Robert Forkel

8/3/15

1400

Coffee is a major part of a lot of peoples lives, so much so that about eighty-three percent

of adults in America drink coffee. Whether you drink coffee right when you wake up as apart of

your daily routine or you drink coffee to help get you through the day. The point is we rely on

coffee to be there for us whenever we need it without thinking twice about it. We always know

we can purchase coffee either at the convenient store or at a restaurant. The part you usually do

not think about is where does that cup of coffee come from? Nor do we take in consideration

what kind of steps go into making coffee so readily available for us? These are some of the

questions we will explore when talking specially about Starbucks coffee. Why Starbucks coffee?

After conducting some research I quickly found out that Starbucks as a brand was the most

transparent. Compared to companies like Folgers and Maxwell House who provided little to no

information on where their coffee beans were actually produced, or how they were produced. I

wanted to show you just how transparent Starbucks really is throughout this paper. To shine a

different light on a company that people may see as over price or believe that there is nothing

special about. We all know Starbucks coffee to be a little bit on the high side when it comes to

pricing but is that due to quality purposes or just branding?

Oil it is Americas largest import second to that is coffee, we import more coffee than any

other country in the world. So it would only makes sense that Starbucks a company started in

Seattle would be the worlds largest coffee chain with over twenty-one thousand stores located in

sixty-five different countries. You can only image how difficult it must be for Starbucks to run a

proper commodity chain where they can still expand and make money. Well, in 2008 that
became apparent when they realized that they were losing money and decided to close six-

hundred stores. A big reason for these stores closing was due to Starbucks operational cost were

starting to rise and at the same time sales started declining. According to the Vice President Peter

D. Gibbons "We had been growing so fast that we had not done a good enough job of getting the

supply chain fundamentals in place. Basically they were growing at such a fast rate that they

could not make the changes needed to the supply chain in order to keep being successful, thus

subsequently their business took a hit. Once they realized that back in 2008 is when they started

to refine their supply chain to plan, source, make, and deliver. The planning group involved a set

of people at Starbucks who would come up with new product ideas, ways to restock items

efficiently and came up with better ways to plan out production within the company. Source

would include the farmers or growers more specifically the people who would plant the coffee

beans. Since Starbucks offers so many different kinds of coffee blends and roast the source could

range from several different countries depending on what they are looking for. Then there is the

make stage which is where the manufacturing takes place. Since Starbucks is worldwide they

have these manufacturing plants all over the world. What happens here is they take the beans

from all the farmers and turn them into a more refined coffee bean depending on the roast.

Basically making the beans ready for the brewing process that would take place at a Starbucks

store. Finally the delivery stage, the last piece of the puzzle where you will find customer service

also assigned too as well as the distribution plants. The distribution plants are where they bag up

all the coffee and ship them to the stores and is what you have come to expect to see when

buying a bag of Starbucks coffee from Publix for example. Now in 2008 they had to also go back

and look at this supply chain and figure out what went wrong and how to get things back on

track. First step that was taken was going back and looking at the prices they were paying the
farmers and realized that cost cuts could be made. But perhaps the biggest change of all was the

addition of a new manufacturing plant in the United States. This new plant allowed Starbucks to

transfer coffee from the manufacturing plants to the distribution plants quicker than ever before.

Now they would have a total of four coffee manufacturing plants across the United States one for

each region, thus being able to cut cost down on transportation. Before the new plant was in

place it would take seven operational days to process and ship out the coffee to the appropriate

distribution centers now it only took a total of five operational days. Not only did they figure out

a way to cheapen their transportational cost without sacrificing quality they also saved a lot on

their operational cost just by adding this one new coffee manufacturing plant. So to recap the

process; it starts out in the planning stages which takes place at Starbucks corporate offices in

Seattle. Then the source better know as the farmers who are located all over Latin America, Asia,

and Africa. They will grow and supply the coffee beans which are bought through a negotiated

contract that has been agreed upon between the farmers and Starbucks. Once that has taking

place the coffee beans will be shipped to either America or Europe. If they are shipped to

America they will be sent to one of the four manufacturing plants we talked about where they

will begin the roasting and grinding process. After that process is over with, the coffee will then

be moved to the appropriate distribution center where they will package the coffee according to

roast. Lastly from those distribution centers they will send out the coffee to the surrounding

stores in the area to fill any orders that were request from those stores. When you run a company

as big as Starbucks you have to realize how crucial logistics are and how important it is to

manage your supply chain. Otherwise before you know it you could be paying to much for

coffee beans or your transportational cost could be to high. This in retrospect cost Starbucks to

close down six-hundred stores across America.

 Now as I have stated before coffee beans are literally produced all over the world in

Africa, Asia, and Latin America. The two key factors to growing a coffee tree that will produce

the perfect coffee beans are tropical climate and high altitudes. The high altitude effects the taste

of the coffee beans and the tropical weather helps ripen the beans for picking. This explains why

coffee can be grown across the world as long as the countries fall within the lines of the Tropic

of Cancer and Capricorn. As well as have at least three-thousand to six-thousand feet of

elevation, growing coffee should not be a probably. If you have never seen a coffee tree before

you probably would not even recognize it, because from a distance it looks like it is a cherry tree.

Essentially the cherry skin serves as protection and each cherry usually contains two coffee

beans which are pick after seven to nine months of growing. Since the climate does not change

coffee beans can be picked year round. For the most part coffee beans are picked by hand due to

the high elevated areas it makes it difficult for machinery to get involved. Unless you are Brazil,

there are certain areas in Brazil in which coffee beans can be picked by machinery, saving a lot

of labor time. Brazil is unique in that way since their land is elevated but at the same time flat

enough for machines to be able to maneuver in such a way. This might have something to due

with why Brazil is able to produce more coffee than any other country. But for some reason

Starbucks does not purchase as much coffee form Brazil as they do from other countries. When it

comes to Starbucks selecting where they get there beans from they are very methodical and do

not just go with the cheapest price. During harvest season Starbucks will send out teams to

around the world to taste different coffee blends from different farmers. They do this for multiple

reasons, one being able to taste test these different farms and another reason is to be able to build

relations with the farmers. This will allow them to not only to hand pick from what they see as

the cream of the crop, but at the same time taking these extra steps also allows them to separate
themselves from the competition. Starbucks also cares about providing a variety of blends and

different flavors of coffee, which is why they do not buy form just one country. Even though

multiple countries can produce coffee beans they all have a little different taste to them. This

allows for different kinds of roast and coffee blends to be made. For example a coffee bean

picked from the Asian region tends to have more of a full bodied taste, you would likely find this

type of bean in your darker roast. If you were wondering where your mid to lighter roast come

from, these coffee beans generally come from the latin american regions. Now what might give

off these different flavors if they are all produced in the same climates and roughly the same

altitude? The one differences that separates certain coffee beans is the soil in which they are

grown in. Soil is a major factor in the harvesting process that leads to this desired and acquired

taste that people have developed. So I believe that is one of the reasons why companies like

Starbucks travel the world and do not just buy coffee beans from one region.

Starbucks coffee prices are notably higher than most places like McDonalds for example,

but this is where I feel like those prices are justify. It comes down to how they treat the farmers

and communities in which they are involved in. I am really going to try and zone in on two

specific countries Costa Rica and Ethiopia. This is where I can show just how big of an impact

Starbucks can really have when it comes to their work relationships with these different countries

around the world. For instance Starbucks believes in what they call C. A. F. E. which stands for

Coffee and Farmer Equity. The four key areas of practice are: quality, economic accountability

and transparency, social responsibility and environmental leadership. To further breakdown the

economic accountability and transparency. What they talk about are how they basically keep an

open book between them and the suppliers. This is so that everybody knows who making what

and they are able to pay the appropriate people according to current sales and profits. When
doing research on coffee no other company even mentions something remotely close to these

kinds of practices. They also touch on social responsibilities where they say state to comply with

minimum wage requirements as well as not allowing any under age labor to ensure proper

humane working conditions. Again I cannot stress this enough that not a lot of companies in

general as big as Starbucks take these kind of stands against in humane working conditions. At

the same time being able to have an open book relationship with these countries who for the part

are considered to be very poor countries. Lastly they talk about environmental leadership, which

is just as important as all the other areas of practice that they are apart of. Like I mention before a

lot of these countries that produce coffee beans are poor countries. So water quality and soil

quality can be a concern when it comes to health code. Since Starbucks holds themselves to a

higher standard these type of things are important. Plus they have developed so many of these

relationships with these different countries and have had success doing so. That being said they

want to see that these countries are taken care in terms of protecting water. As well as using tools

to ensure that the fields being used can be used for a long time. Instead of just buying from an

assortment of farmers and allowing some to fail and some to be successful. They want these

bonds to last which also allowed these countries to keep producing what was for a lot them there

biggest export. Now one of the reason why I wanted to focus on Costa Rica was due to the fact

that Starbucks actually bought a farm their back in 2013. So how does this effect Costa Rica you

might ask? Well, for one it means Starbucks C.A.F.E practices will be implemented from day

one. It also means that now that Starbucks has invested so much of their own money to produce

coffee beans in Costa Rica, more jobs will be available for the people of Costa Rica for a long

time. Because you better believe Starbucks will not let their own farm die out especially since

they are so involved in ethically sourcing. Now coffee has been an export of Costa Rica long
before Starbucks came around. So this farm is nothing new to the country, but what it does do is

help change the culture. Before Starbucks bought their farm, Costa Rica had been producing

coffee since the 1700s. But for a long time coffee beans were picked mostly by slaves and after

that people who picked coffee beans got paid little to nothing for the intense labor. At the same

time you can image their process of making coffee to not be the most environmentally conscious.

In these types of countries they just do not have the same resources that are needed to conduct

proper sourcing without affecting land. Like I mention before soil is a major factor when making

coffee. So if your soil is starting to erode and proper water is not reaching the plants this can

affect the integrity of the coffee beans. This could and would lead to people like Starbucks to

stop purchasing from Costa Rica and some companies would not care. If that were the case and

Starbucks did not implement their C.A.F.E. practices into every where they buy coffee.

Countries like Costa Rican would lose on one of their biggest exports due to the fact that they

simply do not have the resources to properly take care of their land, thus eliminating coffee from

their agenda. I am telling you no other company either cares enough or wants to invest their

money into taking these extra precautions like Starbucks does. So for Starbucks buying a farm in

Costa Rica will forever change the way in which coffee is produced there. Starbucks also hopes

be the end of this year 2015 all their coffee will be ethically sourced. Meaning all the steps of

their C.A.F.E. practices will be fully in place; eliminating all under age labor, poor pay, poor

treatment of land and poor communication between the buyers and sellers in which they are

involved in. I also wanted to talk about what happened between Starbucks and Ethiopia back in

2007. Just like all the other countries that produce coffee, Ethiopia is no different. It is a major

source of income for the country and its means a lot to have their coffee recognized has being

high quality. Now what Ethiopia did was trademarked the name of three coffee brands that they
produce. So theoretically meaning if Starbucks keep buying coffee from them and labeling it as

Ethiopian Sidamo coffee, one of their trademark names Starbucks would have to pay royalties on

it. The problem with doing so is that Ethiopia risked losing Starbucks business all together since

they could not agree on trademark disputes. This was a legal battle that lasted about two years

when they finally came to a fair agreement between the two. This was that Starbucks would not

pay royalties for using the three premium coffee names Harrar, Sidamo and Yirgacheffe

associated with Ethiopian coffee but they did agree on a licensing deal. At the end of the day is a

win win for both sides. Because now the people of Ethiopia believe that having their three

premium brands recognized by Starbucks will raised the demand and prices for their coffee.

Making them more money down the road as well as making coffee a more reliably source of

income.

Final thoughts, a lot of people may not agree with Starbucks high coffee prices. They also

may not look at the whole picture and just want to believe their high prices are due to branding

and popularity. Maybe that how it does look to the naked eye but after doing this research paper I

can clearly see why their prices are high. It is not just because they have a cool looking cup or

just think they can get away with it. Its more than that, its because they believe in ensuring you

get a clean cup of coffee a cup of coffee that has been check form the beginning process to the

end. A process that involves different countries and proper relationships in making sure there is a

fair price for everyone involved. Making sure that the land in which the coffee trees are grown in

have clean soil and water as well as the correct up keep so the land can be used for years to

come. Yeah we might complain about high prices but usually you get what you pay for and when

it comes to coffee and Starbucks it is true.

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