Shortage of beans worries Starbucks
By Allison Linn
Associated Press
SEATTLE — The coffee urns at Starbucks Corp. aren't likely to run dry anytime soon, but the company is worried that its brisk growth could create a big problem: finding enough high-quality beans to satisfy increasing demand for its lattes and macchiatos.
The Seattle-based coffee retailer is rapidly expanding, opening more
than three stores a day and planning to more than triple the number it
operates to around 25,000 worldwide.
"Clearly we're concerned, at our company growth rate, that there's
going to be enough high quality, Starbucks-quality coffee available,"
said Willard "Dub" Hay, the company's senior vice president for coffee.
It's not that Starbucks is using up all the world's coffee; the company
said it only buys around 2 percent of the coffee produced. But
Starbucks is a major buyer of high-quality coffee, and there is much
less of that to go around.
To get the beans it wants, Starbucks has always been willing to pay
extra — currently, an average of $1.20 per pound. That's as much as
twice the market rate, said Ted Lingle, executive director for the
Specialty Coffee Association, a trade group.
But, as its needs increase, Starbucks is learning that paying more
won't guarantee it all the beans it needs. To solve its future supply
problems, Starbucks said it needs to help farmers grow better coffee.
So the company has opened what it calls a farmer support office in
Costa Rica, one of the world's biggest coffee producers.
"There's a lot of specialty coffee out there," said Peter Torrebiarte,
general manager of the Costa Rica office. "It's just a matter of
finding it."
Search for suppliers
Beginning with the office in Costa Rica, Starbucks hopes to eventually
employ a fleet of agronomists, or specialists who deal with crop
production and soil management. Armed with laptops and four-wheel drive
vehicles, they will search the region for potential suppliers and help
farmers who want to grow coffee for Starbucks get their crops up to
par.
Starbucks also is revamping a program, called CAFE Practices, that
rewards coffee suppliers who make environmental improvements. The
concern is that the coffee farms won't be able to continue producing
high-quality coffee in years to come if they don't reduce agrochemical
use, conserve energy and otherwise improve how they treat the land
coffee is farmed on.
Starbucks also wants farms to treat workers better, paying them more
and giving them access to housing, water and sanitary facilities, and
to stop using child labor.
"You can't have a sustainable (farm) if you're mistreating workers and
mistreating the environment," Hay said.
Starbucks will pay 5 cents more per pound for one year to suppliers who
meet 80 percent of its social and environmental criteria. Suppliers can
receive two more one-year price increases if they make other big
improvements.
Hay said the company also is leading the program because "we want
Starbucks to be known for doing the right thing."
Fair Trade guidelines
The company has been targeted by social and environmental activists who
complain about everything from its growing worldwide pervasiveness to
its coffee-buying practices. Although some activists have applauded the
company's recent efforts, others still criticize the CAFE Practices
program for not going far enough to help farms survive.
"What we would like to see Starbucks do is really use its power to
transform the industry," said Melissa Schweisguth of the activist group
Global Exchange. It wants Starbucks to buy more coffee under what are
called Fair Trade guidelines, which promote better wages and working
conditions and ask buyers to pay a minimum of $1.26 per pound of
coffee.
Starbucks said it is a large purchaser of Fair Trade coffee, but that
there isn't enough that meets its quality standards.
Chris Wille, chief of sustainable agriculture for the environmental
group Rainforest Alliance, praised the company's effort to understand
environmental concerns in coffee-growing countries, such as wildlife
protection and reducing chemical use. It's an attitude he said is
catching on across the coffee industry.
Kraft Foods recently started a partnership with the Rainforest
Alliance, and Procter & Gamble has started selling a line of coffee
that meets Fair Trade standards.
"All the companies are waking up," said Wille. "It's a new day for
coffee-roasting and coffee-selling, as well as coffee-producing."
Some of Starbucks' customers will certainly applaud efforts to be more
environmentally or socially responsible, said Carl Sibilski, an equity
analyst with Chicago-based Morningstar. But he said the biggest
advantage of such programs is that the farmers will grow better coffee.
"In the end, I think what it comes down to is the supply issue," said
Sibilski. "Of course it's ethical to keep your supplier in good shape,
but the one that's going to benefit from this the most is Starbucks."
Starbucks brushes off any concerns about the cost of its programs.
"Our concern is having enough great quality coffee in the world," said
Hay. "That's a bigger concern than our bottom line right now."
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