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There exists, somewhere between the fearsome mass-ness of the mainstream grocery store and the high-pitched good works of the coop, farmer's market, or CSA, a world in which low prices are valued slightly higher than locality of the source but, more than anything, the products must be good. Fair-trade, organic, without trans-fatty acids, with fewer artificial colorings or preservatives or Disney characters than all the other products.

It's the world of the natural foods market. A world dominated by two very dissimilar and yet, from a target market perspective, nearly identical competitors: Whole Foods Market, Inc. (NASDAQ: WFMI) and Trader Joe's, a unit of German private company Aldi Group.

Walking into a store -- or simply gazing at one from across the street -- you have a very different picture. On one corner, in the midst of a posh shopping area or trendy boutique-spattered neighborhood, Whole Foods, with its glistening crates of fresh produce, honeydew melons, purple potatoes, and blood oranges piled high in an abundance of exoticism. The doors open smoothly, the merchandise is displayed beautifully, and a high-ceilinged eating area is often overflowing with customers enjoying their deli purchases. Customers enter slowly, looking around as if discovering a stunning architectural landmark for the first time.

Sidamo. Harar. These types of coffee beans in Ethiopia speak to me more seductively than Champagne, Bordeaux, Pinot. Among coffee connieusseurs, these names are the pinnacle of all that's perfect about the bean. Naturally, Ethiopian coffee growers would like to have trademark protection for their most famous varieties.

Not if Starbucks Corporation (NASDAQ:SBUX) has anything to do with it. The coffeeshop chain has, according to British social activist Oxfam, blocked Ethiopian farmers from trademarking their beans. If Sidamo and Harar were trademarked, Ethiopians would have more control over how the names were used, raising the price for their coffee and giving them more money -- $90-$100 million each year, says Oxfam.

Starbucks is a part of the National Coffee Association, which has filed to block the trademark application with the USPTO, and disputes that it was the company's idea. Starbucks doesn't appear to be disputing the block, however; which seems just as bad, to me. Oxfam suggests that Starbucks enter into voluntary licensing agreements with Ethiopia (and they may, indeed, do so -- Starbucks has historically made efforts to treat coffee growers fairly). I'd like to see more proaction on the part of Starbucks than "but it wasn't our idea!" and I'm disappointed with the NCA -- really, give the poor farmers their IP already!

Starbucks [SBUX] has a voracious need for high-quality arabica beans (as opposed to the cheaper robusta beans traditionally favored by your traditional grocery packager of big red cans of coffee). Its ever-expanding business model requires it to take the lead in ensuring steady growth in economically-viable coffee-growers throughout the developing world.

The Daily Monitor of Addis Ababa reports (Via allAfrica.com ) that Starbucks is set to triple the amount of coffee beans it buys from African countries beginning with 2007's growing season. SBUX currently buys just 5% of its beans from the four coffee-producing African nations: Ethiopia, Kenya, Rwanda and Tanzania. The company pledges to pay better than "conventional markets" for the beans -- provided,  the article notes, that the "prices and conditions coffee beans are traded with at each level of the transactions" are transparent.

This is in keeping with the Coffee Farmers and Equity (CAFE) program that Starbucks itself created to  "evaluate, recognize, and reward producers of high-quality sustainably grown coffee" with Scientific Certification Systems (SCS) an independent evaluation and certification firm.

 

Frappucinos have more fat than and a big mac, okay?

Last week, Reuters reported that, the Center for Science in the Public Interest -- having just launching a suit against KFC for frying chicken with trans fat -- now plans  "to campaign against the global cafe chain Starbucks [SBUX] because of the increased risk of obesity, heart disease and cancer associated with high-calorie, high-fat products it sells."

Starbucks is a high-profile company that has come under fire from advocacy groups in the past, leading to the company making changes in, for example, its policies toward coffee growers and an increase in the amount of fair trade coffee it buys. Good products can come from criticism. In fact, in the same Reuters piece, a spokesman said the company "is 'actively researching' alternatives to high-fat products. The company said it plans to eliminate trans fat from seasonal baked goods -- but not necessarily other products -- by this fall. "

With Wal-Mart in the midst of making important changes to its merchandising strategy here in the U.S., how is it going about adding new partners and vendors to supply newer items like organically-grown coffee and natural cotton clothes? Why, by embracing fair trade growers around the globe, of course.

Fair trade certified means a healthy profit for some growers and producers because of certain environmental and social standards must be met in the production of goods. This higher standard can mean a certification and a higher asking price from producers, even to large, penny-pinching retailers like Wal-Mart. As a WMT investor, be glad that Wal-Mart pinches every penny, but also be glad to cost cuts can only lead so far -- more growth must come from catering to different customer segments and their needs.

Although some will scoff at Wal-Mart's new priority of "doing well by doing good" outlined by CEO Lee Scott, movements like this have to start somewhere. You can't turn a large cruise liner around on a dime, in other words. A quote from this source article sums things up for Wal-Mart's churning questions: "Supporting fair trade presents a paradox for Wal-Mart. It is a tacit admission that there is a point at which no more efficiencies can be squeezed out of the system without harming the people who make it work." Well said.