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Coffee Talk: Supplier Guidelines at Starbucks

Starbucks Coffee Sourcing Guidelines are coming to the end of a two-year pilot; this has proved a surprising success for the coffee company whose brand has become synonymous with cappuccinos and skinny lattes on main streets around the world, as well as the target of activists in the wake of the Seattle protests. By Yasmin Crowther

Sue Mecklenburg is one of the people responsible for the pilot, which she sees as probably “the best and most influential thing that I will do in my professional life.” At the time of the interview she was preparing for a stakeholder dialogue around the guidelines. Coffee growers, international experts and NGOs -- from Oxfam to Rainforest Alliance and Conservation International -- had been invited for a one-day review to help Starbucks assess the pilot and future priorities.

The Starbucks Coffee Sourcing Guidelines (CSG) basically aim to set standards for producers, which, if achieved, guarantees them a premium price for their coffee crop. The guidelines cover environmental considerations (such as shade-grown and bird-friendly crops), social issues (such as labour questions), economic transparency (ensuring everyone is paid fairly) and -- critically for Starbucks -- the question of quality.

In order to qualify for a premium price commitment from Starbucks, producers must provide independent verification that they meet the Guideline requirements, which include a rigorous series of Starbucks taste tests.

Last year, 13.5 million pounds of Starbucks coffee beans were sourced through the Guidelines, which is way ahead of the initial forecast of 3.5 million and has encouraged Starbucks to more than double its forecast for the coming year. Sue Mecklenburg says the company has been surprised by its success. “We were trying to do something extremely innovative and challenging, with big risks. We were trying to change our supply chain and did not realize the impact that we could have as a pretty small player in the coffee world.”

Starbucks is a big brand but, as Sue said, a pretty small player compared to the Nestlés, Kraft and Douwe Egberts of this world. It has a little over 1% of the world’s total coffee market. However, in recent years its brand has become one of the most recognizable in the world, and as Sue looked back over the last decade she acknowledged that “in the early days, we had no idea of what we’d be able to leverage with this brand” for coffee growers, let alone for consumers.

Brand Quality

Starbucks was the brand that introduced America to speciality coffee - quality beans that are specially selected and roasted for flavor. It was one of a host of renegade coffee houses that sprung up in the U.S. during the 1980s, at a time when most coffee was weak black stuff and consumption was hitting an all-time low. Starbucks sought to grab the quality market. Its coffee buyers developed relationships with coffee growers around the world to source the best arabica beans from high altitudes on the equator, and brought back a new sense of flavor and variety to the U.S. main street.

Providing quality coffee has always been core to the company’s business, which meant that its top executives grew anxious as crashing commodity prices wrung out the industry and put a squeeze on quality crops. Cheap robusta coffee grown on vast plantations flooded the market from Vietnam and Brazil, and many smaller quality coffee growers looked set to go bust. It was at this point in the late 1990s that Starbucks decided to develop the CSG on the back of the Conservation Principles for Coffee Production that had already been developed by four NGOs: Conservation International, the Rainforest Alliance, the Smithsonian Migratory Bird Centre and Consumer Choice Council in America.

They had developed a process for good conservation coffee and Starbucks added to these Principles the social, economic and quality elements that became the CSG.

Verification: Gap in the Market

When Sue was asked about the biggest barrier to the success of the Guidelines, she said the lack of on-the-ground verification. Of the 160 growers and suppliers who submitted applications for a premium price under the Guidelines in recent years, 60 were conditionally approved and the rest failed -- often because of inadequate verification.

“No one organization has had the scope geographically or broad interests in terms of focus to be an overall verifier for the CSG. It isn’t just about Fairtrade or shade grown or organic, it doesn’t fit into a single certification scheme but covers all of these components. Finding people who can certify on multiple criteria has been a big challenge.” Starbucks expect the next phase to involve working with certifiers to expand capacity or work together to certify against multiple criteria. They have had conversations with Rainforest Alliance and Mayacert (organic) as well as local organizations. Meetings in Costa Rica and Guatemala have explored what needs to be done. As Sue said, “The certifiers have to adjust to the needs of the market.”

About Fairtrade

Fairtrade currently comprises about 1% of the coffee purchased by Starbucks. In the States, the company has provided Fairtrade coffee through Transfair USA since the mid- 80s. In Europe, it was the UK-based Fairtrade organizations that vociferously campaigned for the company to offer Fairtrade coffee here as well, which it now does.

Sue described Fairtrade “as a surrogate phrase for CSR. It’s a message or leading indicator to consumers that a company is involved in responsible business practices.” While Fairtrade is well recognized as a brand in its own right, with far more street credibility than the CSG, from Sue’s perspective it has some limiting factors.

First, it does not look systematically beyond the guarantee of a fair price. Although Fairtrade brands often promote environmental and labor practices, they do not require or publish criteria on those issues that approach the CSG’s specificity, although Starbucks do realize there is more work to do on the social dimension.

This article has been reprinted courtesy of Sustainability RADAR. It first appeared in the April/May 2004 edition of that publication.

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