Starbucks VP visits

While the name of Starbucks Corporation functions as a synonym for coffee in many of our minds, coffee retail is not its only role. On Thursday, Nov. 17, Baruch students and faculty members were given an opportunity to learn about Starbucks' support of social responsibility and about its strategy to ensure steady supply of coffee while simultaneously promoting growing coffee in an environmentally sustainable manner.

This 68th Mitsui & Company Lunch Time Forum, Starbucks and the World Coffee Market, featuring guest speaker Dub Hay, senior vice president of coffee and global procurement, was presented by the Weissman Center for International Business and the Zicklin School of Business Full -Time MBA Program. (Sam Nakanishi, a representative of Mitsui & Company was also present.)

Starbucks, recently named as one of the most innovative companies by Business Week, was established in 1971 in Seattle to offer its customers specialty coffee. Two decades later in 1992, it went national, and today it is world's largest coffee retailer. Hay, who has been with Starbucks for three years, is also on the Board of International Coffee Association, the Starbucks Coffee Association, and he is an honorary elder of a tribe in Kenya. He and his team spend a good portion of the year interacting directly with their coffee suppliers on farms all over the worlds ranging from Costa Rica to Mexico to Rwanda to the islands of Indonesia and beyond.

Coffee farming affects the lives of more than 25 million people and most of the coffee farmers are family shareholders, who pass down the business from generation to generation. Starbucks recognizes the difficulties many of these farmers face. Hay listed contributing positively to communities and the environment as one of the principles Starbucks bases its decisions on. "These [principles] are not just something we put on paper; it's something to live by," said Hay.

Indeed, Starbucks is true to its principles, as evident in the services it has initiated in order to improve communities and the environment in certain areas. These services include access to credit such as low cost loans to enable farmers to fertilize and prune, social development including construction of school, clinics, and homes and establishment of the. Coffee and Farmer Equity Practices.

According to www.scscertified.com/starbucks, "Starbucks Coffee Company initiated C.A.F.E. Practices to evaluate, recognize, and reward producers of high-quality sustainably grown coffee." Under the C.A.F.E. practices, Starbucks is concerned with the quality of the coffee and the economy transparency, meaning the verifiable evidence of how much the farmers are paid for the coffee.

If the farmers follow social and environmental criteria concerning the coffee growing and processing set by the third party-Scientific Verification Systems-they acquire points that then work in their benefit to either improve their contract with Starbucks or to earn them more per each pound of coffee supplied to Starbucks. The criteria set by SVS addresses social issues, such as the treatment of farm workers, their salary, and environmental issues. Starbucks declares that all the workers on the farms it maintains a business relationship with, be paid at least the minimum wage, and that the coffee be processed in ways as to prevent river pollution.

Besides interacting with the current suppliers, Starbucks is constantly on the lookout for potential coffee farmers who are in need of guidance and assistance. "We don't buy any coffee if it doesn't meet our standards," said Hay. However, if farmers show potential of growing quality coffee with, if provided with the necessary equipment and training, Starbucks is likely to invest. "We build a relationship with farmers," said Hay, who believes that it is imperative to listen to the farmers and to control the bean from the very beginning till it gets to the market.

Hay also discussed Starbucks' political involvement focusing on coffee auctions in Kenya, which prevent most of the farmers from making profit on their coffee. "We've been very active to encourage the government to give coffee farmers options," stated Hay.

Starbucks has achieved its goal. As of last week, coffee farmers are allowed to sell their beans industrially rather than through coffee auctions. Hay doesn't deny that, besides the concern for the farmers and the environment, some self-interest is involved. He admitted that there is a strategy involved, as a member of the audience pointed out, to keep as many suppliers in the market to maintain the supply in order to avoid increasing prices.

Other members of the audience also took advantage of the question session in the end. The variety of topics covered included Starbucks' future plans for Asia, competitors' views on Starbucks' approach to its suppliers; and why Starbucks does not grow its own coffee. Afterwards, Hay remained for short one-on-one questions, introductions, and exchange of contact information.

Those who could not attend the event will have a chance to view the Webcast video, which is hosted on zicklin.baruch.cuny.edu/centers/weissman.

The 69th Mitsui & Company Lunch Time Forum Global Business Outlook:2006 will be held on December 6 featuring Tom Niles, vice chairman of United States Council for International Business and Jan Friederich, senior economist of Economist Intelligence Unit.