Worldwide domination has created problems as well as profits for Starbucks, the Seattle-based coffee chain that has grown from 425 to more than 7 500 stores in the past decade.
First comes public trust — or, more accurately, the complete lack of it. It is one of those unfortunate accidents of history that the anti-globalisation movement and Starbucks should both claim the same birthplace.
While it might have been the World Trade Organisation that brought rioters to Seattle in 1999, it was Starbucks’s windows that they chose to smash.
Starbucks’s third corporate social responsibility (CSR) report, published late last month, reveals a “long-term, sustainable” strategy it hopes will enable it to provide coffee drinkers from Santiago to Sydney with their regular caffeine fix without incurring the wrath of the anti-globalisation lobby.
Beneath the picture of a Thai farmer holding a Starbucks-branded mug, the report lays out its “holistic approach”. This means paying farmers fair prices and offering favourable terms, purchasing certified and conservation coffees and providing farmers access to affordable credit. Last year Starbucks paid an average price of $1,20 for just less than half a kilogram for its green (unroasted) coffee — roughly double the market rate.
The Living Our Values report also states that the chain bought 97% of all its coffee at negotiated prices. The move, first pioneered by ethical coffee roasters such as Cafédirect, helps protect suppliers against future downturns in the market.
In the same report we read that Starbucks sources almost a third of its coffee stock from growers with whom it has a direct relationship, while a fifth comes from those that have a long-term contract with the company.
It is a rarity to see any statistics in a CSR report — a genre given more to pictures of smiling children than any substantive data. Rarer still is the promise of enforceable contracts in an industry where historic price lows are forcing many of the world’s coffee farmers to sell at below production cost.
By seeking to build closer relationships with its suppliers, Starbucks is bucking the trend in modern supply chain management. While the pursuit of cheap, overseas production is moving most multinationals towards ever more distant supplier relationships, this year the coffee chain opened a field centre in Costa Rica so that it could work directly with existing and potential producers.
“Now that we are here in the producers’ backyard, we can strengthen the relationships we already have and find the next generation of suppliers we need”, says Peter Torrebiarte, head of the centre. Torrebiarte’s team of agronomists and sustainability experts is also taking the lead in helping implement Starbucks’s new supplier guidelines. Launched in March, the scheme promises suppliers a price premium and preferential contracts based on their ability to comply with a list of quality, economic, social and environmental criteria.
Developed in conjunction with the environmental charity, Conservation International, the guidelines cover issues such as soil conservation, water management, overtime regulation and access to housing and education for workers. The guidelines also place an expectation on suppliers to provide transparency on how much of the purchase price gets paid to farmers.
Oxfam commends Starbucks’s progress as a “welcome relief”, but says improvements are needed.
“Starbucks leads the major coffee companies by buying 30% of their coffee direct from farmers,” a statement by the campaign group concedes, “but we want them to get back to the 32% level they achieved in 2002.”
Fair trade advocates would also question the need for Starbucks to develop its own guidelines. “There is already a very stringent set of standards in place, which are enforced by the Fairtrade Labelling Organisation. Why not just do fair trade?” comments Cafédirect spokesperson, Louise Leadbetter.
Certainly, Starbucks has far to go before its supplier programme makes an impact on the world’s 25-million struggling coffee farmers. After a pilot of more than two years, only 60 suppliers have been through the scheme, almost all from Central America.
The coffee giant is ambitious, however. It has pledged to purchase 101-million kilograms of coffee from certified suppliers by 2007 — a huge increase on the six million kilograms it currently buys. —Â Â