World’s biggest coffee chain commits temporary relief package to subsidise income for its Central American smallholder suppliers amid growing alarm at historically low commodity coffee prices
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Starbucks has become the most high-profile coffee shop chain to intervene in a looming crisis for global coffee farmer profitability. The coffee giant has stepped in to subsidise income for its smallholder farm suppliers in
Nicaragua, Guatemala, Mexico and El Salvador as coffee continues to trade at historically low prices on global markets. The aid package will be used directly subsidise farmer income for the upcoming harvest season until the coffee market ‘self corrects’,
Starbucks said in a press statement.
The radical move reflects a growing industry alarm at the financial viability of many coffee producers around the world. Commodity prices fell below $1/lb for the first time since 2012 in August 2018, with sustained low prices leaving many coffee producers, particularly smallholders, unable to invest in productivity, labour, pest control – or even make a living from coffee. On September 17, 2018, the World Coffee Producers Forum, which represents producer associations from Colombia, Brazil, India, Africa and Central America,
made a direct plea to roasters and consumers to tackle unsustainable coffee prices that are damaging producer communities.
“A majority of the coffee we purchase comes from smallholder farmers and the coffee crisis in Central America related to low prices cannot be ignored,” said Michelle Burns, Starbucks' Senior Vice President, Global Coffee and Tea. “We have a role and responsibility in helping smallholder farmers sustain their livelihoods. Their success will help ensure the long-term health of coffee productivity," she added.
The aid package was welcomed by National Coffee Association, USA and the Specialty Coffee Association of America. Executive Director of the latter organisation, Ric Rhinehart, commented: “It will be through the strong support of the coffee industry and its leading companies, large and small, that we can set the stage for a viable coffee future, letting the farmers know their investment cost in upcoming crops will be compensated, providing them with much needed stability in the industry.”
Stable coffee supply chains will be vital for Starbucks as it seeks expand its global store footprint, including a plan to nearly double its 3,300-store presence in China announced in May 2018. Meanwhile, the coffee giant faces turbulence at home as it grapples with
increased competition and cooling sales in the US.
Bloomberg recently reported that the coffee giant is embarking on a top-level corporate reorganisation, involving job losses and redeployment, in a bid to reverse stagnant sales and stoke investor interest.