Starbucks' Expansion in Latin America Raises Eyebrows

Fair trade?
Larry Luxner.
Latin America Press
Nov 26, 2003

Starbucks raises some eyebrows in Latin America.

Starbucks has finally discovered Latin America, yet not everyone’s happy about it.

The giant Seattle-based coffee retailer, which has been flourishing in Mexico and Puerto Rico for one year now, has opened its first outlets in South America, with stores in both Chile and Peru.

On launching its stores in Mexico and Peru, Starbucks has taken pains to show that it is benefiting local producers by offering its clients home-grown blends for which it has paid a price higher than the international standard.

But some consumer organizations say this assertion is a marketing ploy and that the transnational firm could be doing more to assure that coffee producers get a fair deal (LP, Oct. 8, 2003)

Starbucks offers its clientele in Mexico, where it now boasts 12 outlets and plans to have some 150 within five years, two locally grown coffees. One is a shade-grown blend cultivated by 700 campesinos at six cooperatives in Chiapas state, as part of a program promoted by the environmental organization Conservation International (CI) with which Starbucks has a long-standing partnership. The other is called Mexico Blend, and is sourced primarily from Oaxaca state.

Conservation International says the campesinos who participate in this program — partially financed by Starbucks – get 60 percent more for their coffee than they could in local markets. Since the partnership began in 1998, says CI, forested coffee lands have expanded by 220 percent and Mexican exports of shade-grown coffee have soared.

But some groups have questioned the extent to which Starbucks is really benefiting coffee farmers.

"Less than 1 percent of the coffee that Starbucks purchases is bought at a fair trade price," Chris Treter, staff member of the Minnesota-based Organic Consumers Association was quoted as saying on the association’s web page. The association, which has launched a Fair Trade Campaign against Starbucks, sent Treter to Chiapas in 2001 to investigate why hundreds of farmers were migrating north in search of work.

Starbucks, meanwhile, charges about 36 Mexican pesos ( $3.50) for a double latte, more or less what it would cost in the United States.

Melissa Schweisguth of Global Exchange, a San Francisco-based non-profit organization, said: "Mexicans who are concerned about the coffee crisis (March 12, 2003). should buy fair trade from Mexican-owned coffee shops. …instead of crossing the border to fill the coffers of large transnational corporations like Starbucks."

Starbucks, whose green and white logo at its 6,000 stores worldwide has helped earn it an image of being environmentally friendly, has said that it pays an average of $1.20 per pound for its coffee most of which are specialty blends. Not all specialty coffees qualify as fair trade coffees, however.

Starbucks says that it’s building upon an alliance with Conservation International in Mexico and Colombia by introducing a single-origin Peruvian coffee in its stores in Peru.

Sourced from CI’s Conservation Coffee project site in Peru’s Upper Tambopata Valley, this coffee, says Starbucks, "is grown and processed using methods that protect local biodiversity and provide economic and social benefits for local coffee farmers."

Starbucks Latin American president Julio Gutierrez said at the launch of the first Starbucks store in Peru in August that the company was paying around twice the average international price for its Peruvian coffee, adding that the money reaches the farmer.

But Starbucks prices in Lima are higher than most locally-based coffee shops. A cappuchino costs 6 soles (about $1.70).

Guttierrez said that in the future Starbucks hopes to sell the Peruvian coffee in other countries.

In Puerto Rico, Starbucks is introducing its new single origin coffee, which features "full body, soft acidity and delicate flavor ... and comes from some of the highest-quality arabica coffee beans on the island."

Puerto Rico is a mountainous island of 3.9 million people known for its exports of top-quality gourmet coffee. As a U.S. commonwealth, Puerto Rico also enjoys a relatively high per-capita income, and Puerto Ricans are quite familiar with the concept of American franchises.

Because of the U.S. embargo, Starbucks is prohibited from doing business in Cuba, the largest Caribbean island with more than 11 million people. More realistic markets for Starbucks include Jamaica, Trinidad and the Dominican Republic.

But even those larger countries will have to wait for Starbucks to expand a little more throughout South America, since, as Pablo Arizmendi, vice president for Latin American business development, said "we’d be crazy to spend a lot of time in the Caribbean if we haven’t yet opened in Brazil."

Arizmendi confirmed that Starbucks is actively exploring opportunities in Argentina, Brazil, Colombia and Venezuela.

"In terms of coffee-drinking habits, Latin America is not as developed as Europe, but it’s more developed than Asia — especially countries like Argentina and Brazil, where per-capita consumption of coffee is relatively strong," said Arizmendi.