The Coffee War Mars Globalisation

By Amitava Basu
Financial Express
March 25, 2007

IT is amazing the way wild berries in one corner of Africa grew to transform into a popular, international beverage. Coffee plants were first located growing wild in the highland forests of Kaffe in Ethiopia, from where it derived its name. No one knows when exactly coffee was discovered. However, there is evidence to suggest that sometime between 575 A.D. and 850 A.D., a nomadic mountain tribe called Galla used to ground coffee seeds and mix with animal fat and ate it.

From its birthplace in Ethiopia, coffee berries were transported to the Arab world. From there, coffee travelled to Turkey. It was here that coffee beans were roasted for the first time over open fires. The roasted beans were crushed and then boiled in water, creating a crude version of the beverage enjoyed today. Later, the Venetian merchants brought coffee to Europe. It was only in the 18th century that coffee found its way to the Americas, when a French infantry captain brought one small plant that he nurtured during his long journey across the Atlantic. This one plant transplanted to Martinique in the Caribbean, became the predecessor of over 19 million trees on the island within 50 years. It was from this humble beginning that coffee plant found its way to the rest of the tropical regions of South and Central America.

Even today, Ethiopia produces some high quality arabicia coffee as well as cheap robustas. Coffee contributes about 54 per cent to the country's Gross Domestic Product (GDP) and constitutes nearly 90 per cent of Ethiopia's exports. Out of 75 million population of Ethiopia, 15 million are coffee farmers.

Over the years, coffee houses serving this beverage have spread across countries and become place for meeting friends, relaxation and intellectual exchanges. Today, coffee is one of the most popular beverages across the world. Estimates indicate an annual global consumption of over 400 billion cups of coffee. It is a giant global industry employing more than 20 million people.

Of late, traditional coffee houses are giving way to western-styled coffee shops customised to cater to the interests and tastes of local customers. Founded in 1971 in Seattle Pike Place Market, Starbucks, the US coffee giant, is the leading pack with nearly 3000 outlets in about 37 countries.

Starbucks' mission underlines, inter alia, on application of highest standard of excellence to purchasing of coffee; and, on positive contribution to the community. As part of its Corporate Social Responsibility, Starbucks endeavours to champion business practices that produce social, environmental and economic benefits for the community; and focuses its efforts on improving social and economic conditions of the coffee farmers.

Yet, Starbucks is criticised by OXFAM, a UK-based development, relief and campaigning organisation, of not doing enough to help coffee growers in poor countries. Usually, the Ethiopian coffee farmers receive on an average $1.42 for a pound of coffee as against Starbucks' selling price of $26 a pound. Many of these farmers earn below $1.0 a day.

To ensure level playing field in international market and to enable the coffee farmers to trade on more equal terms with their buyers, Ethiopian Government has filed application with the US Patent & Trademark Office (USPTO) for registration of trademark in the US of its famous coffee names -- Sidamo, Harar and Yergacheffe. Registration of trademark for Yergacheffe is granted, but registration of trademark for other two brands is pending.

OXFAM alleged that Starbucks, which is an influential member of National Coffee Association (NCO) of the US, has prompted NCA to lodge protest before USPTO and prevent the attempt of Ethiopian Government to register the trademarks in the US of its key coffee brands. Starbucks responded to this allegation by publicly announcing that it is committed to paying premium prices for all its coffee and this is part of its integrated approach to coffee sourcing which includes Coffee and Farmer Equity Practices (C.A.F.E. Practices), a set of socially responsible coffee buying guidelines. Additionally, between 2002 and 2006 Starbucks increased its Ethiopian coffee purchases by nearly 400 per cent. However, Starbucks contends that it is illegal to trademark Sidamo and Harar coffee since the names represent geographical regions. A large section of trademark lawyers do not agree with this contention.

Starbucks suggests that instead of registration of trademark, Ethiopian Government could go in for geographical certification of coffee in lines similar to that like Jamaican Blue Mountain Coffee, Florida Orange Juice and Napa Valley Wines. Though geographical certification guarantees a point of origin and standard of quality, it does not bring farmers additional revenue.

The protagonists of trademark for Ethiopian coffee argue that trademark would require licence for companies wanting to use the names of the key coffee brands, and that would provide the coffee producers a commercial asset which they could control. But, certification would not give this benefit. In other words, securing rights under trademark would enable Ethiopia to capture more value from the coffee trade by controlling the use of names in the market and, in turn, enable farmers to receive a greater share of the retail price.

When gurus of globalisation advocate " grow locally, serve globally " which would increase interdependence, integration and interaction among people and corporations in disparate locations around the world, the comatose stage of Doha Round of Trade Talks and the incident like the one involving Starbucks and Ethiopia create barriers to globalisation. The recent poll survey carried out by GlobeScan and the World Bank reveals that two out of three Africans surveyed expressed their concern that the developed countries have not treated them fairly over trade issues, though they state that globalisation has positively affected their lives. The issue that now looms large is whether globalisation would really happen in right perspective. Available financial reports indicate that Starbucks' revenue has surged by 22 per cent to $7.8 billion and its profits reached nearly $2.0 billion in the last fiscal year. The threat that registration of trademark of Ethiopian coffee would lead to increase in coffee buying price and impact the profits of Starbucks seems frivolous as it is unlikely to make any significant dent in the company's bottom line. Let free and fair trade usher to end the coffee war, reduce the fissure between the developed and the developing nations and make the world a better place to live in.

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The writer is a development practitioner based in New Delhi, India