Professional Documents
Culture Documents
Assignment 3 Paper
Assignment 3 Paper
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
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
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
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
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