Madeleine Acey, Enterprise Editor, Times Online
Academic warns American chain that customers will go elsewhere if it places profit before ethics
Starbucks was accused yesterday of “playing Russian roulette” with its brand as a row over prices for Ethiopian coffee farmers intensified.
As an Oxford academic lambasted the American coffee shops chain, Jim Donald, Starbucks’ chief executive, was preparing to visit Ethiopia tomorrow for talks with Meles Zenawi, its Prime Minister, The Times has learnt.
Douglas Holt, the L’Oréal Professor of Marketing at Oxford University’s Saïd Business School, accused Starbucks of hypocrisy and abuse of power and said that the company was in danger of damaging its name among its educated middle-class customers by opposing Addis Ababa’s attempts to trademark Ethiopia’s coffee varieties in the United States.
The international coffee chain had worked hard to cultivate a progressive image, selling fair trade and “ethical” products and promoting sustainable development among the poorest coffee-growers, he said.
“In their rash attempt to shut down Ethiopia’s applications, [Starbucks] have placed the Starbucks brand in significant peril. Starbucks customers will be shocked by the disconnect between their current perceptions of Starbucks’ ethics and the company’s actions against Ethiopia,” he said.
He claimed that Starbucks’ stance was likely to hit profits much harder than any price rises brought about by trademarking.
Oxfam said last month that the Ethiopian growers selling to Starbucks earned between 75 cents and $1.60 a pound on beans that Starbucks sold at up to $26 (£13.40) a pound. The aid organisation issued a strongly worded statement accusing Starbucks of actively blocking Ethiopia’s trademark bid.
Starbucks, in turn, denied this and issued a statement demanding that Oxfam stop its attack. Oxfam took out full-page advertisements on the issue in The New York Times and two Seattle-based newspapers.
Starbucks said that trademarks were not the best way to help growers and suggested a regional certification alternative that it said was used in many countries to brand premium food and wine. It made no sense, the company said, for trademarks to be geographically based, as in the Ethiopian application for three regional names. Starbucks added that it consistently paid premium bean prices and that between 2002 and 2006 it had quadrupled its Ethiopian coffee purchases.
“We support the recognition of the source of our coffees and have a deep appreciation for the farmers that grow them,” the company said. “We are committed to working collaboratively and continuing dialogue with key stakeholders to find a solution that benefits Ethiopian coffee farmers. We have had recent conversations with Oxfam about planning logistics for a stakeholder summit.
“Our investment in social development projects and providing access to affordable loans . . . has been recognised for its leadership within the industry,” it said.
Getachew Mengistie, the director-general of the Ethiopian Intellectual Property Office, said that Addis Ababa had studied the merits of both trademarks and certification and found that trademarks would strengthen the position of farmers, enabling them to get a reasonable return for their product.
Professor Holt said: “With a certification mark, Starbucks and other Western coffee marketers would still have full control over Ethiopian coffee brands.” Trademarks would require licences for companies wanting to use the names — giving the coffee producers a commercial asset that they could control.
Starbucks declined to confirm or deny Mr Donald’s visit. Oxfam said that it had invited supporters to fax Mr Donald in protest and that more than 70,000 people had done so.
“Speciality coffees in other regions of the world can get up to 45 per cent of the retail price, compared with the 5 to 10 per cent Ethiopians are currently receiving,” Oxfam said. “We’re meeting with Starbucks again next week and are hoping there can be progress.” Ethiopia’s growers could earn $88 million (£45 million) more per year with trademarks, it said.
Starbucks declined to respond directly to Professor Holt’s comments.
Brian Smith, research fellow at Cranfield University and author of Guarding the Brand, questioned Professor Holt’s assertions. He said that Western consumers had limited sympathy with subsistence farmers in Africa and although they might be prepared to pay 5p more for a fair trade latte, they might not walk an extra 50 yards to another coffee shop to avoid Starbucks and its policy on trademarks.
“I don’t see this doing Starbucks significant long-lasting harm . . . Starbucks will handle this in an intelligent manner, offering an alternative,” he said.
Crucial brew
$11.2bn
Ethiopia’s GDP
$7.8bn
Starbucks’ annual revenues
12,400
Number of Starbucks coffee shops worldwide
15 million
Number of Ethiopians reliant on the coffee trade
54%
Percentage of Ethiopia’s GDP that is coffee
90%
Percentage of Ethiopia’s exports that are coffee
80%
Perecentage of Ethiopians living on $2 or less a day
Source: The Times