Starbucks tastes Oxfam's brew

Financial Times, 14 October 2004 - Oxfam's UK choose a coffee-growing region of Ethiopia as the focus of its first collaboration with a multinational company, in the shape of Starbucks, the world's largest coffee retail chain.

In the first in a series on how companies work with campaigning groups, Alison Maitland examines a programme to help Ethiopian coffee farmers.

Ethiopia is the reputed birthplace of coffee. It is also the land where famine killed nearly 1m people 20 years ago, haunting western consciences as never before. The pilot venture will see Starbucks UK contribute Pounds 100,000 to Oxfam's rural development programme in the East Hararge region, where farmers battle with poverty and drought in their efforts to produce high-quality Arabica coffee.

The money will be spent on improving irrigation, providing seeds and tools and running women's literacy programmes. Starbucks experts will also offer advice on improving coffee yields and quality, and on strengthening the growers' marketing co-operative. In the UK, Starbucks and Oxfam will share ideas on tackling the world coffee crisis that is destroying the livelihoods of millions of farmers in developing countries.

The agreement, initially for just a year, emerged after months of dialogue. "There was a mutual realisation that by working together we could achieve more than by working alone," says Scott Keiller, Starbucks UK's head of corporate social responsibility and communications.

There can be pitfalls as well as benefits in alliances between campaigning organisations and large companies. Campaigners may find their name being used as a form of endorsement and companies can look bad if the alliance falls apart.

Is it risky for a high-profile organisation such as Oxfam GB to join forces with the ubiquitous Starbucks brand? Perhaps, but the company sees only opportunities, not risks. Cathy Heseltine, Starbucks UK marketing director, says: "I think we're a very positive, optimistic company - some might say naive - and I think that drives us to make sure things like this work."

Oxfam has criticised big coffee buyers such as Nestle, Kraft and Sara Lee for doing too little to tackle the five-year-old crisis over the world coffee price, which has fallen to half its former level. It describes as "a relatively small step" the voluntary code agreed last month between producers and leading coffee companies to improve working conditions and environmental standards in the market.

Against this background, Phil Bloomer, head of Oxfam's Make Trade Fair campaign and previously responsible for its UK coffee campaign, is aware his organisation could come under attack for "selling out". "There are various risks for us, none of which are anywhere near the size of the opportunity we would see," he says. "In this case, there is a risk of the perception of our independence being compromised."

Central to the Oxfam-Starbucks agreement is that each side will remain free to speak about the other. "It is clear in the memorandum of understanding that, with justification, we'll criticise Starbucks and its policies in its supply chain," says Mr Bloomer. "We hope Starbucks will continue to improve its own supply chain. If it were to go backwards, we can say: 'This is a retrograde step.' We're very clear that our independence is as intact as before we signed the memorandum of understanding."

Another sensitivity is that the international Oxfam network is a confederation of national affiliates with different priorities. Oxfam America formed a partnership two years ago with Starbucks, the Ford Foundation and a growers' co-operative in Mexico to help small-scale farmers increase supplies of quality Fair Trade coffee. But some affiliates prefer to stick to campaigning.

So Oxfam GB has gone to some lengths to ensure that its partners in the confederation, in the Fair Trade movement and in the campaigning global alliance on coffee and commodities understand the nature of its relationship with Starbucks.

"We have told all our Oxfam affiliates and they all said, 'We don't have a problem with that'," says Mr Bloomer. Oxfam will continue to campaign for fair trade in coffee and to fight against "rigged rules and double standards" in world trade, he adds.

Links with Starbucks began two and a half years ago when Oxfam GB approached leading coffee-buying companies about its planned coffee campaign. "We had quiet conversations over a year-plus, during which time Oxfam were doing a lot of investigation of us, (talking to) people intimately involved in our coffee sourcing," says Ms Heseltine.

Mr Bloomer adds: "We noticed that Starbucks was interested in dialogue, kept that dialogue going and gave us a lot more analysis than most companies. Out of that, we said: 'Let's make it a more substantial collaboration'."

Oxfam decided Starbucks was a suitable collaborator because it had developed long-term contracts for some producers, expanded its Fair Trade purchases - although last year these accounted for just 1 to 2 per cent of all the coffee it buys - and put in place purchasing guidelines that stipulate the quality and social and environmental standards farmers must meet in return for better terms. The company pays an average of Dollars 1.20 (56 pence) a pound, about double the market price of commodity coffee, for the high-quality Arabica beans that it uses.

"Starbucks has a very strong record in corporate social responsibility in terms of its supply chain," says Mr Bloomer. "We share a sufficient number of common goals for this to become a useful collaboration."

He stresses that it is not the aim of the collaboration to provide an entry for Starbucks into a key coffee-growing region, although its involvement in the development programme "may provide it with an advantage". According to Ms Heseltine, the Harrar coffee produced in this part of eastern Ethiopia is "fantastic", but supplies are erratic. "When it's there, we buy it."

How will the success of the venture be measured? Oxfam plans to carry out a baseline socioeconomic survey, including factors such as the level of women's literacy and the amount of irrigated land. As the project progresses, it will measure improvements, for example in women's participation in civil society. More sustained and higher-quality coffee production, providing growers with higher prices, will also indicate progress.

Some campaign groups remain wary of business but many are now working with companies. Mr Keiller, an ecology graduate who worked for the Kingfisher retail group before joining Starbucks, believes this is partly down to the individuals involved. "There's a cohort of people that have come from the same backgrounds, and share the same passions and beliefs, going into NGOs (non-governmental organisations) and into businesses they admire."

Ms Heseltine argues that campaigners are learning the benefits of using carrots as well as sticks in their dealings with business. "I think there's an element of growing up going on, by both sides, and a greater degree of understanding. It's not just about constantly picking out the bad things."

As for Mr Bloomer, he says: "We want to maintain a constructive and critical relationship with Starbucks. We hope they'll challenge us and we know we'll continue to challenge them."

Copyright 2004 The Financial Times Limited
Financial Times (London, England)