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The dark side of coffee. Price war in the German market for roasted coffee

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  • Koerner, Julia

Abstract

Germany is the second largest coffee market in the world, just overshadowed by the United States. Coffee is the most popular beverage in Germany - in fact more popular than beer. In 1999 the five biggest companies in the raosted coffee market had a combined market share of 84.5%. The market is characterized by fierce competition which continues to squeeze the earnings of the German coffee roasters. The degree of competition was expected to increase even more as a result of a merger in 1997. This paper examines the pricing behavior in the German market for roasted coffee. The second question is whether the degree of competition has changed due to changes in market structure and changes in demand. Changes in market structure are the merger of Tchibo and Eduscho in 1997. Changes in demand are cyclical demand fluctuations - every year before Easter and Christmas. Empirical results are derived using data on the aggregate market for roasted coffee in Germany during 1992:1 to 2000:12 and indicate that the market is suffering on not only a severe price competition, but on price war.

Suggested Citation

  • Koerner, Julia, 2002. "The dark side of coffee. Price war in the German market for roasted coffee," FE Working Papers 0204, Christian-Albrechts-University of Kiel, Department of Food Economics and Consumption Studies.
    • Handle: RePEc:zbw:caufew:0204
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    Citations

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    Cited by:

    1. Mehta, A. & Chavas, Jean-Paul, 2008. "Responding to the Coffee Crisis: What We Can Learn from Price Dynamics," Working Papers 201444, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    2. Celine Bonnet & Pierre Dubois & Sofia B. Villas Boas & Daniel Klapper, 2013. "Empirical Evidence on the Role of Nonlinear Wholesale Pricing and Vertical Restraints on Cost Pass-Through," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 500-515, May.
    3. Oral Capps & Muxi Cheng & Jennifer Kee & Samuel L. Priestley, 2023. "A cross‐sectional analysis of the demand for coffee in the United States," Agribusiness, John Wiley & Sons, Ltd., vol. 39(2), pages 494-514, March.
    4. Durevall, Dick, 2007. "Competition in the Swedish coffee market, 1978-2002," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 721-739, August.
    5. Mehta, Aashish & Chavas, Jean-Paul, 2008. "Responding to the coffee crisis: What can we learn from price dynamics?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 282-311, February.
    6. Holler, Emanuel & Rickert, Dennis, 2022. "How resale price maintenance and loss leading affect upstream cartel stability: Anatomy of a coffee cartel," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    7. Durevall, Dick, 2004. "Competition in the Swedish Coffee Market," Working Papers in Economics 134, University of Gothenburg, Department of Economics.

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