The impact of buying a bag of our coffee

While browsing through our timeline on Twitter recently, I came across a post from a customer who wanted to let us know they had purchased a bag of our coffee beans from a coffee shop. It triggered the following reflection on the impact of that purchase:

The initial beneficiary of that purchase will obviously be the coffee shop owner, who lives locally and is likely to spend their earnings in the local area. Around 25% of the value of that purchase will contribute to staff wages, all of whom live in the local area and all of whom are likely to spend the bulk of their income within the local economy.

The next obvious beneficiary are ourselves. The purchase of the coffee beans resulted an an indirect purchase from us. We currently employ three members of staff so a proportion of that initial spend will be redistributed in the local area by our employees.

Our coffee is delivered to our customers by a local courier company. Buy a bag of our coffee from a coffee shop and they will need to replace it. The local courier company will gain revenue from the re-stocking. It is a similar story with regards the cardboard boxes used to send the coffee – they are produced for us by a small, family run cardboard box company, based less than 20 miles away from us.

We also send out printed material with some of our coffees. We make sure we utilise a very local printing company for this work and they again employee people from the immediate local area. Similarly our green coffee beans are deliver to our Roastery by a local haulage firm.

There exists a multiplier effect which comes into play when a purchase is made in the local economy:

The multiplier results from the fact that independent locally-owned businesses recirculate a far greater percentage of revenue locally compared to absentee-owned businesses (or locally-owned franchises*). In other words, going local creates more local wealth and jobs.[1]

There are three elements to the multiplier and each comes into play in the example cited above:

Direct Impact:

This is spending by the business in the local economy such as utilities, equipment and staff wages – around 25% of the value of that initial purchase will be spent on staff wages alone.

Indirect Impact:

This happens as money spent by a business recirculates around other local businesses – our spend with the local courier company, the cardboard box company and the haulage company.

Induced Impact:

This is the additional spending in the local economy as business owners and staff spend their wages.

A study in America as to the value of this multiplier suggested that, on average, 48 percent of each purchase at local independent businesses was recirculated locally [2]. When purchase are made at a chain store, only 14% of each purchase was recirculated on average. Interestingly, purchases made online result in only 1% of each purchase being recirculated locally [3] :

IMG_0635

The catering trade is very labour intensive and as such it has been suggested that a much higher multiplier exists for these establishments [2]:

IMG_0636

Money spent locally recirculates around the local economy, creating additional spending cycles. One study suggested that for every dollar spent locally, $0.68 in additional revenue was generated. [4]

There are a multitude of coffee brands lining the shelves of local shops. By buying locally, the spend can have positive benefits for many other local businesses and local people.


  1. http://www.amiba.net/resources/multiplier-effect/  ↩
  2. http://www.civiceconomics.com  ↩
  3. Unless of course the online order was with a local, independent business  ↩
  4. Civic Economics’ Andersonville neighborhood (Chicago)  ↩

One Comment Add yours

  1. The impact of buying locally should never be underestimated!

    Thanks,
    Brian.

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