Source: UNIVERSITY OF PUERTO RICO AT MAYAGUEZ submitted to NRP
DEMAND FOR REGULAR COFFEE, DIFFERENTIATED COFFEES, AND SUBSTITUTE BEVERAGES IN PUERTO RICO AND THEIR IMPACT ON THE DOMESTIC MARKET
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
COMPLETE
Funding Source
Reporting Frequency
Annual
Accession No.
1009691
Grant No.
(N/A)
Cumulative Award Amt.
(N/A)
Proposal No.
(N/A)
Multistate No.
(N/A)
Project Start Date
May 5, 2016
Project End Date
Sep 30, 2020
Grant Year
(N/A)
Program Code
[(N/A)]- (N/A)
Recipient Organization
UNIVERSITY OF PUERTO RICO AT MAYAGUEZ
P. O. BOX 9000
MAYAGUEZ,PR 00681
Performing Department
Agri Economics & Rural Sociol
Non Technical Summary
Since early 2000, coffee production, its market, and consumer preferences in Puerto Rico and the world have changed. During this time, differentiated (specialty) coffees and new substitute beverages entered the market. Studies of consumer demand and market analyses have been performed internationally to measure and forecast changes in coffee supply and demand, and to characterize consumer preferences and market structure changes. Yet, Puerto Rico lacks an analysis of demand for regular coffee, differentiated coffees, and substitute beverages. Analyses of consumer preferences and market characterization are also needed.The commodity coffee plays an important economic, social, and environmental role in Puerto Rico. Puerto Rican coffee growers registered reduced profits due to increases in production costs, and the introduction of new diseases. Several Puerto Rican coffee growers and roasters have been successful in differentiating their coffee by quality accessing higher prices (on average114% more than regular coffee at $4.40/lb) in local and export markets. Previous studies performed by the AES-UPRM (Alamo et al. 2006 & 2015) suggest that differentiated (specialty) coffees can potentially attract high-income market segments and increase farmers' profits. However, lack of demand and markets analysis using microeconomic data prevent to estimate the actual market size, and forecast the demand for specialty coffee in Puerto Rico. The objective of this study is to estimate demand for regular coffee, differentiated coffees, and substitute beverages and their impact on the domestic market. The study aims to describe market segments, consumer profiles and preferences, and to provide market strategies for regular coffee and differentiated coffee in Puerto RicoForecasts that include the difference between the products, market size and locations, segments, and consumer preferences could help to stabilize and increase coffee prices, profits, and the welfare of the coffee farmers and their rural communities.
Animal Health Component
30%
Research Effort Categories
Basic
70%
Applied
30%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6032232209025%
6092232209025%
6031099209010%
6091099209010%
6046220301010%
6046230301010%
6076010301010%
Goals / Objectives
The general objective of the study is to estimate the demand for coffee, differentiated coffee, and substitute beverages and their impact on the domestic market strategies and policy. The specific objectives are:1.To estimate the demand for regular, differentiated coffees and their substitutes;2.To estimate the demand for differentiated coffees and differentiated substitute beverages such as chocolate, tea, juices and energy beverages;3.To characterize at retail level (coffee shops) consumer profiles and preferences for regular, differentiated coffees, and differentiated substitute beverages such as chocolate, tea, juices and energy beverage at retail level (coffee shops);4.To describe market segments, consumer profiles and preferences, and to provide marketing and business strategies for regular coffee and differentiated coffee in Puerto Rico.
Project Methods
Method Objective 1 and 2: To gather the data for estimating the demand for regular, differentiated coffees and their substitutes (objective 1), and the demand of differentiated coffees, and differentiated substitute beverages such as chocolate, tea, juices and energy beverages (objective 2) two consumer surveys will be designed. The designed questionnaires will be evaluated by UPRM Institutional Review Board, tested, and administrated to the consumer's sample. Questionnaires will be designed taking into consideration the demand models variables, and selected consumer's preferences and behaviors. The survey's interviewers will be trained for the questionnaire administration. The survey interviews will be by telephone.Sample size: This sample selection will support two surveys. For the first survey the sample frame will be Puerto Rico and we are going to stratify based on the senatorial districts (objective 1). The second pool will focus on high income population. The sample frame for the second survey (objective 2) will be the "barrios" (as defined by the US Census) at the top of the 90th percentile of income in Puerto Rico. The high income locations sample selection respond to the assumption that high price differentiated products are purchased by high income markets segments.Model Specification: The Almost Ideal Demand System (Full AIDS) model developed by Deaton and Muelbaner (1980) is selected to estimate the demand parameters with information at retail level for the two demand systems (objective 1 and 2):Model 1; demand for regular, differentiated coffee and substitute beverage for Puerto Rico and Model 2; demand for differentiated coffees, and differentiated substitute beverages (chocolate, tea, juices and energy beverages) for selected high income sectors in Puerto Rico. The statistical program SAS will be used for the model estimations. Results will be analyzed to estimate demand elasticities and forecast.Method Objective 3: A consumers' survey will be performed in coffee shops to gather data for characterizing at retail level consumer profiles and preferences for regular, differentiated coffees, and differentiated substitutes beverages. The gathered data will be organized (data entry) and analyzed to construct the consumer profile for regular and differentiated coffee drinkers, and substitute beverages available in the coffee shops.Method Objective 4: The Puerto Rican regular coffee and differentiated coffees consumer characterization will be performed using the data gathered from the coffee surveys (objective 1, 2, and 3). Market segments will be constructed using the consumer characterization data, and the coffee drinkers profile at retail level. The consumer characterization, profile, and markets segments data will be employed to design business and marketing strategies for regular coffee and differentiated coffees in Puerto Rico.Efforts to cause change in knowledge and evaluation: Results will be presented and discussed with stakeholders, policy makers, academic community and consumers through meetings, publications and ciberpages. The project results will be evaluated by stakeholders, and policy makers through a survey.?

Progress 05/05/16 to 09/30/20

Outputs
Target Audience:The target audience of the project were coffee consumers above 18 years old. Both males and females took part of the study. It was expected that a high percentage of consumers with higher incomes complete the surveys in coffee shops, and a more heterogeneous segment of consumers completes the survey at supermarkets. With regard to outreach efforts, we presented results to stakeholders at multiple levels. Government officials, faculty members, agricultural agents and coffee producers were invited to different annual meetings organized by personnel of the University of Puerto Rico. Changes/Problems:The project was affected and delayed due to the adverse effects caused by hurricanes Irma and Maria in 2017 and the Covid-19 pandemic in 2020. However, the activities needed for the success of the project were completed after budget revisions and reorganization of activities. All the main objectives were met. Presentations of results in international congresses were not possible due to annual meetings cancellations associated with the pandemic situation. The original PI of the project retired and doctor Héctor Tavárez assumed the role of PI since August 2019. This transition did not affect the overall progress of the project. What opportunities for training and professional development has the project provided?Two seminars on data analysis were presented by the current PI of the project to students enrolled in the Department of Agricultural Economics and Rural Sociology of the University of Puerto Rico. The students could use this information in future studies or current courses. How have the results been disseminated to communities of interest?Two presentations were presented in annual meetings. Multiple stakeholders participated in the meeting, including government officials, professors, students, representatives of NGOs. Unfortunately, final results were not presented at international congresses due to the Covid-19 pandemic. What do you plan to do during the next reporting period to accomplish the goals?This is the last year of this project. Future reports are not required.

Impacts
What was accomplished under these goals? Activities completed: A survey instrument was successfully designed and distributed to consumers at coffee shops and supermarkets. A total of 580 questionnaires were distributed. Two presentations were presented at the annual meetings organized by the Agricultural Experiment Station in collaboration with the Agricultural Extension Service of the University of Puerto Rico. These meetings are oriented to the coffee sector and stakeholders. The secretary of the Puerto Rico Department of Agriculture, agricultural agents, representatives of USDA NIFA, Agricultural Sciences faculty dean, department heads, faculty members and coffee producers participated in this meeting. Specific objectives: The project fulfilled the objectives as all the data needed was collected and tabulated. Two manuscripts were submitted for publication in peer-reviewed journals as a result of this project. Additionally, a draft of a third manuscript is in progress. Results were presented at local meetings.

Publications

  • Type: Journal Articles Status: Under Review Year Published: 2020 Citation: Tav�rez, H. �lamo, C., Nieves, E., & Flores, C. Using Contingent Valuation to Estimate Consumers' Willingness to Pay for Differentiated Coffees in Puerto Rico. JAUPR
  • Type: Journal Articles Status: Other Year Published: 2020 Citation: Hern�ndez J., & �lamo, C. The Effects of Demographic Generations on Coffee Preference in Puerto Rico. Revista Forum Empresarial.
  • Type: Conference Papers and Presentations Status: Published Year Published: 2020 Citation: �lamo, C., Tav�rez, H., Hern�ndez, J.C., & Cort�s, M. (2020). El Consumidor de Caf� de Puerto Rico Caracter�sticas y Descripci�n de su Consumo y Preferencias.AES Annual meeting, Las Mar�as, PR.
  • Type: Conference Papers and Presentations Status: Published Year Published: 2020 Citation: Tav�rez, H. (2020). Disposici�n del Consumidor de Puerto Rico a Pagar por Caf�s Diferenciados. AES Annual meeting, Las Mar�as, PR.
  • Type: Journal Articles Status: Under Review Year Published: 2020 Citation: Hern�ndez, J.C., & �lamo, C. The Demand for Differentiated Coffee in Puerto Rico. JAUPR


Progress 10/01/18 to 09/30/19

Outputs
Target Audience:This project provides insights to multiple economic agents (consumers and producers) interested in different alternatives of coffee production. The project also provides useful information to the scientific community to encourage future research. Thus, the target audience are stakeholders, policy makers, academic community, producers and consumers. Changes/Problems:The only shortcoming was a problem with the database that was not developed correctly. This problem was addressed in a period of four weeks. The project is ongoing as planned, but is running behind schedule. A no-cost extension will be requested for this project. What opportunities for training and professional development has the project provided?Nothing to report as of this date. However, during this year we plan to present a workshop about data analysis to students enrolled at the department of Agricultural Economics and Rural Sociology of the University of Puerto Rico. The research assistant (student) will learn about different strategies for the dissemination of research results. How have the results been disseminated to communities of interest?We are working on data analysis to present part of the results in March 5 2020 in the annual agricultural sector meeting (coffee sector) organized by personnel of the University of Puerto Rico. In the future we plan to submit two manuscripts to peer-reviewed journals, and present an oral presentation in a professional congress. What do you plan to do during the next reporting period to accomplish the goals?This project ends this year. Nothing to report for the next reporting period. However, during the next months we plan to submit two manuscripts in a peer-reviewed journal, present an oral presentation in a professional congress, present a poster presentation at the Third Congress of Applied Economics held in Mayagüez, submit a periodic letter and develop a workshop to train master students on data analysis.

Impacts
What was accomplished under these goals? We completed the process of data entry for most of the project. However, we needed to work on the data for an extra month during this reporting period, as the data was not entered correctly. We have been working on data analysis, including programing of codes, and tabulation of results.

Publications


    Progress 10/01/17 to 09/30/18

    Outputs
    Target Audience:Stakeholders, policy makers, academic community and consumers. Puerto Rican coffee industry components (growers, processors, roasters, marketers, baristas, and coffee shop owners). Changes/Problems:The Hurricane Maria hit and devastated PR on September 2017, thus consumers surveys had to be postposed to January 2018. Because the communication infrastructure was significantly affected the original workplan of perform the consumers surveys by phone changed and the surveys were performed by personal interviews. Due to Hurricanes Irma and Maria that devastated Puerto Rico the consumers' telephone surveys assigned to the Pool Institute could not be performed for the objective; to estimate the demand for differentiated coffees and differentiated substitute beverages such as chocolate, tea, juices and energy beverages. The telephone survey was scheduled from August to December 2017. Hurricanes Irma and Maria were both in September 2017, they destroyed the Pool Institute, and the electric and telephone infrastructure in Puerto Rico. Up to January 2018 40% of the island remains without electricity. The option of a telephone survey is no longer available. To accomplish the project objectives the following changes are planning to be implement on the consumers' surveys to gather the information: Consumers' survey will be conducted by interviews person to person. Due to budget constrains the consumers' survey will be performed in selected municipalities located in Puerto Rico's different regions. Authorization will be require to transfer the budget assigned originally for the telephone surveys to graduate students that will performer surveys' personal interviews. What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?The information gathered was disseminated to researchers, and agricultural extensions on professional conferences. What do you plan to do during the next reporting period to accomplish the goals?Data analysis of the database created will be performed to fulfill projects objectives: Objectives one and two: To estimate the demand of regular, differentiated coffees and its substitutes at retail level and coffee shops. Objectives three and four: to characterize at retail level (coffee shops) consumer profiles and preferences for regular, differentiated coffees, and differentiated substitute beverages such as chocolate, tea, juices and energy beverage at retail level (coffee shops); and to describe market segments, consumer profiles and preferences, and to provide marketing and business strategies for regular coffee and differentiated coffee in Puerto Rico. To provide information on the effect of Huracan Maria on consumers' family size, income, and consumption of regular and differentiated coffees and its substitutes beverages. The project results will be present and discuss with stakeholders, policy makers, academic community and consumers Meetings will be hold with the coffee industry components (growers, processors, roasters, marketers, baristas and coffee shop owners) and the policy makers to present, discuss and evaluate project's results. Reports and publication will be writing and published on professional journals, professional conferences proceedings, and press articles. Results and publications will be available online through a coffee repository that will be available in the AES-UPRM Agricultural Library.

    Impacts
    What was accomplished under these goals? The consumers surveys to gathered the data needed for fulfill the project objectives were performed. Objectives one and two: Databases to estimate the demand of regular, differentiated coffees and its substitutes at retail level and coffee shops were created. Objective three and four: Database to characterize at retail level (coffee shops) consumer profiles and preferences for regular, differentiated coffees, and differentiated substitute beverages such as chocolate, tea, juices and energy beverage at retail level (coffee shops); and to describe market segments, consumer profiles and preferences, and to provide marketing and business strategies for regular coffee and differentiated coffee in Puerto Rico. The Hurricane Maria hit and devastated PR on September 2017, thus consumers surveys had to be postposed to January 2018. The surveys date change provide us the opportunity of gather information related to the effect of Huracan Maria on consumers' family size, income, and consumption of regular and differentiated coffees ant its substitutes beverages. A census was performed at retail level to identify and characterize the supply of coffee and non-alcoholic substitute beverages (juices, chocolates, tea, carbonated beverages and energy drinks) for selected municipalities in different regions of Puerto Rico. The census was conducted in different establishment of retail food sales. The retail food store includes: megastores such as Walmart, members club stores (Sam's and Costco), local supermarket chains with presence in almost the entire island (Selectos and Econo), regional supermarkets (Mr. Special, Ralph's and Supermax), and farmers markets. The municipalities censed were: Adjuntas, Arecibo, Caguas, Fajardo, Mayagüez and San Juan. The growing, processing and roasting of coffees differentiated by quality and origin of Puerto Rico for domestic and export markets has been identified as an alternative to increase the profits of the stakeholders. Since 2000, coffee brands produced by small and medium farmers have doubled. There is lack of information on the market places in which the coffee brands produced by small and medium farmers had access. The data collected in the census suggest differences in the supply of coffee brands by establishment and region. The presence of coffee brands differentiated by origin and quality produced by small and medium coffee growers are more present in local and regional supermarket chains than in megastores and members club stores.

    Publications

    • Type: Conference Papers and Presentations Status: Published Year Published: 2018 Citation: Tewari Rachna; Alamo Carmen; Mart�nez Franklin; and April Jones; 2018 Evaluating Farmers Market Nutrition Programs (FMNP): Perceptions of vendors and recipients in west Tennessee and Puerto Rico, Southern Agricultural Economics Association, 2018 Annual Meeting, Jacksonville, FL.
    • Type: Conference Papers and Presentations Status: Published Year Published: 2017 Citation: Carmen Alamo, Carlos Flores, Miguel Monroig, Wigmar Gonz�lez y Franklin Rom�n Mart�nez, 2017 Caracterizaci�n de cambios en la estructura de producci�n y Mercado de caf� en Puerto Rico, Caribbean Food Crops Society, Reuni�n Anual Carolina PR-julio 2017.


    Progress 10/01/16 to 09/30/17

    Outputs
    Target Audience: Nothing Reported Changes/Problems:Due to the Hurricanes Irma and Maria that devastated Puerto Rico the consumerstelephone surveys assigned to the Pool Institute could not be performed for the objective. The telephone survey was schedule from August to December 2017. Hurricanes Irma and Maria were both in September 2017, they destroyed the Pool Institute, and the electric and telephone infrastructure in Puerto Rico. Up to January 2018, 40% of the island remainedwithout electricity. The option of a telephone survey is no longer available. To accomplish the project objectives the following changes are plannedto be implementedon the consumerssurveys to gather the information: 1. Consumers' survey will be conducted byperson to person interviews 2. Due to budget constrains the consumerssurvey will be performed in selected municipalities only. 3. Authorization will be require to transfer the budget assigned originally for the telephone call surveys to assistanships for graduate students that will performthesurveysinterviews. What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest?The information gathered was disseminated to researchers, and agricultural extensions on professional conferences. What do you plan to do during the next reporting period to accomplish the goals? To estimate the demand for differentiated coffees and differentiated substitute beverages such as chocolate, tea, juices and energy beverages To characterize at retail level (coffee shops) consumer profiles and preferences for regular, differentiated coffees, and differentiated substitute beverages such as chocolate, tea, juices and energy beverage at retail level (coffee shops).

    Impacts
    What was accomplished under these goals? A census was performed at retail level to identify and characterize the supply of coffee and non-alcoholic substitute beverages (juices, chocolates, tea, carbonated beverages and energy drinks) for selected municipalities in different regions of Puerto Rico. The census was conducted in different establishments of retail food sales. The retail food stores include: megastores such as Wallmart, members club stores (Sam's and Costco), local supermarket chains with presence in almost the entire island (Selectos and Econo), regional supermarkets (Mr. Special, Ralph's and Supermax), and farmers markets. The municipalities censed were: Adjuntas, Arecibo, Caguas, Fajardo, Mayagüez, and San Juan. The growing, processing and roasting of coffees differentiated by quality and origin of Puerto Rico for domestic and export markets has been identified as an alternative to increase the profits of the stakeholders. Since 2000, coffee brands produced by small and medium farmers have doubled. There is lack of information on the market places in which the coffee brands produced by small and medium farmers had access. The data collected in the census suggest differences in the supply of coffee brands by establishment and region. The presence of coffee brands differentiated by origin and quality produced by small and medium coffee growers are more present in local and regional supermarket chains than in megastores and members club stores.

    Publications

    • Type: Conference Papers and Presentations Status: Published Year Published: 2017 Citation: Carmen Alamo, Carlos Flores, Miguel Monroig, Wigmar Gonz�lez y Franklin Rom�n Mart�nez, 2017 Caracterizaci�n de cambios en la estructura de producci�n y mercado de caf� en Puerto Rico, Caribbean Food Crops Society, Reuni�n Anual, Carolina PR- julio 2017.


    Progress 05/05/16 to 09/30/16

    Outputs
    Target Audience:Coffee industry components: growers, processors, roasters, marketers, baristas, and coffee shop owners. -Policy makers, government and non government organizations related with coffee industry. -Professionals, researchers, formal and informal educators (extension service) -Market segment of coffee consumers. Changes/Problems:The consumers' surveys for objectives one and two were delayed due to a contractual situation with the telephone survey application. This situation was solved and surveys will be performed from April to September 2017. What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest? Nothing Reported What do you plan to do during the next reporting period to accomplish the goals?Consumer's surveys for objective one and two will be conducted from April to September 2017. Data entry, analysis, and modeling for the demand for regular, differentiated coffees and their substitutes will be performed.

    Impacts
    What was accomplished under these goals? The general objective of the study is to estimate the demand for coffee, differentiated coffee, and substitute beverages and their impact on the domestic market strategies and policy. Questionnaires were designed for the consumers' surveys proposed to accomplish objectives one and two. Objective one and two surveys will be conducted from April to September 2017.

    Publications