Starbucks has announced that it will pay more for ethically and ecologically sound coffee.
Starbucks is taking steps to improve its reputation as an ethical trader on the global coffee market. This is important for Starbucks as it has positioned itself as an experiential and lifestyle choice for the young urban consumer. Although this is a valuable PR exercise, it will also serve to protect Starbucks’ supply of luxury coffee.
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The international coffee trade has long been a poster child for critics of globalization. There is a major discrepancy between the prices paid for coffee by consumers and the prices paid to the growers, as well as between the living conditions of the two groups. The recent glut in the coffee market, which led to prices slumping by as much as 40%, has exacerbated this situation. Starbucks now plans to pay an extra 10 cents per pound of coffee beans for suppliers that meet its criteria for socially and environmentally responsible behavior.
Last month, Starbucks announced plans to buy a million pounds (lbs) of Fair Trade certified coffee in the next 18 months. Fair Trade coffee growers receive higher prices (GBP1.26 per pound) for their coffee.
These moves by Starbucks reflect concern over the possibility of consumer action against perceived unethical business practices. Starbucks is more at risk from this form of negative publicity than many other multi-national High Street food service retailers, as it has avoided positioning its service as being merely convenient. Instead, it has emphasized the experiential, lifestyle aspects of its offering, and targeted young, urban, active consumers. This consumer segment is more likely to take an interest in current affairs, and the charge of exploitation taints Starbucks’ image.
Starbucks’ higher prices will be tied to water and energy conversation, recycling, reduced pesticide use and the treatment of workers, including conditions and pay. Critics say that it is unclear how transparent this scheme will be. Concerns have been raised over how it will be monitored, suggesting that Starbucks is hoping to enhance its reputation among consumers for the minimum possible effort.
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By GlobalDataHowever, Starbucks points to other reasons for paying a higher price to its suppliers. Although Starbucks purchases total only 1% of the total coffee supply, they comprise 15% of the specialty coffee trade. By paying a higher price now, during difficult times for coffee suppliers, Starbucks hopes to safeguard its suppliers and ensure the stability of its coffee supply over the next four years.
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