Corporate Governance

Starbucks and Social Responsibility: Redux

By J. Robert Brown

We have occasionally written on this Blog about Starbucks.  Starbucks has had a rough time financially recently, even before the current crisis caused cutbacks among latte drinking professionals.  We noted that part of the problem came from the apparent decision by Starbucks to market itself as a commodity.  The problem with the approach is that there are others that make a decent latte.  Moreover, with the decision by McDonalds to insert baristas into its 14,000 shops, the commodity competition was going to get even worse.

Somehow, Starbucks needed to be anti-commodity.  There needed to be some unique reason to spend the extra amount for a latte at Starbucks rather than a cheaper version at McDonalds.  We suggested that the answer was Social Responsibility.  Customers of Starbucks coffee (at least some of them) would remain more loyal if they thought their purchase had some benefit that transcended a caffine jolt or a sugar burst.  While Starbucks has a page on its Internet site that trumpets social responsibility, we noted that there was little evidence of this in the assorted establishment (beyond the small sign above the Ethos Water bottles).

We don't know if management at Starbucks reads The Race to the Bottom, but we have to admit that much has changed.  In a recent visit to some Starbucks in Denver, it was subtly apparent that the Company was putting greater emphasis on Social Responsibility and on health.  One piece of evidence was a sign informing clients that:  "You buy more trade certified coffee than anyone in the world."  There was also a discrete yet noticeable placard that advertised how purchases at Starbucks would result in increased funding for Africa.  Purchases resulted in a contribution to the Global Fund.  Moreover, almost any purchase resulted in a contribution, including a 5 cent contribution for each use of a Starbucks card. The medium sized cup contained a message that 65% of its coffee purchased from farmers "who are good to their workers, community and planet" and that Starbucks was working on lifting the number to 100%.

With respect to the environment, the store announced that the purchase of a tumbler would result in a 10 cent discount and would save "another paper cup every time."  Their cups, by the way, note that they are made with 10% post0consumer recycled fiber.

There was also a sign that promised the food not only tastes better but that it is better.  This suggests that the Company is using healthy ingredients, although we'd like to know a bit more about this.  There is some information on the web site but it should be more apparent in the store.  The approach is a page from Chipotle that lets customers know the food is healthy and produced, generally, under humane conditions.

We will continue to watch.  Starbucks announced that it had a good third quarter so maybe the approach (along with many other changes) is already showing results (and showing that social responsibility can be good for the bottom line).  In the meantime, we would offer one additional suggestion.  Every store has a set of shelves that offer for sale assorted coffee paraphernalia, particularly ugly coffee mugs.  Can't a portion of the space be used to sell goods from crafts people in low income countries, perhaps in partnership with someone like 10,000 Villages?  If I knew my dollars were helping an artisan in Africa, I might buy the ugly coffee cup at full price rather than wait until it gets moved to the discount rack on the bottom shelf.

Full post as published by The Race to the Bottom on July 26, 2009 (boomark / email).