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THE TRUTH BEHIND STARBUCKS

AN EXPOSE ON THE INDECENT PRACTICES OF THE SELF-PROCLAIMED ETHICAL COMPANY


Can Starbucks provide an uplifting experience that enriches peoples lives one moment, one human being, one extraordinary cup of coffee at a time When its farmers families are starving, and its baristas require public assistance?

Globalization refers to the increasing interconnectedness of the world; this phenomenon manifests itself primarily in the business sector. Although globalization has facilitated exponential economic growth for most countries, it has also been arguably been responsible for the exploitation of disadvantaged workers, and an increasing income equality threatening to disrupt social cohesion. The exploitation of workers has achieved high levels with the introduction of multinational corporations. Massive companies with colossal profit margins scour the globe to locate the cheapest resources, often with little regard to human rights. It is with this in mind that we investigate the multi-glomerate Starbucks, a company known for its iconic logo and anti-competitive practices. Starbucks began in 1971 in Seattle, a single store at first Howard Schultz took over in 1982 and transformed the brand into that which can be seen on every street corner in NY. Starbucks today has over 17,000 retail stores in over 55 countries; its mission statement claims they hope to inspire and nurture the human spirit- one person, one cup and one neighbourhood at a time. However recent controversy has linked Starbucks with many other socially condemned MNCs, inquiry into the companys ethical sourcing, labour disputes and environmental stewardship programs suggest that Starbucks is not the ethical company it claims to be. As consumers in modern society we have an obligation to hold MNCs socially responsible for unethical practices, please find out more about Starbucks practices before deciding whether to promote the company with your consumer sovereignty. Lets find out the truth about Starbucks, this report will explore the environmental, ethical, labour and saturation concerns regarding Starbucks. Please evaluate this information carefully, and if you find Starbucks practices to be socially reprehensible send this to all of your friends, and expose the indecent practices of the self-proclaimed Ethical Company

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THE TRUTH BEHIND STARBUCKS- An expose into the indecent practices of the self proclaimed Ethical Company

ENVIRONMENTAL CONCERNS
The procedures of Starbucks stores across the globe are having a detrimental impact on the environment. On average, each of the 19,736 stores worldwide uses 6.78 kilowatt-hours of electricity, 0.058 thermos of natural gas and 94 litres of water per square foot per month1. Starbucks takes little consideration for global depleting energy sources and fails to take measures to reduce its energy output. In 2008, Starbucks in the U.K. and the United States were targeted for wasting up to 23.4 million litres of water per day by continuously keeping a tap running in its 10,000 stores, seriously wasting and neglecting diminishing global water supplies. The bulk of Starbucks environmental waste takes place during its packaging and retailing stages. The extensive manufacturing process during the assembly of Starbucks coffee cups requires 90% new paper to be produced. Paper must be harvested from trees and then turned to wood chips in a machine, rather than using recycled paper fibres. Due to the plastic lamination lining, Starbucks cups are unable to be recycled and will therefore end up in landfill. For a company producing over 2 billion paper cups per year, only 18% of Starbucks stores containing recycling facilities2. Through their deceptive marketing techniques and overuse of resources, Starbucks completely fails to uphold their environmentally sustainable image.

UNION AND LABOUR DISPUTES


Whilst Starbucks provides jobs to approximately 172,000 people worldwide (New York Times, 2008) it fails to respect the rights of its employees. Starbucks baristas are faced with inferior working conditions and prevented from taking union action against their employer. Starbucks fails to pay a liveable wage and a secure work schedule, with baristas earning a starting wage as little as $6.25 per hour and work hours fluctuating from week to week based on weekly store sales3 to prevent workers from joining the International Workers of the World Union, Starbucks employed a union-busting firm, Akin Gump, to repress the union through surveillance, intelligence gathering and firing union activists. In 2006, New York barista Daniel Gross was fired illegally for union activity and spoke out against Starbucks inferior working conditions. Every single barista works part-time. No one has a guaranteed number of working hours; one week you might have 35 hours, the next you might have 14. The times you work also shift, making it difficult to budget for necessities, look after families or have second jobs4.

EXPLOITATION OF COFFEE FARMERS


Starbucks claims of supporting the welfare of coffee farmers in developing countries in order to be portrayed as an ethical corporation, whilst in reality these workers are manipulated and underpaid. In 2007, a delegation of NYC baristas travelled to Ethiopia to meet and discuss working conditions with exploited coffee farmers. Farmers are being taken advantage of, being payed only $0.57 per pound of Ethiopian Sidamo coffee, a mere 2.2% of the projected retail price. They deceive us by telling us that theyre going to help us grow, but they are the ones that are growing5 Said Tedasse, a farmer from Fero Co-Operative. The low prices paid to coffee farmers by Starbucks forces children to work on their family farms, with an alarming two million children in the Sidamo area alone working an average of 29.9 hours per week6.Whilst people may not hesitate to spend $3 on a latte, many are unaware that this simple expense is the equivalent to the daily wage of a Starbucks Central American coffee picker7. Starbucks is blatantly aware of its exploitation of coffee farmers, yet it fails to respond to the needs of its workers who are living in poverty.

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2007 CSR Annual Report As you sow, 2011 3 Starbucks Global Irresponsibility Report 4 Daniel Gross 5 Tadasse 6 Starbucks Corporate Irresponsibility Report 7 Organic Consumers Association

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THE TRUTH BEHIND STARBUCKS- An expose into the indecent practices of the self proclaimed Ethical Company

ETHICAL CONCERNS
The term Fair Trade refers to selling coffee at a price that generates a fair wage for the farmers who grow and harvest the crop. In most cases, these farmers grow their crop on small farms and receive very little pay for their work, whilst the mark up for coffee is so large. Coffee is one of most valuable cash crops in the world; this means that it is a crop produced for its commercial value rather than for use by the grower8. In order to benefit these farmers, Fair Trade coffee is sold through cooperatives for a minimum price of $1.26 per pound.9 Ethiopia depends largely upon the agricultural sector, coffee beans being the countrys largest export product.10 Almost 25 per cent of Ethiopians rely in one way or another upon coffee trade, the country being amongst the top ten coffee producing countries in the world.11 The majority of coffee farmers rely on traditional methods of farming, meaning labour is done by hand as machinery is extremely expensive and difficult to obtain. In 2006, Ethiopia fought a long battle with Starbucks coffee when the Ethiopian government decided they wanted to trademark their coffee names. Starbucks claimed to agree with Ethiopias movement for the protection and trade marking of Ethiopian coffee beans, yet the company proceeded to attempt to manipulate the Ethiopian government into seeking alternatives to trademarks, which would have little benefit to the Ethiopian government and the coffee farmers. Claiming they wished to benefit the coffee farmers, Starbucks had ulterior motives; to keep the cost of coffee low, thus benefiting only themselves. Starbucks said they pay an average of $1.20/lb for their coffees, which "compares favourably to the Fair Trade minimum of $1.26".12 Starbucks does not cater for the ethically conscious consumer as they claim to. 14% of the coffee used by Starbucks is still unethically obtained; it was not until the year 2000, 29 years after the business establishment, that Starbucks coffee Transfair USA formed an alliance, in which Starbucks reluctantly agreed to promote and sell fair trade coffee. However, without being targeted by the Black Bloc, a massive group of social activists who vandalised a Seattle Starbucks store during the 1999 Seattle anti-World Trade Organisation demonstrations, as well as being the subject of a year-long protest campaign organized by Global Exchange13, Starbucks would not have been forced to purchase fair trade coffee, which they did simply to avoid further public scrutiny. Without these pressures placed upon the company, Starbucks would not have bothered to trade fairly. Luckily for Starbucks, this transition resulted in higher profit margins as Starbucks claims to cater for the ethically conscious consumer. However, does Starbucks actually cater for the ethically conscious consumer? Starbucks still does not brew fair trade coffee in their stores, claiming they are yet to see a consumer demand for this. This means that the only fair trade coffee they sell is sold straight off the shelf pre-packaged in bags; the coffee they serve in-store is not fair trade. Starbucks claims that the volume of fair trade coffee needed is not available, a ridiculous claim. Ethos water is sold in Starbucks chain stores. With a retail price of $1.80, Starbucks only donates 5c per bottle to the Ethos Water Fund. This means that in order to donate the $1.80 spent on the water, one would have to buy 36 bottles of Ethos water at a total of $64.80.14 Starbucks claims the money collected is used to help support water, sanitation and hygiene education programs in water-stressed countries. Therefore, it is unclear what exactly the money raised by Ethos water is used for. Starbucks is exploiting consumers into thinking Ethos water is a charity, when it is in fact a for-profit organisation that receives over 94% of the $1.80 as profit. This company uses the slogan helping children to get better water to lure customers in at false pretences, leading them to believe they will be helping children by buying the more expensive water option. This effective profiteering is horribly unethical.

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Definition of cash crop - Oxford Dictionary, 2012 Nelson, R - Roast Starbucks, Seattle Times Newspaper, 2000. 10 Ethiopia Cooperative Coffees, 2010. 11 Coffee @ nationalgeographic.com. 1997 12 Fair Trade Coffee, 2012 13 Starbucks Campaign: Background Information, 2000 14 Ethos Water Helping Grow Money Trees | TU Morality, Law & Advertising, 2011

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THE TRUTH BEHIND STARBUCKS- An expose into the indecent practices of the self proclaimed Ethical Company

SATURATION OF THE MARKET


According to published reports, Starbucks controls 73% of the specialty coffeehouse market, they have over 17, 000 stores in 55 countries15, with six stores opening every day. They recently announced their goal of having 40, 000 stores worldwide, but still feel that the company is vastly underestimating the worldwide demand for its items16. The global giant has faced countless allegations of oversaturation of the market, and anti-competitive practices, but the company insists that its countless stores arise as one main complaint they hear from customers is that Starbucks isnt convenient enough17 and state that going across the street can be a barrier18. Independent coffee shops are struggling with Starbucks monopolistic reign; the company is renowned for exploiting its considerable market share and has been constantly accused of using predatory practices to stifle competition. Penny Stafford has illustrated how Starbucks locks out competition through a series of exclusive lease agreements, cluster bombing of stores and competitor buy outs at below market-price, which if not accepted the company threatens to open nearby stores19. There have been numerous reports of Starbucks employees loaded with free samples sanding in front of independent stores to draw customers away20. This anti-competitive behaviour is in direct violation of the Trade Practices Act, by using its market share to reduce fair competition Starbucks is creating negative ramifications for customers. Competition relying on the interaction between demand and supply, increases the quality of good, decreases the price, and encourages innovation, by rejecting fair competition Starbucks is rejecting these principles. Furthermore exclusive lease agreements are an example of collusion, a crime which distorts market principles and is considered illegal. In the search of higher profit margins, Starbucks has compromised the needs of its consumers. However Starbucks still maintains that it sees very little cannibalization of existing business when a new store opens21. Furthermore from an economic standpoint, the saturation of Starbucks stores evident in major cities, coined by Starbucks as infill can be seen as wasteful duplication. The positioning of two stores across the street from each other is an absurd waste of economic resources, and is unnecessary. The equity analyst John Owens maintains that at this stage there are no signs that there is anywhere near the limits to their expansion.22 Starbucks will continue to expand its stores in the search for profit, regardless of the economic impact and destruction of small businesses.

CONCLUSION
Starbucks has incredible power to create a mono-culture paradigm, using its multiplicity of stores to westernize the world. Whether this is a positive or negative aspect of globalization however is to the discretion of the reader; yet the positioning of a Starbucks inside Chinas Forbidden City is indicative of its power to irreparably change the culture of a country. This report indicates that behind the glossy facade of the company stand many concerns to consumers. If you feel that Starbucks should change some of their practices, please send this to all of your friends, and expose The Truth Behind Starbucks.

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Starbucks company profile A Linn, Starbucks flooding the market 17 ibid 18 L Skinner, 2006 19 Independent coffee shops Sue Starbucks, 2006 20 L Skinner, 2006 21 A Linn, Starbucks flooding the market 22 J Owens, Morningstar

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THE TRUTH BEHIND STARBUCKS- An expose into the indecent practices of the self proclaimed Ethical Company

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THE TRUTH BEHIND STARBUCKS- An expose into the indecent practices of the self proclaimed Ethical Company

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THE TRUTH BEHIND STARBUCKS- An expose into the indecent practices of the self proclaimed Ethical Company