Case Analysis of Starbucks Corporation

Case Analysis of Starbucks Corporation

Question 1: Why did Starbucks partner with Conservation International to develop C.A.F.E (Coffee And Farmers Equity Practices)?

Since 2005, Starbucks has been the world's largest specialty coffee retailer and it expanded consistently and saw strong growth in the sales and net profits. In the 1990s, the specialty coffee industry experienced enormous growth, fueled largely by the coffee-drinking habits of college graduates and other educated professionals. However, due to oversupply of lower-grade coffee beans, the prices of coffee beans had depressed and which made it difficult for coffee farmers to earn enough revenue to cover the cost of production. By the end of 2005, Starbucks owned more than 10,000 stores and roasted 2.3 percent of the world's coffee. To support such a high growth rate, Starbucks should ensure a sustainable supply of high-quality coffee beans through well-rounded supply chain to meet company's future success.

Moreover, from a sustainable point of view, Starbucks is facing a tremendous threat – global climate change. The same forests that produce the world's best coffee and sustain millions of farmers also extract and store vast amounts of carbon dioxide. In fact, when they are destroyed, these forests release dangerous greenhouse gas into our atmosphere.

Consequently, Starbucks partnered with Conservation International to develop C.A.F.E. Practices – a set of environmentally, socially, and economically responsible coffee buying guidelines to drive all Starbucks purchases and support conservation at a new scale. Starbucks decided to use its market power as a way to implement social change within its supply chain through C.A.F.E. Practices. Therefore, C.A.F.E. Practices became a way for Starbucks to ensure a sustainable supply of high quality coffee beans, which was an essential component of Starbucks' business.

Question 2: How does Starbucks pay for this program? What are the costs and benefits of CAFÉ to: Starbucks, Starbucks suppliers, producers, and farmers? Is the CAFÉ program sustainable for Starbucks?

Partnered with Conservation International, Starbucks built a set of coffee buying guidelines designed to support coffee buyers and coffee farmers, ensure high quality coffee and promote equitable relationships with farmers, workers, and communities, as well as to protect the environment. It was a way of doing business that was aimed at ensuring sustainability and fairness in the coffee supply chain. How to do these? Starbucks' suppliers were expected to meet Social Responsibility criteria and to illustrate economic transparency on the amount of money that was ultimately paid to farmers. Starbucks helped suppliers to cover the costs to submit a C.A.F.E. Practices applications. Moreover, the higher scores suppliers achieve,