In regards to product certification, the company began sourcing Fair Trade coffee in 2000 and developed its Coffee and Farmer Equity (C.A.F.E) standards in partnership with Conservation International in 2001. The company also provides farmer loans and incentives for grower performance, as well as community support. People and planet-focused initiatives include the setup of Farmer Support Centers in China, Colombia, Costa Rica, Ethiopia, Guatemala, Rwanda, and Tanzania staffed by agronomists and sustainability experts, which advise farmers on responsible growing practices to improve the volume and quality of their harvests. Its initiatives focus on three areas: People (including grower) wages and quality of life, Planet, including environmentally sustainable farming practices, and Products, including tracking of coffee certification and quality. Starbucks has chosen to invest in its farmer suppliers, and now exerts considerable influence over its suppliers regarding quality and sustainability. As Dub Hay, Senior Vice President of Coffee stated in 2004, “Starbucks buys only about two percent of the world’s coffee beans, but as an industry leader and specialty coffee retailer with thousands of locations worldwide, we have an opportunity to lead change.” Given these risks, Starbucks leadership have asserted that it is in company’s interest to support the development of high-quality, sustainable production of coffee, tea, and cocoa, and sees this as a leadership opportunity. In an industry with active competition on sustainability issues, the health of the Starbucks brand is reliant on the company’s ability to source ethically traded inputs. Activists began pressuring the company to offer fair trade coffee in 2000, and the company faced a major reputational blow in 2006 after campaigns by Oxfam against Starbucks dealings with the Ethiopian government as well as the documentary Black Gold. Given the limited supply of beans that meet its standards as well as price volatility discussed in the commodity prices section below, the company faces potential shortages, and skyrocketing prices of its core product should its criteria not be met in a given harvest.Īdditionally, Starbucks’ relationships with suppliers – especially those in the developing world – have long been a target issue for activists of human rights, environmental and labor issues. Currently, Starbucks pays its suppliers an average of 23% above market prices to procure the high-quality Arabica coffee its brand relies upon. To fulfill growing demand, Starbucks must be able to depend on the quality and stability of suppliers who may face limited resources, regulation restraints, and capacity controls. In delivering these products across its supply chain, the company links consumers in some of the wealthiest regions of the world with suppliers in some of the poorest. Starbucks is heavily reliant on commodities sourced from the developing world, such as coffee, tea, and cocoa. Farmer Relationships and Sustainable Sourcing In this report, we outline four key supply chain risks that Starbucks faces, detailing how those risks affect business operations, Starbucks’ efforts to mitigate them, and recommendations to further develop the company’s response. Growth at this scale, coupled with a diverse product range, vast global footprint, and highly complex supply chain, requires careful management of known and unknown risks. It is expanding its offerings to include wine and tea bars that create customer experience-centered retail outlets similarly, and when the company acquired La Boulange to centralize its US bakery operations, it doubled the number of refrigerators in America. Given its global footprint, Starbucks also faces a range of risks that affect both the company’s short-term profitability, such as the speed at which its distribution systems deliver product to its retail outlets, as well as long-term sustainability, such as environmental resilience and coffee farmer’s capacity.įurthermore, Starbucks is growing rapidly, both globally and in its product lines. The company walks a delicate balance between its trademark vertical integration, while also engaging over 9,000 suppliers, from its coffee farmers across the world to its custom roasters, to distribution logistics providers and retail. Just one cup of the ubiquitous Starbucks coffee can depend on inputs from up to 19 different countries. With 27,000 stores operating in more than 64 countries, Starbucks Coffee has become a global leader in the delivery of the coffee experience to consumers worldwide.
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