are focused on. Second, from coffeeindustry value chain’s perspective, take into account the extent to that plantingfield is stretched. Third, viewed from product promotion, sales and marketingare distinguished. From three aspects, business model of multinational coffee companies is divided into two types: Conglomerate diversification+Sales andConcentration diversification+Marketing. In the second place, this paperelaborates three segments of coffee industry value chain in Latin America, anddelves into distribution characteristics of the value chain on this basis. Thedistribution characteristics are mainly reflected in two aspects: First, thedifferences between the upstream and downstream segments. Second, themutual constraints of the upstream and downstream segments.Mutual influences are embodied in the relationship between businessmodel of multinational coffee companies and coffee industry value chain inLatin American. Combined with the industrial value chain theory and thecompetitive advantage theory, this paper analyzes deeply this relationship. Onthe one hand, the business model of multinational coffee companies has aninfluence on coffee industry value chain in Latin America: The business modelpromotes the formation of coffee industry value chain in Latin American; thebusiness model enhances the competitiveness of coffee industry value chain;and the changes of the business model impact coffee industry value chain inLatin American. On the other hand, coffee industry value chain in LatinAmerican also has three effects on the business model of multinational coffeecompanies: Coffee industry value chain facilitates the business model toexpand planting; complete value chain makes for multinationals’ scaleoperation; and mature coffee industry value chain causes the competitionamong major multinationals.By analyzing the business model of multinational coffee companies, thecoffee industry value chain in Latin America as well as the relationshipbetween the two, and by comparing with the current development of thebusiness model of Chinese coffee companies and coffee industry value chainin China, it is easy to find that China’s coffee industry chain is not matureenough and exists many problems. However, China started late on the coffeechain. Chinese coffee industry value chain cannot be universally better orworse than the Latin American value chain. So the existence of this gap is normal. Drawing from a mature system of business model of multinationalcoffee companies, as well as coffee industry value chain in Latin America, thispaper makes beneficial suggestions for innovation and perfection of Chinesecoffee company’s business model and coffee industry value chain.