COFFEE & CONSERVATION:
MAKING THE CONNECTION
Justin Ward, Conservation International
Peter Torrebiarte, Starbucks Coffee, Costa Rica
Dennis Macray, Starbucks Coffee, Seattle
CONSERVATION INTERNATIONAL
Conservation International
(CI) protects the Earth’s
living heritage, our global
biodiversity, and
demonstrates that human
societies and nature can
live harmoniously
PARTNERSHIPS WITH BUSINESS
o The Center for Environmental Leadership in Business
engages the private sector as a force for conservation
o Solutions create environmental and business benefits
o Launched in partnership with Ford Motor Company
o Partners include: BP, ChevronTexaco, Citigroup,
International Paper, McDonald’s, Office Depot, Royal
Caribbean, Shell, Starbucks, and others
STARBUCKS & CI
“Starbucks is introducing [Shade
Grown Mexico] overseas and to
institutional customers. It has
increased its order for Mexican
shade-grown beans tenfold since
the program began in 1998. . .”
The New York Times, Sept. 9,
2001
STARBUCKS & CI
Major Partnership Elements
o At Origin – Conservation Coffee field projects in
Mexico, Colombia, Costa Rica, Peru, Panama and
Indonesia
o In the Supply Chain -- C.A.F.E. Practices
implementation
o With Customers – efforts to increase awareness of
the connection between coffee production and
biodiversity conservation
o Affordable Credit for Farmers -- Starbucks $2.5
million loan to CI’s Verde Ventures Fund
ORIGINS OF C.A.F.E. PRACTICES
o Conservation Principles for Coffee Production- CI,
Rainforest Alliance and Smithsonian Migratory Bird Center
(April 2001)
o Starbucks Launches Green Coffee Purchasing Guidelines
and Preferred Supplier Pilot Program (November 2001)
o Program Objectives:
• Build environmental, social and economic transparency
criteria into Starbucks high quality standards for coffee
• Promote conservation in Starbucks coffee sourcing
regions
• Develop long-term relationships with preferred suppliers
• Create incentives for sustainable practices in coffee
production and processing
• Provide an industry leadership example
PILOT PROGRAM ACTIVITIES & RESULTS
o Field testing of purchasing
guidelines and point rating system
o Independent verification process
design
o Suppliers and verifiers workshops
o Stakeholder consultations
o Engagement of Scientific
Certification Systems for revision of
program guidelines and
procedures, based on pilot results
and stakeholder input
o Development of long-range targets
for coffee sourced by Starbucks that
meets preferred supplier criteria
BROAD INFLUENCE OF STARBUCKS
LEADERSHIP
The Starbucks – CI
partnership and the
C.A.F.E. Practices program
have catalyzed important
public and private sector
developments including:
o Sustainable coffee policy directive from the Costa
Rican government (2002)
o Formation of the Conservation Coffee Alliance
bringing together USAID, Starbucks and CI to
promote improved farmer livelihoods and
biodiversity protection in Mexico and Central
America (2004)
Introduction to Starbucks and
and Specialty Coffee Industry
Company overview
Starbucks Around the World
North America
Latin America
•Mexico
•Puerto Rico
•Peru
•Chile
Europe, Middle East,
Africa
Asia Pacific
•Singapore
•Austria
•Bahrain
•Malaysia
•Switzerland
•Kuwait
•Philippines
•Germany
•Lebanon
•China
•Spain
•Oman
•Greece
•Qatar
•Turkey
•Saudi Arabia
•Cyprus
•UAE
•France
•Taiwan
•S. Korea
•Thailand
•Australia
•New Zealand
•Indonesia
Starbucks Global Locations
Total Store Count (company-operated and licensed)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
92
93
94
95
96
97
98
99
00
01
02
03
04
05
YTD*
*Year-to-date as of February, 2005
Starbucks Coffee
Our six guiding principles
•Provide a great work environment and treat each other with
respect and dignity
•Embrace diversity as an essential component in the way we do
business
•Apply the highest standards of excellence to the
purchasing, roasting and fresh delivery of our coffee.
•Develop enthusiastically satisfied customers all of the time.
•Contribute positively to our communities and our
environment.
•Recognize that profitability is essential to our future success
Environmental Footprint
The Coffee Industry
The World’s Best Coffee
About Coffee
• Coffee is the second most heavily traded commodity
• Coffee farming affects the lives of more than 25 million people
• 50% of coffee is grown on small-scale farms
• 80% of coffee is grown in Latin America
The Coffee Commodity Market
$3.50
$3.00
Double Frost in Brazil
Speculative Buying
Due to Global Deficit
$2.50
$2.00
Three Small
Frosts in Brazil
$1.50
$1.00
Global Oversupply
of Coffee
$0.50
Collapse of ICO Quota System
$0.00
1/89
9/90
5/92
2/94
10/95
7/97
3/99
11/00
NY Board of Trade Daily Close
Source: NY Board of Trade
8/02
5/04
2/05
Importance of Promoting Sustainability
Why?
• Ensure future quality green coffee supply in our high
growth business
• Help ensure sustainability of producers
• Demonstrate leadership in the industry
• Enable consumers to make a difference through
Starbucks
Starbucks Coffee Purchasing
• In 2004, Starbucks purchased:
- 299 million pounds of arabica coffee
- 2.2% of world coffee production
• In 2004, Starbucks paid:
- Average of $1.20 per pound
- This was 74% higher than “C” market prices
Sustainability: Our Integrated Approach
• Premium Prices
• Certified and
Conservation Coffees
• Access to Credit
• Social Development
Projects
• Farmer Support
Center, Costa Rica
• C.A.F.E. Practices
Premium Prices
• In 2004, Starbucks paid, on
average, $1.20 per pound for
high-quality coffee beans
• This was 74% higher than
the commodity market’s price
that year
Certified and Conservation Coffee
• Purchased over 10 million lbs. of
certified and conservation coffees
in 2004 including:
– Fair Trade Certified™: 4.8 million lbs.
– Certified organic: 5.7 million lbs.
– Conservation (shade grown): 2.1
million lbs.
Access to Credit
• Provided $6 million in loan
funds to several loan programs
through 2005
• These loans allow tens of
thousands of coffee farmers
access to affordable credit
• Without these loans small-scale
farmers may:
–
La Florida Cooperative coffee farmer
–
Be forced to sell their crops
prior to harvest at lower prices
Turn to local money lenders,
who often charge high interest
rates
Social Development Projects
• In 2004, Starbucks contributed
nearly $1.8 million to 35 social
projects in coffee communities,
such as:
– Housing project in Colombia,
benefiting 2,300 people since
1999
Panabaj School in Atitlán,
Guatemala
– Health clinic and a
Kindergarten in Ayarza,
Guatemala, serving 50 people
daily and 80 children
respectively
Farmer Support Center
• Develops sustainable best practices for growing quality
coffee
• Implements and administers C.A.F.E. Practices
• Implements social projects
• Manages farmer relationships directly
C.A.F.E. Practices =
Coffee and Farmer Equity Practices
WHAT:
• C.A.F.E. Practices is an incentive based performance
system that provides purchasing preference to coffee
suppliers that provide green coffee grown, processed
and traded in an environmentally, socially and
economically responsible way
WHO:
• Supplier Networks
• Estates, producer associations & processors (including
their supplier farms)
Starbucks Integrated Approach to
Coffee Sustainability
C.A.F.E. Practices
Overview
C.A.F.E. Practices: HOW
1.
Applicants must first meet
coffee quality requirements
and have a history of
successfully delivering green
coffee to Starbucks
2.
Applicant must complete the
self-evaluation document
3.
Applicant submits completed
C.A.F.E. Practices Supplier
Application Form to
Starbucks
4.
Applicant must request
verification by an Approved
Verifier
5.
Preferential status granted
based on independently
verified score
C.A.F.E. Practices: Implementation
Development
Auditing
Verification, i.e.
C.A.F.E. Practices
Evaluation Criteria
C.A.F.E. Practices: Criteria
Prerequisite Criteria:
• Coffee Quality
• Economic transparency
Independently Verified
and Scored Criteria:
• Social Responsibility
• Environmental Leadership
– coffee growing leadership
– coffee processing leadership
http://www.scscertified.com/starbucks
C.A.F.E. Practices pilot
verification of farms in Guatemala
Prerequisite Criteria
• Coffee Quality:
Historical basis of our business
–
–
–
–
–
Origin visits
Investing in agronomy office
Intensive quality check
Contractual requirement
Preferred supplier requirement
• Economic Transparency:
Suppliers provide transparency
through supply chain
– Contractual requirement
– Preferred supplier requirement
Independently Verified & Scored Criteria
- Social Responsibility
- Workplace conditions
- Health & Safety
Independently Verified & Scored Criteria
Environmental Leadership:
- Coffee Growing
Independently Verified & Scored Criteria
• Environmental Leadership: Coffee Processing
– Dry milling
– Wet milling
Applications
Independent 3rd Party Verification
Scoring Process
Sample based scoring
(weighted average)
C.A.F.E. Practices: Tools Available
•SCS Certification Website
•C.A.F.E. Practices Overview
•Evaluation Guidelines
•Supplier Application Forms
•Verification Manual
•Verifier Approval Procedure
•Self-Evaluation Handbook
•Regional Guidance
Documents
•Small-holder supplement
C.A.F.E. Practices: Applicants
C.A.F.E. Practices: Lessons Learned
•Feedback from suppliers,
stakeholders, and NGOs
•Training for verification
organizations
•Economic transparency
challenges
•Evolving standards and
guidelines
•Unknown costs
C.A.F.E. Practices: Update/Status
•Applications from 85 suppliers and more than
1300 farms
•Over 100 inspectors trained
•April 2005 – Transfer to Starbucks Coffee
Agronomy Company
•Regional Guidance
and Small-holder
supplements
Projected C.A.F.E. Practices Purchases
250
225
MM of lbs.
200
150
150
100
75
43
50
3.5
13.5
30
0
FY'03
FY'04
PSP Goal
FY'05
PSP Actual
FY'06
C.A.F.E. Goal
FY'07
Thank You!
www.scscertified.com/starbucks
www.starbucks.com/csrannualreport