La Minita Tarrazu beans command a constant premium of $3.99 a pound, regardless of the gyrations of the price on the exchange. Only about 15 percent of the beans grown on the farm qualify. The rest are pegged to the market, albeit well above the regular price. Customers are invited to visit La Minita, where they see the model farm in action, eat wonderful food along with their coffee, admire the two hundred-foot waterfall, visit the farm’s medical clinic, and meet some of the apparently contented laborers. They can also take their own turn at harvesting.
I got off to a rocky start at La Minita. When McAlpin discovered I had picked up a few coffee beans from other countries along the way, he insisted that I conduct a strip search of myself and go through my luggage. Broca, little black bugs that eat coffee beans, had not reached Costa Rica.
Once at the farm, though, all cares fell away in the mountain paradise of the Tarrazu region, where I stayed in a guest house at 5,000 feet above sea level.
I awoke at 6:00 A.M. to the sounds of workers laughing on the way to work. When I got up, the sunrise was just lighting the 9,500-foot mountain across the valley. After breakfast, the other guests and I hiked to the river that forms one border of the plantation, passing the heavily laden coffee trees and the occasional orange tree, planted for the workers’ refreshment. Then we took a turn at harvesting on the steeply terraced slopes. In an hour, I earned enough to buy two bags of peanuts at the commissary.
Then we joined the real harvesters, who were done by 2:00 P.M. I talked to Angel Martin Granados, a young man who told me he had picked 122 cajuelas (66 gallons) that day, earning him around $15. After working at La Minita for three years, he had saved enough to buy a house and plant his own small coffee plot.
Bill McAlpin presided over his domain as a benign dictator, demanding obsessive attention to quality and detail. In a speech to his workers, McAlpin described La Minita as “a single living organism” where he tried to provide “a secure working and social habitat.” Food, shelter, health, security, liberty, and spiritual activity were what the farm offered, he said.
McAlpin’s idealism extended to his coffee. Rather than use herbicides, his workers weeded the eight hundred acres of coffee with machetes. Except in extraordinary circumstances, he avoided insecticides. Instead, the trees were regularly sprayed with a “coffee aphrodisiac” of boron, zinc, and copper. The soil was tested twice a year. Shade trees helped by fixing nitrogen and shedding leaves for mulch, but fertilizer was also dispensed regularly.
Despite McAlpin’s concern for social and environmental issues, he insisted that he was simply being pragmatic. He treated his workers well because it was good business. He scorned Fair Trade coffee, which he believed asked people to purchase coffee out of guilt. “I don’t want anyone to buy La Minita because of the way we grew it. I want them to buy it because it is superior coffee.” He accused the well-intentioned folks who sell Fair Trade coffee of “cultural imperialism,” blasting those who blend “suffering, pain, and humiliation” into the beans they sell to “the affluent but guilt-ridden, Birkenstock-shod, politically correct, myopically naive creature known as the ‘huppie’”—whom he defined as a combination hippie-yuppie.
McAlpin built a vertically integrated coffee empire under the name Distant Lands Trading Company. He owned thirteen coffee farms and three processing mills in Costa Rica and another processing mill in Colombia. He had joint ventures and quality control employees in Sumatra, Guatemala, Brazil, Honduras, and Ethiopia, along with roasting plants in Tyler, Texas, and Seattle.
“As the industry has matured and expanded and use of fine coffee has increased, it has changed from boutique to more of a mainstream business,” McAlpin told me in 2009. “The challenge we’ve met really well has been to keep the focus on the quality. But we’re not just a few guys in a room anymore. We have two hundred employees in the U.S. and many more than that at origin.”
Bill McAlpin wishes that all coffee growers could command the same premium as La Minita. Then the social inequities built into the system could solve themselves. Unfortunately, the realities of the marketplace make this almost impossible for most growers. When I visited Betty Hannstein Adams at her Finca Oriflama in western Guatemala, we discussed social issues at length.
Yes, it was true that she paid her laborers about $5 a day. She couldn’t pay them much more than other coffee farmers without pricing her beans out of the market. The profit margin was narrow, and the volatile price swings made planning difficult. “Coffee doesn’t yield enough profit to pay anyone one cent more than we are paying nor to put one ounce more of fertilizer or buy one vehicle to replace a worn-out one, or to give the owner a salary,” Adams said. “To top it off, the certifiers and roasters demand more from us every year—more soil conservation, more hand cleaning with machetes and less herbicide use, and so on.”
As Adams figured it, coffee would have to fetch about $8 more per pound to enable farmers to pay their workers the current U.S. minimum wage of $7.25 an hour. That wouldn’t be unreasonable. Even at $20 a pound for roasted specialty beans, consumers could enjoy a cup of properly brewed coffee for about 50 cents—not much when you consider the cost of a soft drink.
Fat chance, though. Throughout most of our history, U.S. citizens and politicians have made it clear that they consider inexpensive coffee a birthright. A few Good Samaritans don’t mind paying extra for Fair Trade beans every now and then, or even more for the highest quality coffee, but even they might squawk if all coffee provided a decent living for those who produce the crop.125
The Coffee Crisis
During the 1990s, Vietnam surged from nowhere to become a major producer of cheap robusta beans. Most were grown in the Central Highlands, where the indigenous tribes were dispossessed of their land. Many of these Montagnards (the French name for the tribes living there—the Rhadé, Jarai, Bahnar, Stieng, Koho, and Mnong, among others) worked for pathetic wages on coffee farms owned by the government or Vietnamese who had moved to the mountains to make their fortunes. Other Montagnards eked out an existence on inadequate plots of land. By the end of the decade, Vietnam had surpassed Colombia to become the second largest coffee producer in the world, after Brazil. The world was glutted with cheap coffee.
In 1999, coffee prices dropped below $1 a pound for green beans, then sank to 50 cents a pound by 2001—far below the cost of production. Throughout the coffee-growing world, desperate coffee farmers abandoned their trees to look for work elsewhere. Starvation loomed. Families lived under plastic tarps by the roadside. Some daughters resorted to prostitution to support their families. Other former coffee workers made the news when they suffocated in a truck smuggling them into the United States, where they hoped to find work.
The retail price for roasted coffee remained relatively stable, and pressure mounted on enriched roasters and retailers to help the coffee farmers. Procter & Gamble, which owned Folgers (since spun off to Smuckers), contributed $1.5 million to the nonprofit TechnoServe in an effort to aid coffee-growing areas. Starbucks gave $1 million to the Calvert Social Investment Foundations to help coffee farmers improve quality and acquire credit at fair rates. Then, in 2004, Starbucks initiated its own internal verification system, C.A.F.E. Practices (Coffee and Farmer Equity), paying high prices to farms that met environmental, social, and quality measures for its beans.
Fair Trade prices—then pegged at $1.26 a pound for green beans—became a life-saver during the worst bust yet in the ongoing boom-bust coffee cycle. But by definition, Fair Trade coffee only covers smallholders who have joined democratically run cooperatives and who have paid for the certification process. It does not help workers on larger farms. TransFair USA President Paul Rice floated the idea of expanding the Fair Trade certification to estate coffees, but he met vehement objections from cooperatives that felt the market was already too small. On average they could sell only 25 percent of their beans for Fair Trade prices.
The coffee crisis inspired other worthy efforts. In 2001, Steve Gliessman, an e
nvironmental studies professor at the University of California in Santa Cruz, and his wife, Robbie Jaffe, an environmental educator, founded the Community Agroecology Network (CAN) to connect coffee cooperatives, researchers, and consumers. Among other things, they promoted direct sales of coffee from Agua Buena, a cooperative in southern Costa Rica, paying the farmers more than Fair Trade prices.
George Howell, the pioneering specialty roaster, started the Cup of Excellence, which has been called the “Oscars for coffee.” Along with Susie Spindler, who continued to run the program, Howell sponsored a cupping competition in 2000 with international judges to highlight exceptional Brazilian beans. After the cupping and judging, the beans were auctioned on the Internet, often sold to the companies the judges worked for.
Over the ensuing decade, the Cup of Excellence program was held in countries throughout Latin America and then traveled to Africa. It resulted in some remarkable prices and discoveries, including Panama’s La Esmerelda geisha beans, grown on trees reputedly descended from a Gesha region of Ethiopia.
“We now know that the program benefits more than just the winning farmers and that after several years the entire producing country sees economic development,” Spindler said. “By focusing on quality and transparency and by rewarding the individual farmer for his/her hard work, the entire coffee infrastructure changes in support of premium coffees. In essence the coffee connoisseur has ended up developing a stronger personal relationship with the farmer.”
The high-end espresso firm illycaffé, based in Trieste, Italy, had already established regional cupping contests for its suppliers, beginning in Brazil in 1991. The company paid up to $30,000 to top winners, while its agronomists helped farmers improve their beans and processing. In Brazil’s humid Zona da Mata, that meant helping farmers prevent their beans from over-fermenting by having them processed differently. Instead of the traditional wet or dry methods, they found that by mechanically removing the skin and most of the mucilage, the partially denuded beans could be dried and the remaining mucilage flaked off, resulting in a superior cup. This is known as the semi-washed method, or cereja descascado (CD).
The coffee crisis that marked the first few years of the twenty-first century finally resolved when prices rose as abandoned or unpruned farms reduced production. Even Vietnamese farmers had cut back. Demand gradually caught up with supply. By the end of 2004, prices for green beans on the C market (the futures price for average arabica beans) finally broke above $1 a pound. But unless another quota system such as the International Coffee Agreement is implemented—an unlikely event—it is inevitable that another devastating price decline will occur.
Fair Trade and Starbucks
Fortunately, the issues raised by the coffee crisis are being addressed in many ways. Fair Trade coffee sales (and awareness) have grown phenomenally, from 37 million pounds in 2001 to 200 million pounds worldwide in 2009. Much of that growth occurred in the United States, thanks in large part to TransFair USA. President and CEO Paul Rice, a relentless promoter and effective speaker, went to great pains not to make enemies and to work with anyone, including large corporations. Global Exchange served as an uneasy partner in promoting Fair Trade beans through boycotts and intimidation. It was a good cop-bad cop approach, in which Global Exchange encouraged consumers to pressure larger roasters.
In 1999, when the World Trade Organization met in Seattle, protestors singled out major corporations, including Starbucks. The company was made out to be a corporate villain for its failure to sell any Fair Trade- certified coffee. The company provided the perfect target—a high-profile, seemingly ubiquitous presence, with its Starbucks outlets and readily identifiable mermaid logo.
On national television in late 1999, viewers witnessed protestors throwing rocks through a Starbucks store window in Seattle, then trashing the espresso machines. A few months later, the company signed a licensing agreement with TransFair USA to sell some Fair Trade beans, though the activists were convinced that the company’s action represented a token effort to stave off criticism.
They were probably right. Starbucks already prided itself on paying well for the best beans it could find, and the farmers from whom it bought generally made a decent living and treated their workers relatively well. In 2001 the company introduced coffee-sourcing guidelines developed in partnership with Conservation International. Why should the company jump through all the Fair Trade hoops and pay 10 cents a pound on top of that for certified beans? Besides, at that time Fair Trade beans frequently didn’t measure up to Starbucks’ quality demands.
Ten years later, Starbucks had changed its attitude. In 2009 it doubled its purchases of Fair Trade beans to 40 million pounds, making it the world’s largest buyer of Fair Trade coffee. The company announced with TransFair USA and the Fair Trade Labeling Organization the beginning of a three-year pilot project to expand a small-scale farmer loan program to at least $20 million by 2015.
The three institutions would also explore the creation of a single audit system to certify farms qualifying for Fair Trade status as well as the Starbucks C.A.F.E. Practices verification. According to Paul Rice, “C.A.F.E. Practices is a serious, legitimate sustainability standard.” Yet few socially conscious coffee drinkers believed that. Many were sure that any private verification scheme must be a form of greenwashing, an attempt to look good while lacking in meaningful criteria.
There was considerable overlap between C.A.F.E. Practices and Fair Trade criteria (between the two of them, there were some four hundred indicators). Small farmers who qualified for both labels complained that it was a waste of their time and money to do audits twice each year. Now, by combining both into one somewhat longer audit, farmers could save about 30 percent in time and money.
It appeared to be a win-win-win situation for all concerned, beginning with the farmers. For Starbucks, it provided the independent Fair Trade stamp of approval, recognized widely by the general public as a trusted label that meant that 100 percent of the beans were grown and traded ethically. For TransFair, it provided a potentially huge market.
Starbucks examined its sources in 2009 and discovered that 85 percent of the farmers supplying their beans owned family farms with less than twelve hectares of land (about thirty acres). I had always thought that Fair Trade was limited to smallholders that grow their coffee on five hectares or less, but Rice told me that there was some flexibility. “Fair Trade standards don’t impose a hard and fast ceiling on land holdings. In our model, it is more about poverty and the relation to hired labor. If you farm twelve hectares with your family and five sons, that’s okay.”
If a group of small farmers who sold to Starbucks didn’t belong to a democratically run cooperative, might the company help them to form one? This was perhaps the most attractive opportunity for the Fair Traders: the chance to extend their movement to millions of unorganized smallholders.
Starbucks also agreed to have its agronomists help launch the Small Farmer Sustainability Initiative to help Fair Trade cooperatives gain better access to working capital, technical assistance, and training. The technical assistance component grew out of Starbucks Farmer Support Centers, first opened in San José, Costa Rica, in 2004. The company realized that it needed to teach farmers to cup their own roasted beans and to figure out how to modify their growing and processing practices to produce higher quality coffee.
Yet Starbucks still had a long way to go in communicating the importance of Fair Trade. By 2009 Starbucks stores in the United States featured only one blend, Café Estima, with the Fair Trade logo. In the fall of 2009, Starbucks in the United Kingdom switched all of its espresso beverages to Fair Trade beans and made the commitment to do so in Europe by March 2010. (The UK had over 90 percent consumer awareness of the Fair Trade label, while only 35 percent of U.S. consumers recognized the label.)
Too many certifications and labels were confusing—Rainforest Alliance, Organic, Utz Kapeh Good Inside, Bird-Friendly Shade-Grown, and more—and the different certificat
ions had different objectives and standards. Rainforest Alliance allowed its logo to appear on packages containing only 30 percent of its beans, for instance. Utz Kapeh specialized in larger farms, requiring transparency along with environmental, quality, and social improvements, but without promising any greater price for the beans. Some critics dismissed Utz, which was originally sponsored by Ahold, a large Dutch coffee firm, as an ineffective corporate fig leaf. Yet it really did make a difference in the lives of coffee workers who would never be covered by the Fair Trade certification.
Howard to the Rescue?
In 2001 Howard Schultz stepped aside as Starbucks’ CEO, though he continued to monitor the business closely. Under the new head, Orin Smith, Starbucks continued to expand. In 2003 the company bought Seattle’s Best Coffee and Torrefazione Italia. In 2005 a new CEO, Jim Donald, continued the expansion by acquiring most of Diedrich Coffee’s company-owned stores, which included Coffee People in Oregon. The stock split two-for-one in October 2005 when it hit $56 a share. From $28, the stock reached $40 a share in 2006. At year’s end, the company owned 12,400 outlets worldwide, with 8,836 in the United States.
During 2007, however, sales slowed in North America, and the share price began to drift downward. That February, Schultz wrote a memo to Jim Donald and other executives that somehow became public. “Over the past ten years,” wrote Schultz, “in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience.” He complained that automatic espresso machines had eliminated “much of the romance and theater.” Streamlined store designs “no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store.”
Uncommon Grounds: The History of Coffee and How It Transformed Our World Page 42