Starbucks: The brewing controversy

Questions are being asked about why international coffee brand Starbucks, in an effort to expand its brand in South Africa, decided to partner an unknown local company, the director of which has a murky financial background.

Last month Starbucks announced it had entered into a licence partnership agreement with Emperica Marketing to distribute its coffee in South Africa through selected Southern Sun hotels in accordance with Starbucks’ “We Proudly Brew” food service programme, which is part of the Starbucks global coffee-to-the-people growth strategy.

But David Taylor, director of Emperica Marketing, which secured the Starbucks contract for the South African market, is at the centre of a controversy surrounding the liquidation of Tiffindell ski resort. The future of the resort is still in jeopardy after an investment by Taylor went belly up and investors in the resort are hopping mad, threatening to sue Taylor and his business partner, Andre le Roux, for their losses.

Last month, the South Gauteng High Court ruled that Tiffski Properties would not be liquidated. But the case had raised questions about the financial dealings at Tiffindell and Taylor’s conduct.

Ivan van Eck, the founding director of Tiffindell Ski Ltd, blames Taylor for the collapse, saying that once Taylor got involved in a deal with the ski resort, it was the beginning of the end.

Van Eck sold a controlling share to Taylor and Le Roux under Tiffski Properties to recapitalise in a R22-million transaction in 2007. But Van Eck raised questions about the transfer of assets between Tiffski and Tiffindell, as well as underpayment by Taylor for Van Eck’s shares; Van Eck was subsequently fired as managing director. He claims that he lost R11-million in the deal. Other investors are also threatening legal action against the directors of both Tiffindell and Tiffski.

Some of the burned investors were surprised when Starbucks opted to go with Emperica as the South Africa agent, in the light of the trouble at Tiffendell. But Taylor ridiculed a Noseweek article, which reported on the troubles at the resort, saying it was largely based on incorrect facts and unproved allegations, as borne out by the recent court ruling.

“With regard to my personal involvement in the matter, you should note that I was never a director of Tiffindell Limited and that I was not personally the subject of any litigation,” he said. “I was a director of the property holding company, Tiffski (Pty) Ltd until January 2010.”

Taylor and his partners in Emperica started planning the Starbucks initiative in late 2009, he told the Mail & Guardian this week.

“Emperica approached Tsogo Sun Group with a business proposal,” said Taylor, whose family friend is Rob Collins, managing director of Tsogo Sun. But Taylor said Emperica did not deal with Collins or with his division, only with the Tsogo group.

“Starbucks did conduct due diligence in the selection of Emperica Marketing (Pty) Ltd and we are confident the group will support us in providing Starbucks coffee to regular customers and visitors alike,” said Starbucks spokesperson Carole Pucik. Pucik did not respond to questions about other potential partners it had interviewed and did not comment on pending litigation when questioned about the Tiffendell controversy.

Michael Acott, head of corporate affairs for Tsogo Sun, said discussions with Starbucks started in March 2010.

He said the group was aware of the Noseweek article but believed it pertained to individuals as opposed to a company that has many other directors. It was not the group’s “place to comment on allegations or media reports of this nature, when our only interest is the successful launch of the Starbucks brand”.—Additional reporting by Lynley Donnelly

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