Decoding the ploy: Starbucks-Ethiopia joint statement

Last week’s 4th East Africa Fine Coffee Association (EAFCA) conference was the latest venue for the ongoing dispute between Ethiopia and Starbucks. Though not on the agenda, this was probably the most widely discussed issue by conference attendees in Addis Ababa.

Starbucks continued to reject Ethiopia’s request to acknowledge its ownership of its coffee marks. At the same time, Green Mountain Coffee Roasters and several others announced that they accept Ethiopia’s position and are in the process of formalizing this acceptance.

Starbucks senior officials led by two VPs, Dub Hay and Sandra Taylor, accompanied by Rosa Whitaker, founder of Rosa Whitaker Associates, a Washington-based lobbying group, maintained the company’s opposition to Ethiopia’s trademark efforts, meeting with senior Government officials and issuing press releases. Whitaker is a former senior US Government trade official under both Presidents Clinton and Bush who now uses her expertise on behalf of Starbucks and others. In an Ethiopian TV interview, she repeated the company position that geographical indicators were better for Ethiopia than trademarks.

Should Ethiopia, a seller of coffee, take advice from a company that wants to buy its coffee as cheaply as possible, so its profits can be as high as possible? Does anyone really believe that Starbucks has Ethiopia’s best interests at heart?

After the conference ended, negotiations between Ethiopia and Starbucks continued. Starbucks has reason for worry. Other African coffee producers expressed solidarity with Ethiopia on trademarks, indicating that this is not the last that Starbucks will hear on the subject. Farmers in all of Africa’s coffee producing countries live in poverty while Starbucks reports steadily rising profits. They are all closely watching Ethiopia’s confrontation with Starbucks.

At the end of the week, a Starbucks-Ethiopia joint press statement made it out to the press. Starbucks has widely circulated this document on its website and through emails. The desired outcome is misleading the unsuspecting public. The joint press release from Ethiopia and Starbucks, no matter how tactfully drafted, shows that Starbucks has not changed its position. It is disappointing that Ethiopia would put its name on this release, which leaves the misleading impression that it has accepted Starbucks’ rejection of its trademarks. Of course, Ethiopia cannot force Starbucks to accept the trademarks. But was it necessary to publicly accept this rejection? Wouldn’t it have been better to issue separate statements?

This outcome looks like a public relations victory for Starbucks. The company said it would no longer oppose Ethiopia’s trade mark applications, which it has aggressively done, and denied. It has offered charity and some technical assistance to buy good will, and made promises to buy more coffee in Ethiopia. It claims to have the welfare of the farmers in mind. If it really had the farmers in mind, it would pay them a fair price based on what they sell the coffee to their customers.

Will Starbucks buy more coffee from Ethiopia? Starbucks refuses to reveal how much coffee it buys from Ethiopia today, and since it buys through third parties, it is impossible to know the quantity. It will be impossible to verify a claim that they increased their purchases. In other words, Starbucks is making an empty, unverifiable promise.

Starbucks says it will support technical assistance to improve the quality of the coffee produced in Ethiopia. But this will help Starbucks more than it will help the farmers. Starbucks is expanding and needs more high quality coffee. It will make big profits if the farmers increase their production of this coffee. The farmers, however, will continue to get the same small percent of the profits. It is unacceptable that Ethiopia would put its name on such a press release. Still, it should issue its own press release with an account of what has - and hasn’t - gone right. But what has exactly happened last week?

Starbucks’ carrot-stick approach

Dub Hay, senior VP, delivered the keynote speech at the 4th EAFCA conference. Despite the outcry by the major coffee growing African countries gathered for the conference, the company refused to acknowledge Ethiopia’s ownership of its own coffee brands.

Throughout last week, Starbucks’ officials have been engaged in a PR campaign promoting their carrot-stick incentive packages.

Hay announced a six point incentive package, which Starbucks hoped would dissuade the growing criticism against the company. Through the press release issued just before the conference opening in Addis Ababa, Starbucks promised to double its purchases from East Africa – currently 6% - by 2009, supporting the humanitarian organization CARE, supporting adult literacy and women training programs, coffee quality assurance program (Farmer Support Center), and make affordable credit available for farmers.

This announcement was Starbucks’ customary tactic to appease its critics. The EAFCA conference participants – over 300 of them altogether – were not convinced either. They appreciated Starbucks’ promise to increase the volume of its coffee purchase but expressed their dismay at the company for inconsiderately ignoring their plea for increased price. During his keynote speech, Hay preferred to take the attention away. He said,

"We have listened very carefully to you and what you need. The first commitment we want to make today is that we will double our purchase from east Africa in the next two years.”

Coffee producers want Ethiopia to own its trademarks

On the same day, the Ethiopian Intellectual Property Office (EIPO) convened the first meeting with the trademark stakeholders - cooperatives, exporters government bodies, and US and Canadian specialty coffee businesses who have acknowledged Ethiopia’s right to Trademark its coffee marks, Harar, Sidamo, and Yirgacheffe. The group vowed to work together for “a new type of commercial North-South collaboration – a Network of Licensed Distributors working directly with the coffee stakeholders in Ethiopia.”

Meanwhile, the conference proceedings and sideline discussions were dominated by talks about the ongoing dispute between Starbucks and Ethiopia. Starbucks’ opposition of the innovative approach taken by Ethiopia to register its finest coffee marks and thereby aim at increasing the farmers’ share in the retail price angered many participants. Major African coffee growers quickly took side and backed Ethiopia saying securing the protection rights could lift millions from poverty.

The Whitaker factor

Outside the conference, Rosa Whitaker defended Starbucks’ actions against Ethiopia’s trademark initiative on the Ethiopian Television show Meet ETV. Whitaker said that she supports GI (certification); that she's seen it work. Further she argued that the only way a country can increase income and get out of poverty is by adding value to their primary exports. Evidently, this is aimed at negating the underlying reasons for Ethiopia’s trademarking efforts.

The bottom-line

Starbucks delegation led by Hay met officials of the ministries of agriculture and rural development, trade and industry, finance and economic development as well as the EIPO.

Later on Friday, Hay held a press conference at the Sheraton Addis with local and foreign journalists. His carefully worded announcement was so misleading that the media interpreted it differently.

Hay told the press that "It is Ethiopians' absolute right to take the course they think it is best for Ethiopia. And we will not oppose that." This statement is misleading. Starbucks has worked with their lobbying group National Coffee Association (NCA) who filed a protest at the United States Patent and Trademark Office (USPTO) opposing Ethiopia’s trademark applications. The opposition is filed in 2006 and there is nothing else for Starbucks not to oppose now.

The public is demanding Starbucks to support the Ethiopian farmers by signing the licensing agreement acknowledging Ethiopia’s ownership of the marks. Mr. Hay responded by saying, "We agreed how we can help to promote Ethiopian products in our stores and to continue the ongoing dialogue. Nothing has been signed. We did not come with the mission to reach an agreement."

Starbucks’ tactic continues to be confusing the public by issuing misleading information. Last year, Starbucks announced on its press release issued in reference to the meeting between Jim Donald, Starbucks CEO and Prime Minister Meles Zenawi, that they reached an agreement with Ethiopia. In fact, the meeting ended without any agreement, thus the need for this second round attempt.

So what is it that they agreed on this time around? According to this report, “they had agreed to work with the Ethiopian government to promote Ethiopian value added products like tea and textile and to continue the ongoing dialogue.” This is in line with Ms. Whitaker’s suggested solution.

While the company’s non-binding offer to promote Ethiopia’s value added products is appreciated, the odd mix up of coffee and textile is curious. The government’s take on this is not clear.

Starbucks has not changed its position against Ethiopia’s coffee marks. Its tagline of “continue the ongoing dialogue” manifests that the company continues to drag its foot.

When asked what would happen if Ethiopia succeeded in trade marking its coffee marks, Starbucks representatives said, according to this report, they did not know the implications adding speculations would harm the ongoing dialogue. And this is the stick – Starbucks’ long-standing ally.