Storm in a coffee cup
Nov 30th 2006 | NEW YORK
From The Economist print edition
The coffee chain is embroiled in a fight over Ethiopian coffee-bean trademarks
A GROWING number of coffee drinkers seem to prefer their morning grande skinny latte without a foul-tasting double-shot of social injustice. The hugely successful Fairtrade brand allows coffee addicts to get their fix with a clearer conscience, safe in the belief that no farmers have been exploited along the way. Coffee has become a testing ground for what it means to be an ethical consumer. No wonder Starbucks, a global coffee chain that prides itself on being socially responsible, has reacted like a scalded barista to criticism from Oxfam, a development charity.
Are those beans ethical, or not?Oxfam says Starbucks is depriving farmers in Ethiopia of $90m a year by opposing the Ethiopian government's efforts to trademark three types of local coffee bean. At least 70,000 customers have contacted Starbucks to complain, prompting the firm to post leaflets in its shops defending its behaviour. It accuses Oxfam of “misleading the public” and says the campaign “needs to stop”.
This week Douglas Holt of Oxford University's Said Business School drew a parallel with the supply-chain problems that made Nike an ethical pariah. “Just as consumers were disgusted by the fact that Air Jordans sold for $120 while Asian labourers produced the shoes in what amounted to slave-labour conditions, they will be equally disturbed by the fact that Starbucks is happy to sell coffee for $26 per pound while refusing to allow the coffee's producers a shot at climbing out of desperate poverty,” he said. On November 28th Jim Donald, Starbucks' chief executive, met the Ethiopian prime minister, Meles Zenawi, but no deal was reached.
This is not the first time that Starbucks has disagreed with ethical-consumption advocates. Despite selling plenty of Fairtrade-branded coffee—it claims to be North America's biggest purchaser of Fairtrade beans—it also buys other beans without a stamp of approval from these arbiters of fairness, in part because it questions the standards they apply in different parts of the world. It doubts even that the strategy of the Fairtrade movement, which is to secure farmers a premium over the market price for their beans, is the best approach to alleviating poverty. The firm prefers a scheme called CAFE (Coffee and Farmer Equity), which aims to help coffee farmers through a mixture of technical support and microfinance loans.
Although it denies being behind coffee-industry lobbying against the Ethiopian government, Starbucks argues that trademarking coffee beans might introduce legal complexities that will deter firms from buying trademarked beans, thereby hurting farmers instead of helping them. It favours a regional certification scheme, like the appellation contrôlée system in French wine, which would allow beans to be branded consistently without creating legal problems. This seems sensible enough.
Indeed, Mr Holt's suggestion that the Ethiopian government is being frustrated in its attempts to help coffee growers become more entrepreneurial is laughable. It is being advised by Arnold & Porter, a top law firm based in Washington, DC. It ought perhaps to have asked its lawyers for help in creating a business-friendly legal system, with meaningful property rights, to give Ethiopians a better shot at escaping poverty through their own efforts. Ethiopia ranked 97th in the World Bank's latest “ease of doing business” index and a dreadful 130th in Transparency International's corruption-perceptions index. Some suspect that its pursuit of trademarks is just a way for the government to boost its own income, with little or none of it being used to help coffee growers.
As for Oxfam's involvement, it will be interesting to see how the battle develops. Starbucks has loyal customers who may well be prepared to hear its side of the story. Is it too much to hope that this battle might mark a turning-point in the war over corporate ethics, and that it will cease to be enough merely for a pressure group to throw mud at a company to make that mud stick? The Economist will drink a grande extra-wet triple-latte to that.