Beyond the cup. - Starbucks

THE COFFEE INDUSTRY— AN OVERVIEW —It is believed that coffee was first consumed asa hot beverage in East Africa during the 11thcentury. Today, coffee is one of the most popularbeverages, with $70 billion in retail sales wordwide.*Furthermore, the coffee industry provides a livelihoodfor an estimated 25 million people* (coffee farmersand their families) in more than 70 tropical coffeeproducingcountries.There are two commercially viable species ofcoffee – robusta and arabica. High-quality arabicacoffee is grown on all kinds of farms that rangefrom very small, family-run parcels to large-scaleestates located between the Tropics of Cancer andCapricorn, and typically situated at higher elevations.These elevations provide optimal climatic conditionsneeded to grow the type of coffee that is consideredspecialty grade. When more care is taken in growing,harvesting and processing the beans, the result ishigher-quality coffee. Starbucks only purchases thehighest-quality arabica coffee beans. These coffees aresold under the Starbucks ® , Seattle’s Best Coffee ® andTorrefazione Italia ® brands.Arabica coffee is traded in two ways:• The majority of arabica coffee is traded as acommodity on the highly volatile New York “C”market. As global supply rises and falls, so do “C”prices. The average “C” price for a pound of coffeeduring fiscal 2005 was $1.04.• Higher-quality arabica beans are sold as specialtycoffee, which represents 10 percent** of totalworldwide coffee purchases. Prices for specialtycoffee are often negotiated at higher prices thanthe “C” offers in order to compensate farmers forquality. Coffee can be purchased from exporters,brokers, cooperatives and in some cases, farms.C.A.F.E. PracticesIn 1998, Starbucks began to integrate conservation principlesin our coffee buying practices through our partnershipwith Conservation International (CI). Three years later, wecollaborated with CI to create and pilot Starbucks PreferredSupplier Program (PSP) that was based on a set of socially andenvironmentally responsible coffee buying guidelines.These early efforts laid the groundwork for what eventuallybecame Coffee and Farmer Equity (C.A.F.E.) Practices.Formally introduced in fiscal 2004, C.A.F.E. Practices wasdesigned to assure high-quality coffee is grown and processedwith environmental sensitivity and social equity throughoutour coffee supply chain. Program improvements were madein fiscal 2005 by Scientific Certification Systems (SCS),a third-party evaluation and certification firm retained byStarbucks for the development, training and auditing ofC.A.F.E. Practices.OUR GUIDELINES FOR C.A.F.E. PRACTICESC.A.F.E. Practices helps ensure that Starbucks purchasescoffee that is grown and processed in a sustainable mannerby evaluating the social, environmental and economic aspectsof coffee production. The guidelines include 28 indicatorsagainst which suppliers (farmers, cooperatives, processorsand exporters) are evaluated. With the exception of theindicators for quality and economic transparency, whichare prerequisites, all other indicators have been assigned aminimum and a maximum number of points.Suppliers need to earn the minimum points in each scoredarea, representing social and environmental criteria. Finalscores are determined by independent, third-party verifiers,a process monitored by SCS. Starbucks looks at the pointsearned in each section to decide each supplier’s status.In fiscal 2005, Starbucks purchased 76.8 million pounds(34.8 million kilograms) of coffee from C.A.F.E. Practicessuppliers in seven countries. There are three status levels forC.A.F.E. Practices suppliers: Strategic, Preferred, and Verified.Starbucks buys on a preferential basis from C.A.F.E. Practicesapproved suppliers.Of the C.A.F.E. Practices coffee we purchased in 2005, thepercentage from each supplier group is as follows:• Strategic (score of 80% and higher in social andenvironmental areas): 27%• Preferred (score of 60% and higher in social andenvironmental areas): 11%• Verified (score of less than 60% in social andenvironmental areas): 62%* International Coffee Organization** Specialty Coffee Association of America18OUR WORLD OF PRODUCTS