Starbucks Corporation (NASDAQ: SBUX)

Whooaaa…hold on a minute…Starbucks may be a company in the Bull’s Eye?  Doesn’t everyone in America love Starbucks?  Isn’t that love affair moving offshore as well?  After all, the familiar green and white Starbucks oval sign pulls many of us in to the chain’s convenient retail outlets to partake of the morning (or afternoon) share of coffee & conviviality.  We even get our Starbucks at work, in malls, at airport counters…everywhere!  What’s not to like?

Well, for some shareholders, and social responsibility activists, the new litmus test for Responsible Corporate Citizenship is coffee.  The dark beans are usually grown in developing countries in key latitudes close to the Equator and on higher ground.  (Think of Jamaica’s low, rolling Blue Mountains and the delicious coffee that these hills yield.) Families and small farmers are often the folks who raise the beans that eventually end up as a delicious cup of hot coffee or an exotic “Frappuccino-Machiata-Foam” at the local Starbucks.  (As well as the coffee sold at retail by such companies as Proctor & Gamble, Green Mountain, and the equally-ubiquitous Dunkin’ Donuts chain.)

Coffee is a prime agricultural product for growers in Mexico, El Salvador, Costa Rica, Guatemala, Colombia, Venezuela, Brazil, and Jamaica in the Western Hemisphere; and for Indonesia and Ethiopia in Asia and Africa respectively.  Coffee is said to have originated in Ethiopia.  And that brings us to the Bull’s Eye that is seen in place of the mermaid or whatever on the Starbucks sign out front. 

Ethiopian interests and Oxfam America –

(Web Link: http://www.accountability-central.com/single-view-default/article/oxfam-america/?tx_ttnews%5BbackPid%5D=1413&cHash=85d6573340  the US arm of the global social action not-for-profit – are pressuring Starbucks to do the right thing in terms of the Company’s treatment of Ethiopian coffee growers.  Oxfam organized activists in December 2006 for a “Day of Action,” claiming that 85,000 people in 70 countries have joined the campaign. (That qualifies for a Bull’s Eye nomination.)

Says Oxfam:  Ethiopia has asked Starbucks to sign a licensing agreement that recognizes the country’s ownership of certain gourmet coffee names:  Sidamo, Harar and Yirgacheffe. By signing, Starbucks – because of its size, purchasing power, influence over public opinion, and other factors – would set a trend in the coffee industry that could allow Ethiopia to capture a larger share of the global market value of these brands. (Eventually, says Oxfam, better brand recognition could bring Ethiopia another $88 million annually – need in this desperately poor country on the horn of Africa, and not far from the volatile Middle East region.)

Why Starbucks?  Oxfam says “because it is an industry leader with a history of involvement with Ethiopia’s trademark campaign (there are conflicting filings with the U.S. Patent and Trademark Office for the same coffees); Starbucks already helps a lot of farmers and recognizing Ethiopia’s rights to its own coffee names would complement these efforts; and, Oxfam is now asking Starbucks to honor commitments to small coffee farmers.

Starbucks management responded (February 8, 2007) with immediate new funding ($500,000) for CARE (the global humanitarian organization) and a commitment for $3 million over 15 years to help improve economic and educational prospects for 6,000+ people in Ethiopia’s coffee-growing regions (in 1,500 households). (Similar programs were funded through care in Costa Rica, Guatemala and Indonesia, as well as in Ethiopia.)

In November 2006 Starbucks accused Oxfam of misrepresenting the situation with Ethiopia: “While we respect Oxfam and is mission,” the Company stated in a news release, “we believe they are wrong on this issue.  Signing a trademark agreement will not help coffee farmers.  It may hurt them if roasters stop purchasing Ethiopian coffees.”  The Company said it offered “alternative solutions” (such as a geographic designation, similar to appellations for wine), and wants to continue collaborations with farmers. 

See these links:

http://www.starbucks.com/aboutus/pressdesc.asp?id=719X

http://www.starbucks.com/aboutus/pressdesc.asp?id=746

Starbucks has a Corporate Social Responsibility platform for its relations with coffee farmers in two dozen countries, and claims to pay premium prices for coffee.  Starbucks has “Coffee and Farmer Equity Practices,” (CAFÉ) a set of socially responsible coffee buying guidelines.  The Company claimed it paid US$1.28 per pound on average, 23% higher than the average “New York C” price. Between 2002 and 2006, Starbucks said it increased purchase of Ethiopian coffee by 400%. See http://www.starbucks.com/aboutus/pressdesc.asp?id=738

Starbucks Corporation will be challenged in the months ahead to stay even with and ahead of its critics, as such groups as Rainforest Alliance focuses on “Fair Trade” and organic coffee issues.  The Rainforest “Better Banana” program (including Rainforest Alliance Certification) helped to turn the image around for the well-known “Chiquita” brand, and could be a model for activists’ campaigns on coffee.  (Maybe of some help:  Board member William “Bill” Bradley, star player of the NY Knicks then U.S. Senator from NJ, and a well-known social advocate since the 1960s.)

Responding to these issues, McDonald’s agreed to sell “sustainability-grown” coffee in the United Kingdom; this will be “Kraft Kenco” coffee (Web Link: http://www.kraftafh.co.uk/Cultures/en-GB/Brands/Kenco/ ) that is obtained from Rainforest Alliance(http://www.accountability-central.com/single-view-default/article/rainforest-alliance/?tx_ttnews%5BbackPid%5D=1413&cHash=1fba0fb31c  (certified) farms in Colombia, Brazil and Central America.  Newman’s Own (actor Paul Newman’s enterprise) has a “Newman’s Own Fair Trade” brand coffee(Web Link: http://www.newmansownorganics.com/food_coffee.html ; the Green Mountain Coffee Roasters’ (corporate) (Web Link: http://www.greenmountaincoffee.com/ ) marketing campaigns are built around the core philosophy of selling only “fair trade” coffee.

While the editors’ inclusion of Starbucks in the Bull’s Eye feature may not be of the same nature as some other companies – Ford, with its financial woes, Hewlett Packard with the bizarre behavior of board interests, Wal-Mart with its 390 moving parts of controversy – given the importance of the coffee industry’s treatment of growers, most of whom live in poorer countries and circumstances, this is an issue worth watching and Starbucks with its large reputation will be part of the coffee litmus test with Corporate Social Responsibility activists.  Gallons and gallons of coffee are consumed every week in hundreds of thousands of church Sunday coffee hours and or are dished up to liberal-minded consumers by retailers and barristas!

Starbucks was ranked #91 in  Business Week’s “The 100 Top Brands” annual feature, Coca-Cola ranks #1 (as determined by Interbrand methodology)( http://bwnt.businessweek.com/brand/2006/ )  Web Link: .  “Starbucks brings in customers with lifestyle marketing, pushing music, books, and lunch food to get them to stick around,” said the BW editors. (Rankings in BW issue of August 7, 2006. Starbucks was ranked #99 in 2005.)

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The legend of Starbucks is well known – it is the world’s largest coffee retailer (10,000+ outlets in 30+ countries) – and all this stems from a small coffee retailing operation that began in Seattle, Washington in the 1970s, the name in part derived from “Starbuck,” the first-mate in the classic 19^th Century Herman Melville novel, “Moby Dick.”

For more about Starbucks, see the extensive history and background post on Wikipedia -- http://en.wikipedia.org/wiki/Starbucks

Also, take a look at our profile on Starbucks:  http://www.accountability-central.com/single-view-default/article/starbucks/?tx_ttnews%5BbackPid%5D=1413&cHash=4855f7c935

 

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