The people vs Starbucks

NI Special Feature - Starbucks

I’m writing this in Starbucks, but it’s hard to concentrate.

The guy behind the counter keeps bellowing incomprehensible orders, (‘Extra-Hot-Signature-Spiced-Pumpkin-Latte-With-Soya-Milk!’ ‘Skinny-White-Choc-Mocha-No-Cream!’) while the muffins behind the counter wink at me distractingly. On the wall a grinning Latino farmer supports the proclamation: ‘Good Coffee Can Do Good Things.’

The entire store is saturated with branding and subconscious images – even the tissues have been stamped: ‘Less napkins [sic]. More plants. More planet.’

More than any other mainstream multinational, Starbucks tries to present itself as ethically virtuous: the company knows that corporate social responsibility (CSR) sells. The first page of Starbucks’ 2006 CSR report reads: ‘For us, corporate social responsibility is not just a programme or a donation or a press release. It’s the way we do business every day.’ In an interview with 60 Minutes Howard Schultz, the company’s CEO, evangelized: ‘We’re in the business of human connection and humanity. We set out to become a company that would create and achieve the balance between profitability and… a love of benevolence.’ A corporation that profits from such statements must not be surprised when consumers seek to hold them accountable to their promises or when the reality behind their rhetoric gets questioned.

Taking a sip from the cup of frothy white stuff by my side, I think about the 40 million Starbucks customers around the world who will do the same this week. The store I’m sitting at in North London is packed: it’s just one of Starbucks’ 12,440 stores situated across 37 countries (at the time of writing). In 2006, this global empire delivered the corporation a net revenue of $7.8 billion – a figure over three times the size of Liberia’s GDP. Not bad for a company that came into existence in 1971.

Starbucks’ titanic rise doesn’t just say something about consumer preferences; it also says something about global society. The corporation’s green and white logo – the mermaid with no nipples stamped on the cup by my side – has come to represent more than Starbucks’ stores; it has become an icon of globalization itself. Starbucks symbolizes the rising role of corporations, service industries and flexible wage schedules. It fits into a bigger pattern that has developed between consumption in the West and exploitation in the Majority World, making it a strategic target for anti-globalization protesters. It is also symptomatic of a rising culture of consumption; no longer are our coffee shops smoky hubs of political activism. It seems that the bohemians have been replaced by yuppies and the revolution substituted by extra cream.

But just as Starbucks’ rise says something about our society, so too may its decline. The number of store transactions was down in the fourth quarter of the fiscal year 2007 for the first time in the company’s history, prompting Schultz to fire his top dog and resume his position as CEO after a gap of almost eight years. The stores, he says, are suffering from the McDonald’s effect, with the corporation’s huge expansion draining away the ‘romance and theatre’ of older outlets which ‘no longer have the soul of the past’. Schultz’s re-ascension to CEO is unlikely to transport Starbucks into the romantic, socially responsible reality he projects. People around the world are reacting against Starbucks, not just by withdrawing their custom, but by outright protest.

By fair means or foul

In February 2007, a delegation of Starbucks baristas (waiters) from New York flew to Ethiopia to meet the people producing the coffee they sold. They returned with a video of interviews with the coffee farmers.

‘We work hard, we labour hard, but we do not get our sweat’s worth,’ said Tedasse, a farmer from Fero Co-operative. ‘They deceive us by telling us that they’re going to help us grow, but they are the ones that are growing.’

The farmers told the delegation that they were being paid $0.57 per pound of coffee sold – that’s 2.2 per cent of the $26 per pound it sells for in the United States.

This low price is a function of over-supply in the market. The world supply of coffee used to be controlled by the International Coffee Agreement until its collapse in 1989, but since then prices have been in almost constant decline. Starbucks may not have engineered this situation, but it has certainly benefited from it, growing by over five per cent per year since 1991.

There are those who argue that Starbucks’ growth has benefited the Majority World. ‘Starbucks has done more to lift coffee farmers out of poverty than almost anyone else – including Oxfam and the do-gooders,’ said Alex Singleton, a fellow at the Adam Smith Institute. ‘The answer to development is not large amounts of foreign aid; it’s getting these countries to engage in the global market, and Starbucks helps that.’

This argument is not just supported by free-marketeers, as Seth Pitchers, Oxfam’s Lead on the Make Trade Fair campaign, explains: ‘Starbucks has been building demand around premium coffee, which holds profit for farmers because it sells at a premium price.’

It might be hard to believe that the generic white froth Starbucks serves is built on high quality coffee, but it’s true; in 2006 Starbucks boasted that it paid a ‘premium’ average price of $1.42 per pound, a figure 37 per cent above the New York commodity price. But quality coffee isn’t just likely to sell more – it is also likely to cost more to produce, and any extra the farmer does make may simply go on higher overheads. Furthermore, because Starbucks does not disclose whether this is the direct price paid to farmers or to middle men, we can’t say who the quality market boom is benefiting. If what the baristas discovered in Ethiopia is representative, it seems unlikely to be those at the bottom.

Starbucks claims that farmer welfare in the 24 countries it purchases from is guaranteed by its own Coffee and Farmer Equity (CAFÉ) standards. However, look a little closer and the CAFÉ practices tell you more about the failures of Starbucks’ social responsibility than its achievements. Almost 70 per cent of Starbucks’ farmers fail to meet over half of the CAFÉ guidelines. Furthermore, these standards remain vague (‘manage waste’) or frighteningly insubstantial (‘fair and humane working conditions’ and ‘minimum child labour laws’) – one can’t help thinking what the 69 per cent of farmers who fail to meet the criteria are living like.

Of course, the problems faced by farmers in the Global South are much bigger than Starbucks alone. Farmers who want to move into processing and roasting are blocked by Western tarriffs, whilst their voices remain under-represented in world trade talks. National governments are susceptible to corruption. On the ground, farmers have little access to credit and technical assistance.

Yet that doesn’t mean that Starbucks doesn’t have a role to play in improving their lot – indeed, it may even be a self-interested one. Farmers who are struggling to survive are unlikely to invest in quality coffee, threatening the sustainability of Starbucks’ supply chains. Already the farmers in the video say they are switching to producing qat, a narcotic plant that sells for more money in local markets than coffee. Starbucks’ image of corporate social responsibility might have made a profit in the past, but it’s tempting to think that an irresponsible reality could contribute to making its future bankrupt.

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