200 - 500 word answer only

Question: Evaluate the effectiveness of the fair trade certification system. Discuss whether buying fair trade coffee is a step in the right direction for Starbucks and other coffee retailers, or whether the system is too flawed to be effective.

Case: Starbucks and Fair Trade Coffee

Starbucks built a fast-growing business on a corporate philosophy of putting people first. This philosophy began with employees, providing good working conditions and treating them all with dignity and respect. Howard Schultz, the leader of the company, who bought it from its founders in 1989, wrote in his book Pour Your Heart into It that if you treat people like family they will be loyal and give their all.⁸⁹⁴ Customers were also important for Starbucks. The aim of the company to create enthusiastic, loyal customers was secured by offering a special ambience in its stores and a guarantee of the finest coffee available. The Starbucks mission statement expressed a firm commitment not only to treat employees and customers well but also to benefit communities and protect the environment. It was characteristic of the Starbucks philosophy that the mission statement mentioned the need for profitability last.

Fair Trade Campaign

In 2000, Starbucks was confronted with a demand that the company buy fair trade coffee.⁸⁹⁵ Global Exchange, a nongovernmental organization (NGO) that focused on human rights, accused Starbucks of making a profit at the expense of coffee growers in poor countries, who received a small portion of the world price for their beans. The first salvo in the Global Exchange campaign took place in February with a demonstration at a San Francisco Starbucks store. A few days later, leaders from the NGO appeared at the annual meeting of Starbucks and threatened a national boycott if the company refused to buy and promote fair trade coffee.

Starbucks Responds

The demand by Global Exchange for Starbucks to purchase and promote fair trade coffee fit with the principles in the companys mission statement, especially the commitment to apply high standards in the purchase of coffee beans. Some customers had requested not only fair trade coffee but also coffee grown in the shade to protect bird habitats and organic coffee grown without chemicals.⁸⁹⁶ However, the customer demand for fair trade coffee was unknown. Partners (the Starbucks term for employees) might find more satisfaction in their work if the company were to offer fair trade coffee and might be distressed by a boycott against the company. Moreover, Starbucks had already worked with NGOs on several social and environmental projects. The company contributed to CARE, an international humanitarian organization devoted to fighting global poverty, with instructions that its funds be directed to coffee-growing countries. In 1998, Starbucks joined with Conservation International to promote shade-grown coffee, which brought many benefits to coffee cooperatives in Chiapas, Mexico. In 1994, Starbucks established a department of Environmental Affairs, and created a department of Corporate Social Responsibility in 1999.

Although the demand by Global Exchange fit with Starbucks mission, company executives were concerned whether it was compatible with Starbucks successful strategy of offering high-quality coffee at premium prices. The companys reputation was built on meeting customers expectations of a certain experience. Sourcing fair trade coffee would mean dealing with suppliers whose record for consistent high quality, uniformity in taste, and reliability in delivery was unknown. The head of bean purchasing at Starbucks cautioned, This was an uncharted category, and, as marketers, we were concerned about endorsing a product that didnt meet our quality standards. Although the price of free trade coffee was only 6 cents per pound more than Starbucks generally paid, additional costs would be incurred in identifying fair trade growers and working with them, if necessary, to meet Starbucks high standards. Developing a marketing campaign would entail further costs.

Starbucks executives also needed to consider the impact of sourcing fair trade coffee on the companys relationships with its regular suppliers around the world who had managed to obtain the high price offered by Starbucks only by meeting the companys high standards. As one executive explained,

The relationships I have with growers were built over the last 20 years. Its taken some of them years before I would use their beans consistently and pay them $1.25 or more. Now I was being asked to use another farmer who I didnt know and pay him the same price without the same quality standards.

Many of Starbucks suppliers could not meet the criteria for fair trade certification because they were large growers and not individual farmers or cooperatives, and so they could not be run democratically as the fair trade criteria required.