The Madness of Kopi Luwak Coffee

Around the time that Journalist Charles MacKay published Extraordinary Popular Delusions and the Madness of Crowds in 1841, in which he discussed the Dutch Tulip Mania of the early 1600s, a similar supply and demand driven phenomenon was emerging, again among the Dutch, but this time among Dutch Colonists in Sumatra. Unlike Tulip Mania, which could possibly have been the first recorded speculative bubble, the madness that started in Indonesia 150 years ago continues to this day.

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In the mid-1800s, Dutch coffee farmers in Indonesia prohibited native plantation workers from picking coffee for their own use. But the Dutch couldnt stop a native animal, the palm civet, from eating coffee cherries. The coffee pickers discovered that the palm civets digested the coffee cherries but not the coffee seeds, which could be found in the civets droppings. The palm civet was a cute little coffee mill. Plantation workers would harvest these beans then clean, roast, grind and brew them so they could enjoy coffee too.

Palm civet coffee began as a simple and practical means by which coffee pickers could have access to coffee, which they were forbidden from picking for personal use. The Dutch plantation owners eventually caught wind of this unusual coffee and declared it a delicacy. Because of the exotic milling method, but mostly because civet coffee was scarce relative to coffee that was just picked off trees, the laws of supply and demand kicked in and the price of palm civet coffee was set many times higher than coffee milled by more tradition methods. Coffee pickers became coffee picker uppers too and were again without a convenient source for coffee. Palm civet coffee, commonly known as Kopi Luwak coffee, remained a rare, prized, and expensive coffee for over a century. Knowledge of and demand for Kopi Luwak coffee began to increase in the 1990s and the price went even higher. A $75 cup of Kopi Luwak is not unheard of. Then, oddly but not surprisingly, there began to be more Kopi Luwak coffee for sale than there was produced, meaning the extraordinary price had led to counterfeit Kopi.

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Over the last decade, with guest appearances in movies and on TV, the price has remained high and demand has increased. Unfortunately, this has led to the creation of palm civet coffee factories, where the animals are caged like factory chickens and fed coffee cherries so that their droppings can be harvested. This unconscionable mistreatment of wild animals is only one reason Batdorf & Bronson® does not roast and sell Kopi Luwak coffee. Even if all Kopi Luwak was harvested from the droppings of wild animals, we had every guarantee that the coffee we were buying was legitimately Kopi Luwak, and it did not cost over $100 a pound, we would never sell this coffee for a very simple reason. It doesnt taste good. At its worst, Kopi Luwak is an awful coffee and at its best it is nothing more than inoffensive. If, on occasion, one comes across a cup of Kopi Luwak that tastes better than average, it will be because of the roast and not the source, and in that case the price is indefensible.

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In economic terms, Kopi Luwak cannot be considered an example of a speculative bubble, but nevertheless, if Charles MacKay were writing Extraordinary Popular Delusions and the Madness of Crowds today, we believe Kopi Luwak coffee would merit an entire chapter.

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