Starbucks quietly cuts quality sourcing
Starbucks rhetoric clings to tradition while its business model strays toward expediency, altering sourcing methods to penetrate emerging markets.
Sunday, January 30, 2011 - 23:41
STARBUCKS' SOURCE: Drying coffee beans at the Doka Estate, known as one of Costa Rica's highest quality coffee plantations for three generations. (Photo: Michelle Hardy)
Costa Rica's Doka Estate grows coffee to brag about, and Starbucks knows it. Steeped in tradition and renowned for superior beans, this beautiful plantation is weaved into Starbucks rhetoric on providing high quality coffee. But as Starbucks pushes full steam ahead into emerging markets, it seems they're leaving Doka beans in the dust, along with much of the romanticism they embodied.
As of now, Doka is the only plantation Starbucks represents by name and picture in its website section on coffee origin, while all other coffee types are represented solely by region. This suggests the estate is still a main supplier. Such name dropping was honest back when Starbucks bought about 80 percent of Doka Estate's yield; now, the company buys a mere eight percent.
"Coffee is like wine — you pay for the name," says Edgar Vargas, Doka owner and grandson of the original estate founder. "Starbucks still wants to use our name, so they buy a little bit, but they don't want to pay for the name."
To be clear, Doka is not too upper crust for the average American coffee company to afford. Its main buyers are now Caribou Coffee, Peet's Coffee, Green Mountain and Allegro. Starbucks could eat these companies for breakfast and wash them down with a Trenta iced latte, especially with its 44 percent revenue growth and impending expansion into lucrative emerging markets. So what prompted this hushed split from one of the company's most prestigious suppliers?
"The sheer size of that company makes it impossible for them to use such quality beans like ours consistently," explains Vargas. "I understand why they have to change. They're too big to sustain such high quality, so they want to move to cheaper farms and use more of a blend. I believe they want to move to some bigger farms in Brazil."
Sure enough, Starbucks is mimicking Coca-Cola-like ambition as it prepares to capture the caffeinated beverage market in Brazil and China. That's why the company recently changed its logo by removing the words "Starbucks Coffee," making it more universal for expansion into Asian and Latin American markets.
In Brazil, the world's number two coffee market, the company has planned "aggressive expansion"; it'll serve traditional Brazilian recipes as fast food, VIA instant packets and to-go cups to a culture of coffee drinkers who never before needed caffeine on the run.
In China, Starbucks is creating the first-ever coffee plantation in the Yunnan province to help cultivate the emerging Chinese demand for coffee. Starbucks plans to open 1,000 more stores in China — more than twice the amount currently there — in the next few years. This market penetration will develop alongside McDonald's aggressive introduction of McCafes in China.
But amid this grand expansion, Starbucks' aesthetics and rhetoric still cling to a quaint image of the past. Indie music playlists, lofty modern art, cheery photos of well-paid coffee pickers — it's no wonder customers forget during the Starbucks "experience" that this company is now in half as many countries and has half as many stores as the colossal McDonalds. Yes, by turning to large-scale farms, fast-food products, and drive-throughs, it's well noted Starbucks is acting like the very fast food chains it sought to replace.
If there is one area of business in which to preserve romanticism, coffee is a strong candidate. For regions like Costa Rica's volcanic valleys, for instance, coffee is not just a business; it is a culturally-bound art form and livelihood. Small farms, co-ops and family plantations like Doka pride themselves on finesse and tradition, hiking each morning through volcanic highlands to pick coffee cherries by hand, dry and de-shell the harvest, and roast the beans ever so precisely. The entire process is precarious and beautiful, and centralizing or mechanizing such a business would rob brews of many regionally-specific nuances.
What's more, these small-scale coffee farms tend to encourage biodiversity and require less insecticides and pesticides than large monoculture farms. As their coffee plants grow beneath forest canopy, shade trees fix nitrogen in the soil and shed leaves that feed useful insects.
About three quarters of the world's coffee comes from small farmers and locally owned plantations, but that could change. If the Starbucks coffee farm in China proves efficient, who's to say it won't try to source the majority of its coffee from company land? The sheer volume of Starbucks may convince the company that those rustic, locally-owned coffee farmers are an inefficient relic of the past. And if Starbucks changes its sourcing and supply chain strategies, other coffee companies are sure to follow.
Starbucks' abandonment of original principles?
A reverence for scale and expediency at Starbucks would not be unusual for a globalized corporation, but it sure isn't what the company meant to be. Other businesses built on necessity or discount can serve shareholders by veering from romanticism, but the entire point of Starbucks is romanticism. In fact, Starbucks Chief Executive Howard Schultz knows this; he often criticizes his own company for straying from original ideals of high quality coffee and appreciation for detail in his infamous "third place" of solace.
These worries haven't been reflected in new policies, though. After the company's stock price peaked in 2006 and delayed new store openings, Starbucks didn't re-evaluate the quality of its brews or channel its original romanticism; it started selling VIA instant coffee packets. Now, instead of salvaging any of its abstracted core principles, Starbucks continues speeding ahead on its shaky new foundation of expediency.
Yet contrary to frequent criticisms of its homogeneity, the original vision of Starbucks needs to succeed on a large scale. If Starbucks — creator of the modern mainstream coffeehouse culture — regresses to a hated machine, it will discourage investment in other coffeehouse chains keeping that productive and therapeutic "third place" in the forefront of American culture.
More importantly, Starbucks has more potential for social responsibility than any other food or drink chain of its size. Its partnership with Conservation International, for instance, gives coffee pickers and employees fair salaries, working conditions and educational opportunities. This Coffee and Farmer Equity program (C.A.F.E.) also upholds environmental standards and discourages farmers from disrupting primary forest area. The company's many programs like these — however PR-contrived they may be — set the bar for conventional food and drink chains.
Starbucks was a lovechild of elegance and ethics; if it can conquer the world with most of its principles still in tact, its long-term influence on the coffee industry and even the fast food industry could shake the foundation of mechanized franchises across the globe. The real shame, though, would be if Starbucks persists as a simulacrum of its original self: customers basking in a facade of quaintness and social responsibility, while back-room employees unload another factory farm shipment of Egg McMuffin replicas, organic energy drinks and sacks of random coffee blends from international mega farms.
It's time to start appreciating that romanticism Starbucks brags about — and to make sure that image is used to set the bar, not to abstract the truth.
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