Equal Exchange: Not So Fast, Starbucks

by Zarah Patriana

Published November 14, 2008 @ 08:43AM PT

Starbucks' recent decision to double their Fair Trade coffee purchases has drummed up much discussion about the implications to the Fair Trade movement. Leading Fair Trade coffee roaster, Dean Cycon shared his critique on the recent decision and mentioned Starbucks' C.A.F.E. standards. I, myself have trouble figuring out what these standards really entail, and Dean even points out that the standards "are pretty mysterious, and most Starbucks people will readily admit they don't fully understand them." GreenLAGirl, Siel has investigated this herself and brought up the fact that Starbucks has often pushed their own C.A.F.E. standards more strongly than Fair Trade Certification.

Thankfully, Rodney North, "Answer Man" at pioneer Fair Trade company, Equal Exchange was kind enough to share his knowledge of Starbucks' C.A.F.E. standards. He points out the holes in the standards and explores the key differences in Starbucks' C.A.F.E. approach and the Fair Trade and Organic alternative. Think the C.A.F.E. approach is better? Dig deeper and think again...

Rodney North of Equal Exchange:

I've studied the Starbucks C.A.F.E. up close and even got to visit (w/a NY Times reporter) a small-farmer co-op in Chiapas that sells to Starbucks, as well the Chiapas HQ of the huge coffee exporter, AMSA, who is one of the two outfits that does all the buying and exporting for Starbucks in Mexico. They gave us a detailed presentation on their work with Starbucks.

With that - and other research - this is the how I see the difference between the C.A.F.E. system and the Fair Trade & organic alternative.

(Note: that Starbucks has moved into chocolate, too, and there again is planning on NOT choosing Fair Trade or Organic suppliers but rather will apply a cocoa-version of C.A.F.E.)

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Some of the key differences between the Starbucks' C.A.F.E. approach and the Fair Trade & organic alternative.

Do you know what you're getting?
With Fair Trade & Organic certification you do. With C.A.F.E. you don't. Starbucks can (& does) say that x % of their beans are bought under their C.A.F.E. standards, but was the coffee in the bag in your hand grown & traded that way? Maybe, maybe not.  Starbucks doesn't segregate and label their C.A.F.E. sourced coffee from the rest.

Certified vs. "Just Trust Us"
While I personally think that the C.A.F.E. system has actually motivated coffee growers to improve their practices it's hard to know due to the opacity of the C.A.F.E. system. For instance, whereas organic and Fair Trade systems make it clear you must do X & Y, and you may not do P or Q, the C.A.F.E. system works on a point system that makes most anything optional, so long as you score high in another area. Additionally, whereas organic and Fair Trade certification requirements externally imposed demands upon those participating, Starbucks wrote their own standards (admittedly with a lot input, but you see the problem).

Are you supporting a co-op, or a plantation owner?

With FT coffee you are supporting a small farmer cooperative -- period. With STBX coffee it might not even be sourced under C.A.F.E. standards. In which case you're not. And if it was sourced via the C.A.F.E. program, it might not have been grown by a co-op. And even if was co-op grown, it definitely was not co-op exported (whereas it always is under Fair Trade). This is because Starbucks has centralized their supply chain to minimize the number of exporters they buy from. This has meant that co-ops (like the Comon Yaj Noc Pic co-op I visited in Chiapas) must sell to a large corporate exporter (in their case AMSA) who in turn process and export the coffee.
And if a co-op has not moved up the supply chain to become an exporter, than they are not developing nearly the organizational or professional strength and independence that the Fair Trade co-ops are. It was very telling that the co-op we visited sold 100% of their crop to Starbucks (via AMSA, of course), AND that organizationally they were very weak. They had very limited capacity to judge their own quality (AMSA does that), and no capacity to seek out other buyers if that were necessary some day.

Credit:
In 2007 Equal Exchange fulfilled 100% of the requests for advance, affordable credit, which totaled $1.9+ million. That's amounts to about 45 cents for every pound we imported.

The C.A.F.E. program has the growers meet many criteria, but doesn't ask much of Starbucks. For example, Starbucks doesn't provide advance credit.  Yes, you might read about Starbucks writing a check here or there to a group like Calvert or Root Capital to support the provision of credit, but they don't actually tap that for their own supply chain. I guess because that kind of involved intimacy with their supply chain doesn't REALLY interest them (hence they outsource the work to corporate exporters like AMSA). Further, even if you were to count those checks Starbucks has written, it's a negligible amount compared to the scale of their operation - equal to about 1 cent per pound imported.

Price:
Equal Exchange, of course, promises to pay co-ops at minimum $1.36 for non-organic coffee, and $1.56 for certified organic coffee. Often we pay more. For example, for the most recent Mexican harvest we paid up to $1.65. In contrast, according to their most recently released data, Starbucks pays exporters on avg. $1.42/lb. But even a co-op, like Comon Yaj Noc Pic, who sells certified organic coffee into the Starbucks system, gets only $1.23 (at least 23 cents less than they would from EE).

Outsourcing the hardest work to the coffee growers:
With Fair Trade a grower will get, at minimum, a definite price (from EE its at least $1.36 or $1.56/lb) if they meet certain established, fixed criteria, assuming they can find enough buyers (which is why we try hard to grow not only our own imports, but also encourage the industry to buy more Fair Trade coffee).

Conversely, under the C.A.F.E. point system Starbucks has created a situation where coffee growers (including both plantations and co-ops) are in a constant struggle to score more and more social and environmental points, as that might move them closer to the front of the line of potential suppliers. Those in the front of the line get first right to sell to Starbucks. Thanks to this competition the "bar" is always moving higher.

This means that while last year your co-op may have had the right to sell to Starbucks, and while you may have improved your social and environmental performance by another 5% since then, it may now not be good enough - if other growers improved by even more.

While it's nice to see this kind of arguably "virtuous competition" it must be kept in mind that Starbucks makes no promise to pay any more for this coffee, even though more effort went into it, and more "good" was accomplished. And because the desire to sell to STBX is so great STBX doesn't need to offer any more. The net effort is that whereas Fair Trade importers are consciously committing to paying growers more to make social and environmental improvements possible, Starbucks has devised a way to, in essence, outsource that extra burden to the growers themselves. If they want to sell to STBX they just need to dig deeper, or try harder, than the other growers, but they can't count on a higher price for their coffee to offset these investments or efforts.

Supporting broader industry-wide change vs. supporting The Starbucks Way:
By buying & supporting Fair Trade and organic products consumers are adding momentum and market power to a pair of independent systems that can be utilized by thousands of growers, importers and food companies around the world. Just look at our how both systems have caught on and are transforming our agricultural and trade practices.
By buying non-organic, non-Fair Trade coffee (or tea or cocoa) from Starbucks, and instead relying on their C.A.F.E. system to create change, you're strengthening Starbucks' decision to keep their participation in the organic & Fair Trade systems to a minimum, and to instead handle their massive imports through their own proprietary standards system that directly competes with, and undermines, the - we believe - much more demanding, effective & transparent organic and Fair Trade systems. How many of their competitors have adopted their heavily promoted C.A.F.E. standards? Zero. This is in part because there is a built in disincentive (who wants to strengthen STBX's hand?), and in part because STBX created something that doesn't lend itself to adoption by others.

[Photos: Didier Gentilhomme & Equal Exchange]