Comments on: Starbucks admits claims about trademarking were “not accurate”

By: fluffy assumptions

fluffy assumptions — Tue, 06 Mar 2007 08:23:29 +0000

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.

By: DW

DW — Mon, 05 Mar 2007 21:31:31 +0000

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.

By: fluffy assumptions

fluffy assumptions — Mon, 05 Mar 2007 08:57:16 +0000

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)

By: selam

selam — Sat, 03 Mar 2007 04:49:00 +0000

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.

By: Jasmin

Jasmin — Fri, 02 Mar 2007 22:29:56 +0000

Wait, so Starbucks would rather be seen as stupid than greedy? Way to go.