There's something strange about coffee...

Today's blog will be on the wonderful world of coffee in America. Or more like, I don't understand why coffee prices are so weird here. For the record, I'm a serious coffee drinker, so the economics of coffee are important to me =)

Let's take a typical jar of Nescafe instant coffee, like the many many types of instant coffees you see in Singapore. Only in the US, instant coffee is considered a rarity; a luxury if you will. A 200g bottle of instant coffee costs a whopping $8... or about $12 SGD. Normal coffee prices for Nescafe deluxe in NTUC will only set you back $8 SGD.

In contrast, ground coffee, which is a rarity in Singapore, is the cheapest, most available coffee product in the US. I accidentally bought a 200g jug of ground coffee, for an amazing sum of $2.80 USD. Now, making coffee from ground coffee requires a fixed cost, which is the cost of the coffee machines, and they use drip coffee makers around these parts. An economical model will set you back about $18 USD.

Economically speaking, if you purchased a coffee machine and coffee grounds, you would potentially break even with the instant coffee option within 3 jars of instant coffee (3 months of consumption for me).

I would suppose that my research question would be: Why does instant coffee command a price premium in America? My suspicions are the cost of processing coffee in the US are much higher than those in South East Asia. Store space in the US is cheap as well, so manufacturers can offer big 500g tubs of ground coffee without significantly increasing the costs of stocking and displaying the product. (Approximately twice or three times the volume of ground coffee is required to produce the same amount of coffee as a teaspoon of instant).

What does this mean for the average lay coffee drinker in the US then? Buy a coffee machine, and buy coffee grounds. Instant is too expensive in the long run and not as tasty as freshly brewed coffee.