Starbucks Corporation (NASDAQ:SBUX) paid way, way more per pound for its coffee in 2006, the company will announce this morning -- more than any other major coffee company (according to Starbucks' own claims, anyway). In 2005 and 2006, the average commodity market price paid for coffee was $1.04 per pound; and, it's certain, far less for The Procter & Gamble Company (NYSE:PG)'s Folgers brand or Kraft Foods Inc. (NYSE:KFT)'s Maxwell House tinned coffee.
Starbucks (the company reports with obvious pleasure) paid a premium price of $1.42 per pound in 2006, up from $1.28 per pound in 2005. In doing so, the company believes it allows coffee farmers to make a profit, and gives them a "sustainable livelihood." The company also reported it had increased its percentage of coffee purchased under purchasing guidelines developed with Conservation International -- C.A.F.E. Practices -- to 53% of its total, or 155 million pounds.This, while certainly grand, is not an indication that Starbucks is perfect. I'm certainly a fan of sustainability, even if it's trumpeted loud and proud by the corporation which practices it. In late 2006, Starbucks was roundly decried for objecting to Ethiopia's attempt to secure trademark protection for its Sidamo and Harar beans.
It's great that Starbucks is moving in the direction of better trade practices and more fair treatment of hundreds of thousands of farmers in third-world countries around the globe. However, the company needs to go all the way. I'll be chatting later today with Dub Hay, senior vice president coffee, Starbucks Coffee & Global Procurement -- and hopefully, finding out what the company will do to reduce the double-standard impression.
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Reader Comments (Page 2 of 2)
1-18-2007 @ 1:11PM
Greg Sherwin said...
There's something perverse when companies publicly go on record, boasting that they run higher cost lines for commodities on their financial statements than their competitors. But that reflects the sort of scrutiny that Starbucks is under.
The problem with such a statement is that Starbucks opened themselves up to an argument they will never win -- because smaller chains with less bloat, like Peet's or Caribou, could easily steal their thunder in the "we pay more for coffee per pound than you" game.
IMO, a dumb move and lose-lose proposition by Starbucks' strategic communications department.
1-19-2007 @ 1:14AM
mark pinto said...
7 eleven coffee is better than StarBucks - and cheaper and they are on every corner.
1-18-2007 @ 12:23PM
Mike B. said...
Hard to believe the passion STARBUCKS brings out in people,on both sides. They are the good guys, but I'd rather have a cup of the new McDonalds coffee for sixty nine cents anytime!
1-18-2007 @ 12:46PM
Cliff Zimmerman said...
This is a true story. My name is Cliff Zimmerman. In the summer of 1969, I
> > was trying-out for the Canarsie High School (in Brooklyn, NY), football
> > team. At the time, I was almost 16 years old, about to enter the 11th
> grade.
> > I had recently transferred from Stuyvesant HS in Manhattan, where I was
> the
> > starting quarterback on the JV (junior varsity), football team. I had an
> > extremely strong arm for my age, and was able to throw a football almost
> 70
> > yards. I was not well received by the players on the Canarsie team, as
> they
> > were a tight group of friends that had been playing together for years. I
> > was good enough to challenge for the starting quarterback position, but my
> > efforts to join the team met with much resistance. The other quarterback,
> > already on the team, was extremely jealous of my talents. Since it was
> > acknowledged by the coach that I was the better player, and consequently
> had
> > the inside track for the starting position, the other quarterback went
> out
> > of his way to physically hurt and humiliate me. There are two specific
> > incidents which I can recall. To this day, they are still ingrained in my
> > mind, as if they had just happened. One time, I was standing in front of a
> > bunch of thorny bushes. The quarterback's best friend, Michael "Meatball"
> > Hirschorn, sneakily knelt down behind me, as the quarterback violently
> > shoved me into the sharp bushes. They all laughed and taunted me, as I lay
> > there bleeding and dazed. Another time I returned to my locker just in
> time
> > to witness the quarterback urinating into my locker, pissing all over my
> > personal belongings. He turned to me and laughed, "What are you going to
> do
> > about it, huh?" I stood there completely stunned, as he walked away,
> > hysterically laughing... This past summer I was at my high school reunion,
> > where I struck-up a conversation with an old acquaintance. I was informed
> > that this same person, the quarterback who tormented and humiliated me, is
> > now the owner of Starbucks - Howard Schultz. I remember him as being a
> > ruthless and despicable human being, who would stop at nothing to crush
> > those who got in his way. It is common knowledge that untold numbers of
> "mom
> > and pop" stores have been put out of business by the corporate monster
> known
> > as Starbucks. Too, they employ over-sea / underaged child labor to keep
> > their operating costs at a minimum, all the while claiming to know
> > absolutely nothing about unfair and illegal business practices. I do not
> > patronize Starbucks, and anyone with a social conscience should not
> either.
> > Both Howard Schultz and his company epitomize GREED.
>
>
>
1-21-2007 @ 4:39PM
Raylie said...
I don't know why you are all complaining about starbucks. most of you that are complaining don't even like starbucks coffee. me and my mom love starbucks and buy it as a special treat, not for EVERY day. I don't think it is over priced at all, for specialty coffee. I agree with steven. Why complain about gas when you are buying 3.50 coffee every morning? Ever heard of McDonalds?
1-18-2007 @ 9:20PM
Judah said...
It is business, people. If you don't do it, you probably have no idea what you are talking about: spending others money is far easier than actually making it.
1-18-2007 @ 12:55PM
Mark Roberts said...
Say what you want, but of all the businesses I frequent, none come close to the level of excellent customer service that Starbucks employees display. The company must be doing some things right.
1-18-2007 @ 12:52PM
Carl said...
Anyone who has frequented a Starbucks should know that everything they sell is grossly overpriced and
if they choose to pay it then let them, I personally will not.
1-18-2007 @ 1:08PM
Lawrence Jackson said...
I think one should determine how many coffee plantations Starbuck has purchased before stating prices? You might change your mind about how well the farmer/producer is treated or paid! What a tax write off?
1-18-2007 @ 2:10PM
keith said...
ITS VERY SIMPLE FOR YOU PEOPLE THAT THINK STARBUCKS IS BURNT TASTING OR WHATEVER ELSE COMPLAINT YOU HAVE.. JUST DONT FREAKIN GO THERE!!
THERE WILL BE ONE LESS IDIOT INLINE NOT KNOWING WHAT THEY WANT HOLDING ME UP FROM GETTING MY CUP OF JOE.
PS. DUNKIN DONUTS.. GAG! WANNA TALK ABOUT LOUSY COFFEE??????
1-18-2007 @ 3:52PM
Tim Spence said...
Get a life, people! It's just coffee! Go to work and conribute something to society!
1-18-2007 @ 1:59PM
Tobias said...
Funny Cliff ... too bad that story isn't true. 1) you're no even close to Howard Schultz age... 2) Howard was never a quarterback in high school... get your facts right before you lie
1-18-2007 @ 2:02PM
robert said...
AMERICA RUNS ON DUNKIN'
1-18-2007 @ 2:10PM
rob said...
Open a bag of both Sbux and Dunkin Donut coffee beans and compare. First, Dunkin sells an actual pound of coffee, whereas sbux is less than a pound(but more money). The Dunkin Beans are whole, unlike SBux which have many chipped pieces, the Dunkin aroma is much better and the taste is far superior to sbux. And Dunkin costs less!!
1-19-2007 @ 2:13PM
Carolyn Wu said...
The whole "Fair Trade Certified" thing is a scam, pure and simple, to allow corporations to make more money. Firm 1 buys coffee for $1 and sells it for $1.25. Firm 2 decides to be "fair trade certified" and pays $1.25 for coffee and sells it to you for $2.00. I'm sorry but I'd rather pay $1.25 for my coffee and have $0.75 left over. Then IF I CHOOSE TO, I can DONATE $0.50 to some charity that helps the third world farmers of this world and take a tax writeoff for that amount. THAT would make them better off (by $0.25) AND me better off (by $0.25 PLUS the tax break) as well.
The only "fair trade" is to pay market price. Anything above that is socialism.
1-24-2007 @ 4:17AM
Hone said...
Starbucks coffee is poor quality and their most popular coffees are loaded with sugary syrups.
It just goes to show there must be some truth to branding if such a poor quality product can make so much money.
4-09-2007 @ 6:51PM
Keith Johnson said...
Again...the FACT that charbux buys very little is hogwash. It is a LIE, but you gullible people sympathize with the most profitable coffee co in the world! It is ALL marketing and for you that THINK their coffee is good, they are the only ones making a cup on the street in tha afternoon.
AGAIN, I SAY THEY ARE GETTING CREDIT WHERE CREDIT IS NOT DESERVED! GAVIN, WHERE THE HELL ARE YOU DOING YOUR SO CALLED RESEARCH??? If they wanted to be so great for the farmers, they'd go 6 kilometers away and buy from Huila or Popayan who produces 119 million lbs annually. BUT...they could not afford that, right??? There is so little bottom line in coffee for the roasters that sell it commercially as well. That restaurant you went to over the weekend where the cup was $1.95?? They paid about .04 for that cup of coffee and the roaster MAYBE made .60 per lb while selling it at about an 8% pretax profit...and you call them bottom line bandits???!!! IDIOT!
They go to El Narino, for example and buy the coffee for .30 more per lb...the only problem is they get accolades from all the press when it is a big snow job! El narino produces MAYBE 1 million lbs of coffee annually! So the net effect to the farmers is $300,000.00 spread amongst the 760,000 farmers in Colombia and of course the Colombian Coffee Federation. Cmon all you morons that take up for this load of ...beans! They are getting credit for doing NOTHING.