Starbucks- In the limelight & NOT loving it

photo credit: iapia

Starbucks is already working on moving towards rBGH-free dairy products. Agreed,
- there is no deadline at this point for Starbucks' dairy suppliers to go rBGH-free and
- the ban is for company-operated stores (~6000) only and doesn't apply to its licensed outlets (3168) in such locations as supermarkets, airports and hospitals.
But they have actually heeded the consumers wishes and many thanks to them for all the effort being put into making rBGH-free a huge reality.

The publicity hasn't ended there for Starbucks though and one good deed done isn't enough, as they've found out. Another kind of reality is biting their ass, threatening to paint it a hypocrite; this in spite of their "Coffee that cares" mantra... it's the reality of social justice and free trade.

Talks in Briton have begun on Ethiopia seeking fair price for its coffee... which includes screening of the documentary 'Black Gold' - shot by the British brothers Nick and Mark Francis. Marc said that the focus of the film was to emphasize the plight of the coffee farmers in Ethiopia and the need for these farmers to capture more of the value chain of their product. He also said that they weren't attacking any particular coffee giant. The documentary tells a riveting and jaw-dropping story of Ethiopia's coffee farmers like the epic tragedy that it is, showing malnourished coffee growers depending on handouts of food from the United States to stave off starvation.

Now Starbucks, whose annual turnover of $ 7.8 bn isn't much lower than Ethiopia's total GDP, is feeling the heat more than anyone. This despite the fact that Starbucks imports about 2 % of the coffee produced in Ethiopia- accounting for only $6-8 million of the total $ 400 million in exports.

Tadesse Meskela, who is the subject of the movie, runs the Oromia Coffee Farmers Cooperative Union in Ethiopia, representing about 105,000 coffee growers, and struggles to get the best price - nowhere near high enough to earn them a decent living.

He says the country's premium coffees - Yirgacheffe, Sidamo and Harar - can sell for fair trade export at about $1.60 a pound. After deducting costs, the growers get about $1.10. Roasters can sell the coffee on at $20-26 per pound. Coffee retailers make about 52 espressos from a pound of coffee, worth up to $160 a pound. Asking for $4 a pound minimum, Mr Meskela said that the people are living hand to mouth, without any clean water, or proper health care. Farmers are sometimes forced to sell their product for less than it costs to produce, so more of them are turning to the cultivation of a fast-growing, extremely lucrative narcotic plant in East Africa, called Chat. Given the picture, it doesn't take a genius to see less famine, more aerial bombing of agricultural fields in this country's future.

Mr Meskela already has the backing of Ed Balls, economic secretary to the Treasury. He said : "Delivering trade justice is not just morally right, it is an economic necessity for Tadesse and the farmers. We urgently need the WTO talks to start again so that we can make good our promise to deliver trade justice for Tadesse and millions of others in the world's poorest countries."

Defending itself, Starbucks said it is paying premium prices to farmers in poor countries, well above the average market price. It has gone on a charm offensive, telling its customers "you can feel good about drinking Starbucks coffee", taking its message to YouTube and sending its chief executive to Addis Ababa. Responding to this Mr. Meskela said "Starbucks may help bring clear water for one community but this does not solve the problem. In 2005, Starbucks' aid to the third world was $1.5m. We don't want this kind of support, we just want a better price. They make huge profits; giving us just one payment of money does not help," said Mr Meskela.

The Ethiopian government, keen to get a much better price for a commodity that makes up the bulk of its exports, has been trying to trademark its three prized coffee brands. While Green Mountain, (US's second biggest speciality coffee distributor after Starbucks), have been willing to engage with Addis Ababa to discuss a voluntary licensing scheme which recognises their ownership of the coffee brands, Starbucks has used its muscle within the National Coffee Association of America to block Addis Ababa's trademarking attempts.

Ron Layton, a Washington-based lawyer with Light Years IP who is advising the Ethiopians, says successful trademarking could add $88m a year to Ethiopia's export earnings. He says Europe, Japan and Canada have already registered the trademarks and the US trademark office could do so were it not for Starbucks' opposition.

Douglas Holt, a professor of marketing at Said Business School at Oxford University, says the company may be committing brand suicide by continuing to resist the Ethiopian move. The company built its brand on a commitment to economic justice for its poor coffee farmers, but now risks losing millions of customers if they perceive it as a hypocrite. He sums the whole issue effectively when he says "Starbucks must now walk the walk even if it means occasionally making economic sacrifices."

All you coffee drinkers out there, wake up and smell the numbers

$1.10: Amount per pound of coffee that growers receive after deducting costs
$160: Amount that retailers can make on a pound of coffee

It will soon be apparent, whether the outcome of the campaign in London will spell doom for this particular coffee giant, but till then I hope the executives at Starbucks develop a conscience & hatch out a plan to redistribute their wealth to help the very people who fatten their pockets. Social justice anyone?

Source: Guardian Unlimited ; Starbucks