Starbucks admits claims about trademarking were “not accurate”
[image from abc. For those new to the Ethiopia coffee trademark issue, start here]
In response to Starbucks, which put out a misleading video on YouTube saying that the Ethiopian trademarking effort’s illegal a few weeks ago, we have a new video on YouTube.
This one features Robert Winter, a partner at the law firm Arnold and Porter, saying that Starbucks’ claim is “plain silly.”
And it seems that now, Starbucks has changed its mind about the legalities of the issue. As Wondwossen points out out on Coffee Politics, a Starbucks employee called Matt Murray wrote a comment on the new YouTube video, saying that “When we posted that video we felt the information was correct & since we’ve learned a lot & realized the information about the legality of the trademark was not accurate.” Matt appears to be a Communications Specialist at Starbucks.
This isn’t the first time Starbucks has admitted it doesn’t know much about the trademarking issue that the mermaid has worked so hard to discredit. Jim Donald, Starbucks CEO, previously told The Times UK that he can’t tell the difference between trademarking (which Starbucks doesn’t like) and certification (which Starbucks recommends). Jim admitted his ignorance AFTER going on a trip to Ethiopia specifically to tell Ethiopia to take the certification route.
I recommend that Jim and others at Starbucks educate themselves before making absurd claims and attempting to strongarm others into accepting its often “not accurate” point of view.
Here’s the new YouTube video:
This whole issue hinges on Ethiopian farmers getting $90m extra as a result of trademarking. This defines the debate as a “big issue”.
But I don’t see this assumption being questioned. Anywhere. For instance, if we say 15,000mt (10% of exports) from Ethiopia can be considered ’specialty’ and therefore ‘trademarkable’, that works out at around $2.66/lb. Ethiopian coffee currently costs around $1.40 for top quality. So now, generous buyers are going to pay $4 istead of $1.40. Why would they do this? Where is the mechanism? If they do pay, how would you keep it out of the hands of the kleptomanic Ethiopian government anyhow?
It would be great if the farmers do get this extra money, but don’t you think its worth questioning the assumptions? I fear that in 6 months time, the media will move on, and farmers will still be poor. And a few egos at NGO’s will be able to puff out their chests and say “i beat Starbucks”.
Please, tell me I’m wrong.
Comment by fluffy assumptions — March 2, 2007 @ 12:36 am
You are wrong. First, Oxfam’s figure’s $88 million. And these calculations are based on just 80 cents extra an lb, not $3.60, as per your odd calculations. The extra 80 cents would come not due to “generous buyers,” but because market prices would go up. Here’s a quick summary of Oxfam’s calculations from Fortune, a mag that usually lauds everything Starbucks does:
“trademarking would not rely on the beneficence of the buyer. According to calculations by Oxfam, which has taken up Ethiopia’s cause, if trademarking pushed prices of specialty coffee up 80 cents a pound, Ethiopia would stand to gain $88 million a year.”
Comment by Siel — March 2, 2007 @ 10:20 am
Yes, you are wrong. The buyers are not known for paying a higher price out of generosity. If they pay more per pound, it is because they had to (most likely because they were forced by market forces). Trademarking the brands will eliminate this fallacy for good. By taking ownership of the trademarks, the sellers will be able to have the negotiating power and avoid the need for them beg for a better price.
Currently, Ethiopian farmers sell their coffees through the existing marketing channels and will continue to do so in the foreseeable future. Despite all the inefficiencies in the marketing system, the additional price fetched by the trademarks will trickle down to the farmers at a rate we are seeing now. True, a more efficient system will ensure increased income for the farmers. I do want to see an improved marketing system and a fair representation of the farmers in the trademark stakeholders’ group but I disagree with the notion of holding off the trademarks until such a “mechanism†is put in place.
Comment by Wondwossen — March 2, 2007 @ 1:48 pm
Wait, so Starbucks would rather be seen as stupid than greedy? Way to go.
Comment by Jasmin — March 2, 2007 @ 2:29 pm
fluffy, you are dead wrong! Your “assumptions” also did fail you. Take the easy route and compare the $1.40/lp you quoted with the $26/lp Starbucks sells the Shirkina Sun-Dried Sidamo coffee. That is what makes THE big issue. To understand how the trademarks would work for benefit of the sellers, simply recall the bargaining power you had the last time you visited a brand-name store to buy your favorite merchandize. That’s the magic of pathent rights. The coffee marks will play the same role in shifting the ownership to the rightful hands - Ethiopians - enabling them to determine the selling price for their products. … How would they spend the money is off topic.
Comment by selam — March 2, 2007 @ 8:49 pm
I guess I asked for the “you are wrong” line.
However, when I asked “where is the mechanism?”, i meant “how will the mechanism work?” Sorry, I wasn’t clear.
If this is going to work, it has to do so within the confines of a market system (lets be realistic). As such, the mechanism is already there, I’m just asking how it will play out. For instance, it could be that roasters will have to pay a licence fee to the Ethiopian government if they have any of this coffee in their bags, or if they use any of the three names (and note there is a huge difference between these two possibilities)
(oh, and Siel - I don’t see whats so odd about my calculations. $1.40 is the FOB price of top-quality Ethiopian coffee, $2.60 would be amount if $88m were realised for the farmers. Total $4/lb. Bear in mind, you’ll never be able to trademark bog-standard Ethiopian Djimmah 5 sundried quality for instance - its not high quality and too easily substitutable with Brazilian grades)
Comment by fluffy assumptions — March 5, 2007 @ 12:57 am
Perhaps on the numbers thing I should ask which year’s numbers you’re using. Those numbers were (if I remember correctly) based on Ethiopia’s 2005 estimates of coffee production and sales. If you used 2003’s numbers, for example, you would wind up with vastly different results. This is particularly true given the volatile price of coffee over the last while.
To answer the mechanism thing - this is a long term project where Ethiopia is now in the process of putting together a licensed network of distributors. This means that unless the retailer agrees to certain conditions (which can include price) that Ethiopia can refuse to allow them to use the trademark on coffee that they sell. That’s a large reason the trademarking effort is so important. And as they make more progress in the distribution network they can do joint promotions and such that will raise demand (and thus profits) for both Ethiopia and the retailers in part through brand management.
And lastly, Ethiopia already determined that the licenses are royalty free.
Comment by DW — March 5, 2007 @ 1:31 pm
Hi DW - thanks. The way you describe it, it is truly a huge shift from the way business is done right now. If they can control the whole chain without alienating their traditional markets, then that will truly be an achievement to be proud of.
The numbers I’ve been talking about are this year’s numbers. We’re in the maincrop now, and while normal Sidamo2, for instance, is trading at +15c/lb FOB to NYC, better cupping lots are at around +30c/lb. This compares reasonably well with other gourmet origins, although top cupping Kenyans can go for a lot more due to their scarcity of supply and unique characteristics.
Interestingly, in Kenyan they have a new approach to trying to get the market closer to the farmers. They have dismantled the monopolistic auction system, and have opened what they term the ’second window’ to allow co-ops to strike deals directly with roasters (this was forbidden before). While Ethiopia has a similar mechanism in place, it is rarely used due to the administrative hassles of making such arrangements, and the poor counter-party risk represented by the local companies. Encouraging inward investment in the coffee export sector (currently banned in Ethiopia) would improve the balance sheet of the exporters and would have an immediate upward effect on price, since international buyers would not have to discount so heavily for counter-party risk.
Just to say, there’s more than one way to make a positive effect.
Comment by fluffy assumptions — March 6, 2007 @ 12:23 am