As one of the top five coffee buyers in the world, Starbucks actions have significant influence over

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As one of the top five coffee buyers in the world, Starbucks’ actions have significant influence over the industry as a whole, but have also been a source of negative publicity for the company in the past. Among other things, Starbucks has been accused of profiting at the expense of coffee growers, whose livelihoods riseand fall in line with the wildly fluctuating global market price for coffee, which can generate a situation where the market price of coffee falls below the cost of production. Coffee was not only the first consumer product to by widely available as a Fairtrade certified product; it is also one of the most popular. Today, fair trade coffee makes up “20 per cent of the UK retail sales of ground coffee” and “70% of the [total] US fair trade market.” Due to high-profile NGO campaigns and firm responses, public awareness about fair trade issues is growing.

As a result of the combination of growing awareness of fair trade, in general, and the growing popularity of fair trade coffee, in particular, Starbucks has attracted a lot of attention from fair trade campaigners who began campaigning for change at Starbucks “in February 2000 when the activist NGO Global Exchange launched a protest at the company’s annual meeting, demanding that Starbucks sell Fair Trade coffee.” In response, Starbucks has been at the vanguard of developing the profile of fair trade products in the U.S. ever since. Today, the company works closely withsuppliers to help them convert to sustainable practices and offers long-term purchasing contracts as an incentive to do so. This approach helps Starbucks meet the needs of the fair trade industry, as well as increase the quality of the product it buys and then resells in its stores. In particular, in 2004, Starbucks launched theCoffee Agronomy Company. It is based in Costa Rica and positioned as “the flagship vehicle for Starbucks’ sustainable supply chain commitment.” Soon after, the company launched its Coffee and Farmer Equity (CAFE) Practices guidelines, which “spell out Starbucks’ expectations for its suppliers on economic, social and environmental issues. Starbucks developed CAFE in conjunction with the environmental charity Conservation International.162 The goal for suppliers in conforming to theguidelines is to be certified as a Starbucks’ preferred supplier, which contains specific price guarantees by Starbucks over and above current market price.

Today, Starbucks’ website tracks the firm’s progress regarding its ethical sourcing practices and performance since 2000 when it began purchasing fair trade coffee:

Since then we’ve paid over $16 million in Fairtrade premiums (on top of the purchase price of green coffee), which are used by producer organizations for social and economic investments at the community and organizational level. . . .Starbucks bought over 428 million pounds of coffee in fiscal 2011. Some 86% of that—367 million pounds worth—from C.A.F.E. Practices-approvedsuppliers. We paid an average price of $2.38 per pound for our premium green (unroasted) coffee in 2011—up from $1.56 per pound in 2010. . . . The reach of the program is vast, spanning 20 countries, affecting over 1 million workers each year and encouraging responsible practices on 102,000 hectares each year.

Closely associating itself with fair trade coffee is a straightforward business decision for Starbucks. It enables the firm to deflect criticism, help win those customers who are willing to pay for the value-added by the fair trade certification label, and, most importantly, helps secure supplies of the high quality coffee beansthat are central to the firm’s business model. In short, fair trade is a point of differentiation for Starbucks that will help it expand further into those markets where it is not yet established.

Source: Strategic Corporate Responsibility Stakeholder, Globalization and Sustainable Value Creation by David Chandler & William B. Werther, Jr., Pg 445-449 Edition 3 Sage Publication

After reading the above Case, answer the following questions

1. Because of Fairtrade practices, farmers and other suppliers getthe right price for their products. Express your opinion about this statement and also discuss challenges to this concept.

2. If Fairtrade practices helping are Starbucks to ensure the quality of the coffee, consumers are happy to shop and pay a premium price for the products at Starbucks because of its ethical sourcing of coffee beans. Do you agree with this statement? Give reasons.