Starbucks’ response to the Starbucks Challenge 3.0’s Letter to Starbucks, posted in its entirety per Cindy’s request.
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Dear Siel and Al,

First of all, thank you for the opportunity to dialogue with you and other bloggers from around the world. This is the first time we have engaged with our customers in this manner, and we have learned quite a bit in the process. We pulled together a cross-functional team to answer your questions to the best of our ability.

1. Why are so many Starbucks stores out of Café Estima, the only fair trade certified blend offered in Starbucks stores? (see here, here, here, here, here, and the comments here and here) Is this the fault of the distribution system (for not getting it to stores), the district or store manager (for not ordering it), or the individual baristas (for not looking harder for it)? Or – more optimistically – has Starbucks run out of Café Estima due to overwhelming customer demand for fair trade certified coffee?

Thank you for alerting us to the fact that Café Estima Blend™ has not been available in some of your local stores. We have followed up with our distribution centers and discovered no issues with our inventory of Café Estima Blend™. However, we did discover that until September 2005, our previous Fair Trade blend like many of our core coffees was automatically replenished by our system so the stores were not required to order it. We experienced many complaints from the field regarding the automatic shipping as we were wasting much of our coffees. So when Starbucks launched its new packaging, we discontinued the automatic shipping of many of our core coffees allowing the store manager to run their business and place the appropriate orders to support their customers demand. It is apparent that some store managers have not added this coffee to their weekly orders. We will notify our field teams that Café Estima Blend™ will not be automatically replenished, and they will need to order the coffee moving forward.

We want to assure you that we are not withholding our support of Fair Trade coffee. We consider it an important element of our integrated approach to sustaining coffee communities. We value our collaborative relationship with TransFair USA; other Fair Trade initiatives; and the FTC cooperatives we purchase from. However, it is fair to say that our retail system is not perfect, and on any given day, any number of our stores may be out of this or any another coffee. Honestly, this was a new learning for us, and thanks to customers like you, we are now aware of the challenges.

We have also learned that the extent to which our partners (employees) have knowledge of any given product or program is a reflection of how interested customers are. Therefore, we hope you continue to ask for Café Estima Blend™ and assist us in our continued effort to educate our partners and customers about Fair Trade.

2. Are there concrete plans (i.e. percentage figures) a-brewing to increase Starbucks’ fair trade certified purchases? As you can tell by the results of the Starbucks Challenge, stores have been discouraging and refusing customer requests for fair trade coffee. We think it’s pretty fair to say that Starbucks’ headquarters doesn’t have a good sense of how much demand for fair trade certified coffee is out there. You said you’d have more fair trade certified coffee if customers demanded it. We’ve been, and we are, demanding it. Will you deliver?

Starbucks purchases only the highest quality Arabica coffee that meets our specific taste and quality profiles. Coffee quality is the determining factor as to whether we purchase the coffee, whether the coffee is from a Fair Trade cooperative, conservation hot spot or brand new origin. It takes several years of us working directly with the local coffee supply chain to build a steady source of quality coffee. Our buyers and quality team spend time on the ground with each of our sources of supply including Fair Trade cooperatives. In 2000, Starbucks established a licensing agreement with TransFair USA and purchased 684,000 lbs in fiscal year 2001. We worked with Fair Trade coops on our quality standards, volume and delivery needs, and as a result, our purchases have increased. We purchased 1.1 million lbs in fiscal year 2002; 2.1 million lbs in fiscal year 2003; 4.8 million lbs in fiscal year 2004; and should exceed our goal of purchasing 10 million lbs in fiscal year 2005.

Starbucks has a full range of comprehensive and concrete programs which support Fair Trade coffee farmers. This includes purchasing coffee, providing significant funds to loan agencies for investment and pre-financing, providing technical assistance through our agronomy office, creating rigorous, quantified Best Practices through C.A.F.E. Practices, and developing and selling products through multiple channels, from retail to food service to consumer packaged goods.

o Our best guess is that in FY2005 Starbucks accounted for over 20 percent of US Fair Trade imports and approximately 10 percent of world Fair Trade imports. We see ourselves as significant purchasers in the Fair Trade arena, even though we only account for approximately 2 percent of world coffee production.

o We are proud of our commitment to loan funds which benefit small scale farmers and Fair Trade coops. Working with groups such as EcoLogic, Calvert Foundation, and Verde Ventures, we’ve committed $8.5MM in affordable loans through 2005. This has impacted ten of thousands of farmers to invest in environmental best practices & agricultural technology – improving quality and alleviating poverty. The loan funds also create pre-financing options for Fair Trade coffees sold throughout the specialty industry (not just to Starbucks).

o Our agronomy office, along with extensive visits from our buying teams, provide on-going technical assistance on sustainability, quality, growing techniques and market insights to all of our supply chain, including Fair Trade coops. The same team will be working to incorporate our quantitative and rigorous guide lines (C.A.F.E. Practices) into coop operations. These direct connections and specific work plans are highly valued on both ends – linking Fair Trade cooperatives concretely to our business and consumers.

o Also from the product side, we are proud to offer Café Estima Blend™. On a recent visit to Fair Trade coops, we shared this coffee with the farmers, and they expressed their enthusiasm and pride for this extraordinary coffee. We’ve worked to assure that we can offer a full range of Fair Trade choices to college communities and are actively developing Fair Trade products to roll out globally to consumers.

Our coffee buyers will continue to search out the highest quality coffee from all coffee suppliers including Fair Trade cooperatives, and we have established multi-year programs to support this.

Customer demand is extremely important to us as we are a retail business. However, as a retail business, it is important to note that we measure “customer demand� by what is actually being purchased in our stores. Typically, store managers will stock Starbucks highest selling coffees in their stores. And we would like to thank you all, again, for pointing out the fact that Café Estima Blend™ has not recently been present in our stores for purchase. We are working with our store operations team to rectify this oversight.

Thank you and your fellow bloggers for your purchases of Café Estima Blend™ thus far, and we appreciate your help in raising the visibility of it in our stores. We do track our Coffee of the Week and whole bean coffee sales to determine our top sellers and use this information to make purchasing decisions. Customers can help ensure strong sales of Fair Trade coffee by purchasing Café Estima Blend™ whenever it is available in their local stores and buying it when it is offered as brewed Coffee of the Week. Café Estima Blend™ is scheduled to be offered as Coffee of the Week the weeks of January 2, 2006; February 20, 2006; and April 17, 2006.

We continue to actively work with TransFair USA, other national Fair Trade initiatives and consumer groups to promote Fair Trade coffee and sustainable coffee production.

3. But back to what you’ve already promised — What’s Starbucks planning to do on a national and international level to make sure its stores meet the Starbucks Challenge? We’re looking forward to the LA meeting, set for Dec. 16, but as you know, stores are failing the challenge all over the U.S. and the world. Neither of the emails sent out by headquarters have done much to improve things, and the new barista training video won’t come out until May 2006 – a half year after the start of the Starbucks Challenge. Since Starbucks prides itself on “legendary service,� we hope the mermaid can more swiftly deliver on a customer service promise it’s been making for years. Will the mermaid take real actions – actions that actually effect change — to ensure its fair trade promises are kept?

Starbucks will continue to educate our partners on the important part that corporate social responsibility plays in delivering the Starbucks Experience to our customers. This includes understanding our new Fair Trade certified coffee, Café Estima Blend™ and our commitment to working with farmers and their communities. An important part of this education is to continue targeted communication at the store level and to our field leadership teams reinforcing our commitment to corporate social responsibility and how partners can deliver legendary service to our customers in all ways. We are confident that our commitment to continued education will help ensure that partners are following the guidelines that have been established and that we are providing a coffee press of not only Café Estima Blend™ but all our coffees upon request in our company-operated locations. We apologize for any experience that you have encountered that did not reflect these guidelines.

4. And in case you assert (again) than certification’s not so important because all of Starbucks’ coffee is fairly traded, is there any way we can find out the minimum price Starbucks pays farmers for a pound of green coffee? We’re curious as to what the bare minimum is for this all-fairly-traded claim – especially since 41% of Starbucks’ coffee purchases don’t have transparency clauses that let Starbucks find out how much farmers are paid. We’re confused: How can Starbucks know that the prices paid to all its farmers are fair, when Starbucks doesn’t know how much many of its farmers are paid? Please illuminate us.

For all coffee Starbucks buys, it is our goal to pay premium prices that result in a profit for the farmer. In 2003, we began inserting transparency into our standard contracts, many of which are longer than one year. You are correct that by 2004, we had requirements for economic transparency written into the contracts for 59 percent of all coffee Starbucks purchased during the year. This does leave a percentage of coffee where we may not have documentation. We continue to request this type of documentation as economic transparency is a prerequisite to apply for C.A.F.E. Practices.

Although we cannot make assertions about payments to farmers without such documented information, we do know that the “Starbucks effect,� as it is often referred to in origin countries, reflects the benefits that our high prices have provided to farm communities over the years. We also understand that the sustainability of our business relies on the sustainability of farmers who grow our coffee. While Fair Trade supports that goal for farmers who are part of the Fair Trade system, Starbucks needed a system that was applicable to coffee farmers more broadly. To that end we have instituted buying guidelines that reward farmers who produce high quality coffee, provide economic transparency and meet environmental and social criteria.

Requiring economic transparency is a relatively new practice in the coffee industry, and we recognize it poses enormous challenges. For example, we discovered that many coffee farms in developing countries do not have a formalized accounting system. Since Starbucks is the primary purchaser for many of these farmers, we felt it would not be socially responsible to abandon them if they had challenges complying with the economic transparency prerequisite immediately. We continue to work with farmers as they develop new ways to track this type of information.

We are currently working to analyze the information received from C.A.F.E. Practices so that we will be able to make purchasing decisions based on farmers receiving an equitable share of the price we pay. Starbucks plans to increase the amount of coffee we purchase under C.A.F.E. Practices so by 2007, we expect to purchase 225 million lbs of C.A.F.E. Practices verified coffees. Starbucks supports efforts to make transparency a common practice throughout the coffee industry worldwide.

Again, all of us here appreciate your time and commitment. You demonstrated that the operational reality in our stores did not coincide with our objective regarding the availability of Fair Trade coffee to our customers. We hope you realize that this was not intentional as we continue to work on better processes to communicate and educate all our partners. You may not see immediate changes in our stores but know that we are aware of the challenges and are working toward a sustainable solution.

We realize that our responses may not answer all of your questions to your expectations, but our goal is to be as honest and forthright as possible. We don’t have all the answers, and we are not perfect. But as long as caring and passionate customers like you are willing to engage with us, we can work together toward greater, more profound social responsibility.

Warm regards,

Cindy Hoots
Corporate Social Responsibility
Starbucks Coffee Company

Update, 12/28/05: Our response to Cindy’s letter.

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