COFFEE is ranked as the second most common traded commodity in the world behind petroleum, and one of the most consumed beverages, with over 2.25 billion cups consumed globally per day.

Over 90 per cent of coffee production takes place in developing countries such as Africa, South America and Asia. Brazil is the largest producer and exporter of this product. Coffee has become a vital cash crop for many people living in these areas and it is estimated that over 100 million people have become dependent on coffee as their main source of income.

The industrialised economies are the largest consumers and the demand continues to increase. It is estimated that in the US alone, coffee is enjoyed by over 100 million people on a daily basis, making it the largest consumer in the world.

Figures from the International Coffee Organisation have shown that total export for coffee year ending September 2011/2012 was 107.8 million bags, the highest level on record and a three per cent increase over 2010/11. Notably, exports for October, the first month of coffee year 2012/2013, increased by 17.3 per cent moving from 7.57 million bags to 8.88 million bags when compared to the corresponding period in 2011.

What is driving this demand?

Aside from globalisation and robust marketing campaigns which does impact demand, the health benefits of coffee is another factor.

Extensive studies have been conducted to examine the health aspects of coffee and findings show that the positives outweigh the negatives. Research has shown that consuming coffee reduces the risk of developing certain cancers, heart rhythm problems and strokes.

It is also lessens the likelihood of getting Parkinson’s disease, Dementia and type 2 Diabetes.

Trading coffee is big business for major coffee-producing countries such as Brazil, Vietnam and Colombia due to those that demand its distinct taste.

For individuals who are desirous of investing and gaining exposure in coffee, an indirect method of investing would be via the stock market. This means buying stocks in companies that are involved in the coffee business, and would include businesses that harvest and roast coffee beans, wholesalers and retailers. You can also invest in coffee through an Exchange Traded Fund (ETF).

Exchange Traded Funds are instruments that track a commodity or index but trade like a regular stock.

Trading mainly on the NASDAQ exchange, some of the major companies in this multi-billion dollar industry include, Starbucks, Green Mountain Coffee Roasters, Caribou Coffee Company, and Coffee Holding Company.

These entities have seen tremendous growth over the last five years and have attracted renewed interest from other competitors in the market such as Dunkin’s Brand Group and McDonald’s to name a few.

As owners and operators of restaurant franchises worldwide, these large corporations have identified that the coffee business is a lucrative and growing market. Coffee forms a part of their product line and although not new to the business, in recent years more emphasis has been placed on marketing coffee as their biggest product offering.

An all-out coffee war has been brewing between Starbucks and Dunkin’s Brand Group with both of them developing new and innovative strategies to garner market share as they compete to be the “Best Coffee in America.”

Mergers, acquisitions and partnerships have been the approaches adopted and reaching as much people as possible will be the defining factor as the focus is on pushing their presence worldwide. To gain global recognition and appeal, these companies have targeted the growing markets of the world’s two most populous countries — China and India. With increases in its youth population and disposable income, successful growth seems assured as there is enough room to expand the business.

Locally, Jamaica’s Blue Mountain Coffee is world renowned. The distinct quality is primarily due to the altitude at which the coffee is grown; somewhere between 2,000 and 5,000 feet. The demand for this quality product is very high but unfortunately the supply is low.

A relative newcomer to the coffee business, “Marley Coffee” (corporate name Jammin Java Corp) headed by Rohan Marley, is a US-based company that provides premium, artisan roasted coffee to the grocery, retail, online, service, and hospitality industries. Within the last year, the company has been strategically positioning itself with some of the largest distributors across the US, Europe and Canada.

Contracts have also been negotiated to supply some of the largest companies with their premium product. Indeed, it has been recognised that this is potentially a very profitable business. Poised to become a major player in this multi-billion-dollar industry, investors can purchase shares via their ticker JAMN.

Recently, it was announced that the exclusive contract between the Ministry of Agriculture and Fisheries and Zhejiang Dunn’s River Coffee Company for the sale of Jamaican coffee in China, will expire on February 1, 2013.

The coffee Industry Board (CIB) has indicated that they will no longer grant exclusive contracts to a sole distributor which will ultimately open the way for a wider network of operators to apply for authorised foreign importation permits.

In 2009, the decision was taken to target China, after Japan, which was the largest importer of Jamaican Coffee, terminated forward payments for the product. The targeting of China should prove valuable in the future as this Asian nation is predicted to become the world’s largest consumer of coffee.

Patrick Robins is a Wealth Advisor at Stocks & Securities Limited and can be contacted via probins@sslinvest.com.