Is Starbucks Corp. (SBUX
) profiting at the expense of the poor--that is, the poverty-stricken coffee farmers who supply the basic ingredient for the espressos and grande cappuccinos that affluent Americans buy?
Consider this: While company profits have tripled since 1997, to $181 million in fiscal 2000, many of the world's coffee farmers have been devastated by historically low prices. Coffee is now priced around 50 cents per pound, while production costs are around 80 cents per pound. "Small farmers are barely able to survive right now," says Guillermo Denaux, who monitors Central American Fair Trade cooperatives from El Salvador.
Starbucks' role as the world's fifth-largest buyer of coffee--behind the likes of Nestlé (NSRGY
) and Procter & Gamble (PG
)--has placed it smack in the center of a controversy over how well-heeled corporations deal with poor farmers. The chain has a lot to lose if consumers, especially young ones, see it as a Third World profiteer. But the plight of the world's financially struggling coffee farmer is a complicated one--and not all the fault of corporate coffee buyers. Farmers are caught up in the harsh world of commodity markets, where prices are based on supply and demand in a highly fragmented industry. A chronic coffee surplus has resulted in years of low prices.
While undeniably benefiting from those cheap beans, Starbucks is striving to portray itself as a responsible global citizen. Chief Executive Orin C. Smith points to the company's involvement with various programs aimed at hiking the wages of farmers and improving the local environment. Starbucks recently unveiled guidelines that will pay farmers a premium price if they meet certain environmental, labor, and quality standards. Last year, the company joined TransFair, an organization that guarantees that farmers will receive most of the $1.26 per pound that coffee roasters pay for high-quality beans. "Our longtime suppliers couldn't make it if we weren't doing any of this," Smith says.
This year, Starbucks bought 150,000 pounds of fair-trade coffee from COOCAFE, the Consortium of Coffee Cooperatives of Guanacaste and Montes de Oro in Costa Rica. That's double what the cooperatives sold Starbucks last year but far below the 1.8 million pounds they had been hoping for. Groups such as Global Exchange and the Organic Consumers Assn. note that Starbucks is the only specialty coffee company that won't certify 5% of its coffee as "fair trade."
Critics contend that Starbucks spends more time polishing its image than it does tackling gaping inequities with suppliers. Starbucks makes sure everyone knows about the health clinic it built in Guatemala, says Deborah James, fair-trade director for Global Exchange, a San Francisco-based human-rights organization. "Building a clinic is a great thing," she says. "But it doesn't address the underlying poverty that is killing coffee farmers and their families."
Starbucks says it is working toward creating a sustainable business model in Guatemala, not trying to change its laws. Still, the company could do more for the people who have a big hand in its success, contends Stephen Coats, executive director for U.S./Labor Education in the Americas Project, another rights group. He would like to see Starbucks move faster to buy more fair-trade coffee. "Starbucks is moving very slowly, given the gravity of the situation, and tends to move only when pushed." It's time, activists suggest, for Starbucks to share the wealth.
By Stanley Homes in Seattle and Geri Smith in Mexico City
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