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John
Dugan
Coffee.
Whether internationalist bohemian or 9 to 5 yuppie, chances
are you drink the stuff. So why is your morning pick-me-up
friend an especially hot topic
these days? Forget clouds in your coffee. Today, there’s
politics and global economics in that dark void of swirling
liquid.
Here’s a contrast that’s
somewhat confusing, if not alarming. Yes, America (and Europe)
is still in the throes of a designer, high-quality coffee
boom, one which finds the discerning spending up to $15.99/lb
for bag of Jamaican Blue Mountain beans. Specialty coffee
sales hit $6 billion this year, up from $1 billion in 1990.
At the same time, the global coffee market and its producers
are deep in a slump. Low quality, what used to pass for “normal”
coffee is as cheap as dirt. There’s simply way too much
of the raw “green bean” out there.
A ‘90s coffee price jump pushed
producers to raise production and cash in. Increased mechanized
harvesting techniques in Brazil and Vietnam’s spectacular
invasion of the marketplace with cheap robusta beans added
up to giant increases in production that outmatch consumption.
In 2003, global production is exceeding consumption by 15
million bags (132 lbs per bag). The result is that millions
are left without a source of income as production costs exceed
the paltry return on the open-market. Roughly 600,000 (permanent
and temporary) workers in Central America have lost their
jobs. Whereas Vietnam has produced an estimated 4 million
jobs from its coffee boom. The sudden shift is considered
a humanitarian crisis even by conservative leaders in Central
America.
After petroleum, coffee is the world’s
major, most expensive commodity. It is produced in 50 countries,
and nearly 6 million tons are exported a year. 25 million
farmers (mostly small landholders with less than 25 acres)
depend on coffee for their income. Countries such as Honduras,
Uganda and Ethiopia depend on coffee exports as a major portion
of their revenues. For nearly 15 years, coffee has been traded
“freely” (without tariffs). And right now, with
the crisis hitting hard, there is pressure for a regulatory
solution. Activists long for the time when the global coffee
trade was regulated. Under the International Coffee Agreement,
price was controlled internationally from 1963 until 1989.
The International
Coffee Organization (created by the UN) still exists,
but the US has been MIA since 1989, rendering it less effective.
With the current crisis, even pockets of the coffee industry
are calling for the US to come back into the fold.
What’s the solution? Some activists
are calling for a better deal for small-time coffee producers,
others want programs encouraging growers to get out all together
with crop diversification. It’s worth remembering that
for decades, developing countries were encouraged to stop
growing their own food and grow export crops like coffee.
The ICO wants the production of higher quality and less quantity
of robusta coffee and they want roasters like Starbucks to
encourage this in their purchasing. Oxfam, the humanitarian
organization has taken the lead on the activist side of the
issue, and is promoting Fair Trade coffee as the solution.
Conservatives are uneasy about all
of this. And think-tanks such as the CATO
Institute defend “free” markets to death, even
as it is obvious that in this case the market is failing miserably.
The conservatives answer that inefficient over-producers need
to exit the market and things will sort themselves out. In
fact, many of the growers are exiting. And reports indicate
they are getting into a more lucrative business, narco-trafficking.
Many coffee farmers in the developing
world truly are in a tough place right now. They can’t
grow corn or other commodities for export because the US and
EU heavily subsidize their farmers who over produce so much
that they can only dump incredibly cheap stuff on the south.
G. W. Bush has even increased subsidies. There’s not
much “free” in free trade. So what of Fair Trade?
Fair Trade coffee presently holds only
1 percent of the American market. Certification means that
farmers were paid a premium rate, such as US $1.26 per pound
and $1.41 for organic for their coffee. Fair Trade coffee
is more expensive and the average coffee drinker is unlikely
to come in contact with it. Most coffee consists of blends
of wildly varying quality rather than high-end one-source
beans.
It’s en vogue to call Starbucks
the evil empire of coffee. The
Organic Consumers Association has Starbucks in its crosshairs
because while the coffee retailer talks a good game, they
say it still uses genetically modified dairy ingredients and
doesn’t buy and brew much Fair Trade coffee. Actually,
Starbucks agreed to begin brewing some Fair Trade coffee and
offering it in stores way back in October2000. It also declined
to sell milk from growth-hormone supplemented cows in early
2001, incurring the wrath of the technology-crazed dairy industry
who claims that such milk is tested and safe.
So is Starbuck’s the bad guy or
the good guy in the current coffee war? Does Fair Trade group’s
Global Exchange bumper sticker “Starbucks profit as others
starve” real or jive? After all, Starbucks is not the
source of the coffee crisis. Aforementioned massive increases
in production by Brazilian and Vietnamese coffee growers have
caused the glut, not savvy marketing and aggressive retailing.
And price fluctuations have had little effect at the coffee
bar. In actuality, only 5 to 7 percent of the cost of a cup
of coffee is for the beans. The cost of a latte is in the
dairy, the labor, the advertising, etc. Furthermore, Starbucks
has probably increased the demand for coffee all over the
country at a time when the American consumption is actually
decreasing. We don’t guzzle the mud like we used to.
Per capita, Americans sucked down 36 gallons of coffee per
year in 1970. As of 2000, it’s a sissy 17. Starbucks
has created a new, artificial consumer need which naturally
has done what? Led people to become more interested in the
higher-end product, thereby increasing the supermarket and
café demand for shade-grown, premium, boutique level
(more likely Fair Trade) coffee even if Starbucks isn’t
selling as much of it as idealists would like.
Starbucks has turned Fair Trade into
a useful marketing technique. It offers four kinds of Commitment
to Origins coffees that are either Fair Trade (bought
through co-ops for a premium price) or Farm Direct (purchased
directly from growers). They’ve got big fat logos for
shade-grown, sustainable, ecologically sound on these products.
But most Starbucks coffee is not like this stuff at all because
the demand simply is not there. One could argue that a truly
responsible Starbucks would offer only Fair Trade coffee.
Rather, retailers have learned ways to take the cheaper bean
(a Vietnamese Robusta or Brazilian Arabica) and get a smoother
flavor out of it. This is why Starbucks doesn’t need
Fair Trade beans to please most of its customers.
But
Fair Trade may have it’s day in the sun yet. Not
surprisingly Newman’s Organics is getting on board the
movement, with a Fair Trade coffee on the launch pad. But
perhaps more of a shocker, is that Dunkin Donuts will launch
espresso products that will be fair-trade certified (soon).
Sometimes enlightenment comes in unlikely packages.
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