Starbucks Coffee Company (Nasdaq: SBUX) and Starbucks Coffee Canada, a wholly-owned subsidiary, have signed a licensing agreement with TransFair Canada that will bring Fair Trade Certified coffee to more than 270 Starbucks retail stores and other business channels across Canada.

"Canadian consumers have a great appreciation for sustainable products, including Fair Trade coffee," said Launi Skinner, Starbucks regional vice president in Canada. "We are pleased to bring this coffee to our customers." Under the agreement, Starbucks will offer Fair Trade Certified coffee in its Canadian company-operated stores and to its business accounts including colleges and universities, hotels, restaurants and office coffee service operations. In addition, Fair Trade Certified coffee will be brewed upon customer request. Starbucks will also provide informational materials and hold an annual promotion for the coffee in its company-operated stores. Prepackaged bags of Fair Trade Certified coffee with the TransFair Canada logo will be available in Starbucks stores later this year.

"This is good news for Canadian coffee-drinkers who now have a greater choice of outlets in which to enjoy fair trade coffee," said Caroline Whitby, Managing Director for TransFair Canada. "The agreement with Starbucks will add to the strong growth of fair trade coffee sales in Canada."

As of May 20, and the 20th of each month moving forward, Fair Trade Certified coffee will be brewed and promoted as the "Coffee of the Day" offering in all Starbucks company-operated stores in North America. The monthly coffee offering is an initiative taken by Starbucks to raise awareness of consumers about Fair Trade Certified coffee. "Fair Trade Certified coffee complements Starbucks comprehensive strategy to support sustainable coffee production," said Orin Smith, Starbucks president and chief executive officer. "We are committed to sourcing coffees of the highest quality that are socially, environmentally and economically sustainable." 

TransFair Canada currently licenses more than 80 Canadian companies to deal in Fair Trade Certified coffee, tea, chocolate and sugar. Fair trade coffee is sourced through cooperatives of small producers in 23 coffee-growing countries. Cooperatives sell the coffee at a minimum price of U.S. $1.26 per pound, which allows members to receive higher revenues and to invest in the quality of their coffee. It also allows communities to invest in social services such as health and education.

The agreement with TransFair Canada is part of Starbucks larger effort to offer Fair Trade Certified coffee in its international markets. At the Company's annual shareholders' meeting in February, Starbucks announced it had signed a Memorandum of Understanding with Fairtrade Labelling Organizations International (FLO), a European organization that maintains the registry of Fair Trade Certified producers and serves as the umbrella for the 17 Fair Trade licensing organizations around the world. The memorandum with FLO enables Starbucks to enter into licensing agreements in order to sell Fair Trade Certified coffee in its markets outside the United States. Fair Trade Certified coffee has been brewed in Starbucks company-operated stores in the United States since October 2000. Since March 2002, Fair Trade Certified coffee has been brewed in the United Kingdom through an agreement with the Fairtrade Foundation of the United Kingdom.

Fair Trade Certified coffee is part of Starbucks Commitment to Origins coffee offerings. The line-up, which also includes organic and shade grown selections, brings Starbucks mission statement to the forefront and highlights through special product offerings Starbucks commitment to the people and places that grow our coffee. Earlier this month, Starbucks was awarded the Humanitarian Award by the Coffee Quality Institute at the Specialty Coffee Association of America conference and included in Business Ethics' 2002 "100 Best Corporate Citizens" list.

More information on Starbucks coffee purchases and origin country involvement may be found in Starbucks Corporate Social Responsibility Annual Report located on Starbucks.com. TransFair Canada is a not-for-profit, independent fair trade certification and labeling organization and is the country's only member of Fairtrade Labelling Organizations International. Based in Ottawa, TransFair licenses companies across Canada to deal in fair trade and certifies their products. The Fair Trade CertifiedTM logo appears on  certified products, providing consumers with an independent guarantee that their purchase benefits farmers in developing countries. Additional information about TransFair Canada can be found at www.transfair.ca.

Starbucks Coffee Company is the leading retailer, roaster and brand of specialty coffee in the world. In addition to its retail locations in North America, Europe, the Middle East and the Pacific Rim, Starbucks sells coffee and tea products through its specialty operations, including its online store at Starbucks.com. Additionally, Starbucks produces and sells bottled FrappuccinoR coffee drink and a line of superpremium ice creams through its joint venture partnerships. The Company's other brands enhance the Starbucks Experience through best-of-class products: Tazo Tea Company offers a line of innovative premium teas, and Hear Music produces and distributes a line of exceptional compact discs.

Coffee farmers in one of Mexico's main growing states, driven to desperation by rock-bottom prices, are abandoning the crop to plant forests instead or even emigrating, a senior farm official said yesterday.

Marco Miguel Munoz, farm trade commissioner of Veracruz state, said many farmers were now emigrating to the United States, often illegally, in a desperate search for work. "We are looking to diversify from coffee and the best option is forestry," he told Reuters on the sidelines of a meeting of the International Coffee Organisation (ICO), which brings together producers and consumers. "If something is not done, we think the coffee crisis will become a world security problem," he added. 

Mexico is the world's fifth largest coffee producer. Output from Veracruz represents some 20 percent of Mexico's coffee area. Low prices have slashed 65 percent from the value of Veracruz's coffee exports this crop year, Munoz said. In the first five months of the 2001/02 crop year, Veracruz's coffee exports were worth $105 million, sharply down from $307 million in the same year-ago period. Munoz echoed remarks by Nestor Osorio, ICO's executive director, who said last week that the situation in some countries was becoming potentially explosive as the slump in prices battered farm incomes.

Osorio said that half a million jobs in Central America had been lost as farmers could no longer cover their costs. Global coffee prices have slumped by some 80 percent since a peak of $3.18 a lb in 1997 and are now hovering at just over 50 cents a lb. Veracruz aims to destroy a third of its coffee area to try to encourage farmers to plant more remunerative alternatives, improve the environment and the quality of beans.

Mexico has been one of the key drivers behind an ICO-backed global quality improvement programme, aimed at destroying five percent of the lowest quality beans. "But this is not enough, because of overproduction. We are going to keep having surpluses and that will continue depressing prices," Munoz said. Mexico is losing around 668,000 hectares of forest a year to agriculture and urbanisation. Veracruz has lost vast areas of forest, Munoz said.

But for diversification to have any lasting impact on coffee prices, it would need to be carried out globally. Munoz said he was keen to present his idea to Vietnam, the world's second biggest coffee producer and a relative newcomer to the market, whose massive output increases had helped to destabilise the supply/demand balance.

WHO PAYS?

Fresh Cup Magazine

When we talk about a specialty coffee, particularly at source, we inevitably talk about things like which cooperative the coffee came from, how that co-op is organized and what sort of growing practices the co-op adheres to. We talk about cooperatives, because they have come to define much of what we consider to be specialty coffee. But in this industry, the cooperative concept has typically begun and ended at origin -- until now. Stirring among the bellows of a little more than a dozen small North American roasters has been an idea longstanding among small coffee producers but new to specialty coffee buyers: a roaster's cooperative, appropriately named Cooperative Coffees. Intrigued? You should be, because as small roasters and retailers, the notion of banding together with like-minded colleagues for better access to unique coffees and more direct relationships with farmers could change the way you do business.

Cooperative Coffees is the brainchild of Bill Harris and the baby of a handful of other small American and Canadian roasters. Harris fell into the idea through a series of coincidences. He had left a corporate job in the foodservice industry and was looking for a life change, so when a friend invited him to build houses for Habitat for Humanity in Guatemala, he jumped at the opportunity. Little did he know he would be constructing homes for coffee farmers. "We were digging a foundation for a farmer on the side of a hill when we accidentally covered a coffee plant with fill dirt," Harris recalls. "The farmer got so upset that when we covered the second plant, he stopped the work, and for an hour and a half, he explained how important these coffee plants were. He allowed us to continue working once we promised that we would not cover any more of his coffee plants." Struck by how much the plants meant to the farmer, it dawned on Harris that the trip, ostensibly about building houses, was turning out to be about coffee.

Eager to learn more, Harris began visiting other coffee co-ops, talking with growers about the difficulties they had faced in getting their coffees to the American marketplace. When he returned to the United States, he began thinking of ways to help small coffee farmers connect directly to American buyers. "This was before I had heard of what we know now as fair trade," he says. "I was simply looking for a way to establish a more direct market for growers."

For the next year, Harris continued researching and traveling to origin, and in 1998, he founded Cafe Campesino, an Americus, Ga.-based importer and roaster of sustainable coffees. Over the next year and a half, he concentrated on finding buyers for his coffees. He secured a few loyal customers, but more often than not, he met with resistance. His prices were considerably higher than what most roasters wanted to pay, and his selection was limited. "Conceptually, most people agreed with what I was trying to do, but in reality, when you only have a couple of coffees to offer, most roasters aren't interested. They don't want to use an importer for one or two coffees."

Feeling pressure to make Cafe Campesino more financially viable and looking for a way to make the concept of directly buying sustainable coffees more appealing to roasters, Harris threw an idea out to his core customers: "What if we all go into business together and form a cooperative in the U.S. that imports from growing cooperatives elsewhere?"

So in the fall of 1999, he set out on a one-month driving tour around the eastern U.S., pitching his cooperative concept to small roasters he thought might take interest. "I found seven roasters who said they would love to go in together," he says. With that, Harris hired Daniel Pistone to manage Cafe Campesino, which went from being an importing and roasting operation to being solely a roaster and, of course, a member of the fledgling co-op. Harris, in turn, became president of Cooperative Coffees.

The Making of a Co-op

From the start, the mission of Cooperative Coffees has been to help its roaster members source a greater variety certified-organic and fair-trade coffees and, in the process, establish more direct, transparent connections with farmers. "When you only need 40 or 80 bags of a particular varietal each year, your options for purchasing are limited to what is offered by various brokers," says Dean Cycon, one of the co-op's founders and the owner of Dean's Bean Organic Coffee Co., a roaster/wholesaler in New Salem, Massachusetts. "By pooling our buying power, we are able to go directly to farmers, create personal relationships and get our needs met."

Currently, there are 14 members stretching from Rhode Island to Washington State (although most are concentrated east of the Mississippi). Some are roaster/retailers, others are roaster/wholesalers, but all are small-sized operations that are committed to selling sustainable coffees. Like any non-profit co-op, Cooperative Coffees has officers and a board of directors, and recently, it formed several committees to oversee critical aspects of the group: membership, finance and green beans.

The finance committee approves spending and looks for ways to raise capital and qualify for loans. The membership committee markets the co-op, seeking out new members and answering questions about the co-op from interested roasters. In addition to approving purchases and overseeing quality issues, the green committee makes the initial decision to work with certain producer groups. To date, Cooperative Coffees has established partnerships with producers in Mexico, Costa Rica, Guatemala, Nicaragua, Colombia, Cameroon, Sumatra, and Ethiopia. Recently, based on input from all of the co-op's members, the committee chose East Timor as its next origin of interest. "Fair trade is concentrated in Latin America, and we want to continue working with groups there, but we also want to expand into other growing areas," says Harris. "The co-op brought on Sumatra last year, Ethiopia this year, and soon we will add East Timor."

The formation of committees grew out of the co-op's annual membership meeting, which takes place every fall and offers the group a chance to collectively examine purchases, relationships with producers, coffee quality, and goals and accomplishments. Last year's meeting was hosted by Peace Coffee in Minneapolis, and according to Harris, it was both philosophical and strategical. Members spent half a day with a human rights organizer who updated the group on the impact of the Zapatista revolution on coffee communities in Mexico's Chiapas region. They also examined how the co-op's money was spent in the prior year, and they determined how much coffee the group would need for the upcoming season.

In addition to the annual meeting, co-op members gather informally at the yearly Specialty Coffee Association of America (SCAA) Conference, they communicate via e-mail and phone, and they travel together to origin as often as possible. Origin trips have become more frequent and better attended over the past year. Last year, half of the members traveled to Mexico and Guatemala, and this year, almost everyone went to either Ethiopia, Mexico, Guatemala, or Nicaragua. "Our goal is not for everyone to travel together at once," Harris says. "We want to spread out and make sure we visit as many farming groups as we can each year."

How It Works

To become a member of Cooperative Coffees, you must purchase one share of stock in the co-op, you must guarantee a portion of the co-op's line of credit (in the form of a letter of credit from your bank to the co-op's bank stating that you will stand for a small portion of the co-op's debt), and you must commit to buying 10,000 pounds of beans per year.

Members book green coffee orders around the end of one year for the following year. Based on past purchasing history and future projections, the members can estimate how much coffee they will need. Once the coffee is purchased, most of it arrives at a warehouse in New Orleans, where it is re-sorted based on member commitments. The coffee is then shipped to warehouses in Minneapolis and Toronto, where it is distributed to nearby member roasters. As membership expands west, Harris expects the co-op to eventually open warehouses in other parts of the country. "Right now, our primary warehouse is in New Orleans, but I see us becoming more like other importers, where we store coffee from coast to coast."

Not all of the members buy all of their green coffee through Cooperative Coffees. Harris says that more are shifting over to buying solely through the co-op, but some of the roasters want to purchase beans that are not available as fair-trade-certified coffees, so they continue to buy from other importers as well.

All of the co-op's beans are fair-trade-certified, meaning the roasters pay a minimum $1.26 per pound. Many of the coffees are also certified-organic, placing the minimum price at $1.41. But Harris stresses that Cooperative Coffees is always willing to pay a premium for quality. For instance, "in Costa Rica there's a new organic coffee that producers are asking $1.80 per pound for, and we're gladly paying it," he says.

Quality control is addressed by sending every coffee sample to Mane Alves, president of Coffee Lab International in Waterbury, Vt., for final evaluation. Alves uses the same cupping criteria established by the SCAA, and he rates the coffees on a scale from one to 100. Coffees are considered commercial-grade below 80 and specialty-grade above 80. Alves tests for bean density, moisture, size, and defects. Then he roasts the coffee, grinds it and cups the samples. He says that the quality of Cooperative Coffees' samples can vary, but he believes the co-op's coffees have improved considerably over the past few years. "At first, the coffees were in the upper echelon of commercial," he says. "Now they're definitely specialty coffees. Just recently, I cupped an exceptional Colombian coffee for the co-op. In a blind cupping, I would have no problem giving that coffee a 90, and I don't give 90s very often."

Facing the Challenges

Not surprisingly, Harris has had to contend with the ongoing perception that organic and fair-trade coffees lag behind in quality. But the co-op's members insist that sourcing quality sustainable coffees is not a problem. "We expect the best quality that farmers are capable of producing," Harris says. "Because we're in long-term partnerships and we're paying what these days are considerably higher prices than most people, we expect the best. The co-ops respect what we're doing, and we find that with rare exception, we're getting the best they can produce, which is excellent coffee."

Another of the co-op's challenges has been financing. "We could sell a lot more fair-trade coffee if we had the financing in place to bring in more," Harris says. "So that's a constant challenge: How many members do we have, and how much money do we have access to in order to buy more coffee?"

He says that he responds to new membership inquiries every day, but it's often difficult to convince small business owners to make the financial commitment. "Once I explain that you have to pay money to join and that you have to commit to buying a certain amount of green beans, a lot of people aren't interested," he says. "It's typically a commitment new roasters don't want to make. But those who have been in business for a while are probably roasting at least 10,000 pounds, so it's not so scary."

Down the Pike

With a goal of recruiting another three or four members this year, Harris's mantra for the co-op is slow and steady. "The co-op is much more than a buying club; it is people going into business together," he says. "We're bringing in business partners, so we need to progress at a rate that allows the co-op to absorb new members effectively." He adds that as Cooperative Coffees increases its manpower, growth will accelerate. He envisions eventually having a member in every state, but he reiterates that he's not in a hurry. "Right now, I don't feel the need to recruit aggressively," he says. "First and foremost, I want to service the members we have."

As for other possible endeavors, Harris would like to see members pool their resources to secure discounted pricing on packaging materials, equipment and shipping. He also hopes that origin travel will become an even bigger priority among members.

Harris is not alone in his ambition. Kevin Walters, a co-op member and co-owner of Alternative Grounds, a roaster/retailer in Toronto, says that he would like to see the co-op get involved in more need-based projects in coffee communities, an interest that stems from a recent trip he took to Mexico with several other co-op members. "We visited a community with 150 schoolchildren, and when we asked if there was anything they needed for their school, they told us that they needed paper," he says. "So we got together and purchased paper and notebooks for all of the students.'"