Have you ever wondered about the relatively high price of some coffee types, like Jamaican Blue Mountain or Kopi Luwak, when compared to very palatable, high quality beans from other locales? While there are a number of factors that dictate the final purchase price of each "high-end" varietal, let us look at an example close to home, the only type produced within the borders of the United States--Kona. After all, why does Hawaii, where the plant can literally be found growing and producing cherries wild and without any human tending, deliver a product more costly than equally good beans cultivated as far away as Kenya? If you are interested in the economics of the centerpiece of your morning ritual, particularly this cherished grown-in-America selection, read on.
To understand the cost structure of Kona coffee, you must first understand the economics of the remote Pacific Ocean state in which it is produced and, more specifically, the region where it is grown--the slopes of a live volcano on the leeward side of the Big Island. While many coffee connoisseurs assume they pay a premium for Kona due to shipping--it costs more to move coffee to mainland U.S.A. from Polynesia than from coffee-rich South America, for example--this is only part of the equation. For starters, the cost of doing business in Hawaii, whether it be agriculture or construction, is high when compared to other regions of the country, not to mention third-world coffee producing nations. Highest national prices for gasoline and electricity are only two drivers behind this phenomenon on an island that must import 90-percent of its food.
As you can imagine, living and running a business on the slopes of a live volcano has insurance implications as well--high premiums, if you can get coverage at all. In some coffee growing areas of Hawaii other than Kona--such as in parts of the Puna district where the coffee industry on the island originated--insurance companies will not cover operations, which affects business risk calculations.
The high cost of doing business is a key driver behind the current laws that allow Hawaiian-produced coffee to be labeled as "Kona" with as little as 10-percent actual Kona bean content. Unless your Kona coffee clearly states "100-percent Kona," you are drinking a blend that could include beans from just about anywhere on the planet. Business costs also explain why Hawaiian residents can buy very good quality coffees--including organic, fair trade product--from as far away as Africa for less than beans growing on Hawaiian slopes only a few hours' drive away.
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