According to press reports, Starbucks has doubled its orders for Jamaica’s Blue Mountain coffee, increasing its order to 15,400 kg, a 360% increase on the initial order in 2010. However, according to the general manager of the Gold Cup Coffee Company, a fall in orders is expected for 2013, ‘given the “shaky period” that the coffee industry is going through’.
While there is no price disclosure on the specific contract concluded with Starbucks, Director General of the Coffee Industry Board Christopher Gentles suggested a value of just over US$400,000 for the order.
Following the increase in purchases by Starbucks, Jamaican Blue Mountain coffee producers are being encouraged to sign up to Starbucks’ programme ‘CAFE Practices’ – Coffee and Farmer Equity Practices. This is ‘a set of buying guidelines developed by Starbucks, Conservation International and Scientific Certification Systems of California to ensure that coffee is grown in a responsible way’. The programme calls for growers to:
- provide safe, humane working conditions;
- protect the rights of their employees and providing adequate living conditions;
- comply with minimum wage laws;
- refrain from the use of child labour;
- conserve water and energy, reduce the use of agrochemicals;
- preserve biodiversity and manage waste appropriately to protect water quality.
According to press reports, ‘Applicants get points for their performance on different criteria, and are awarded preferred supplier status if they pass 60 per cent and strategic supplier status if they get an overall score above 80 per cent.’ Starbucks then reportedly offers ‘enhanced pricing and contract terms to its preferred and strategic suppliers’. Under the CAFE Practices programme, an investment fund has also been established to offer concrete assistance to farmers. The aim is to source the entire coffee supply for Starbucks from CAFE Practice growers by 2015. Since 2008, the percentage of total coffee used sourced under the CAFE Practices programme has increased from 77% to 86%. Elsewhere in the ACP, Starbucks sources CAFE Practices coffee from Ethiopia, Kenya, Tanzania, Rwanda, Burundi, Zambia, Papua New Guinea and Timor-Leste.
At the wider coffee sector level in Jamaica, complaints have emerged of a shortage of government financing, deployed through the Coffee Industry Board, for supplies of inputs to coffee farmers. This has left farmers seeking credit from private dealers to allow them to purchase the required inputs, with loans being deducted from their payments. However, press reports indicate that ‘some dealers are hesitant to do so, having been burnt in the past when farmers took their money and sold the coffee elsewhere.’
Jamaican Blue Mountain is a world renowned brand and, to date, Caribbean countries have not been able to position their coffee directly with specialist coffee houses such as Starbucks and Rituals, the Caribbean coffee house chain based in Trinidad and Tobago. With Jamaica now becoming the first Caribbean country to have producers participating in the Starbucks CAFE Practices programmes, this could prove a breakthrough for regional producers.
Unlike many other good agricultural practices schemes run by retailers, the Starbucks programme appears to link the attainment of quality standards with an enhanced price, a secure contract and even investment support. Given the general situation in the coffee sector in Jamaica, this could assist producers in securing the necessary finance to sustain and develop production.
If the arrangements under the CAFE Practices programme are found to be secure, especially in terms of provision of much-needed inputs and working capital to bring down costs of production and enhance product quality, they could provide a basis for the formation of an independent coffee cooperative in Jamaica that directly handles marketing on behalf of producers.
Given the financing needs of the coffee sector in Jamaica and the widely stated objective of attracting private sector investment in the sector, there would appear to be scope for the government to strengthen the legal framework for contracts between farmers and coffee buyers, in order to provide greater surety of repayment of loans while preventing the emergence of abuse of contractual arrangements under prefinancing deals.
A critical issue is whether the opening up of this type of initiative will prompt a rethink from commodity boards in terms of their role in supporting the development of marketing arrangements. There is a felt need for marketing arrangements that:
- help producers to get closer to major retail chains;
- help producers to more effectively meet buyer requirements;
- assist primary producers in retaining a greater share of the final value gained from the end-consumers.