A value chain represents the entire journey of a product — from raw materials to the final customer. Understanding where a company sits in the value chain helps identify who captures the most profit.
The Coffee Value Chain
1. Farming / Cultivation
Low margins and high dependency on climate and global prices.
2. Processing & Exporting
Better margins but still volatile.
3. Roasting & Branding
Brand strength increases pricing power.
4. Retail / Café Experience
The highest value segment — brand + location + experience = profits.
5. Accessories & Ecosystems
Players like Nespresso earn high margins through ecosystem control.
Farmers put in the most effort, but brands and retailers earn the most profit. Companies closest to the customer capture maximum value.
As an investor, choose companies that sit at the higher end of the value chain — where pricing power and long-term profitability exist.