The Starbucks Affair: Is It Really Over?

"In June, Ethiopia and Starbucks made a joint statement announcing their agreement concerning their long held dispute over ownership of coffee trademarks. How did this controversy arise, to start with? Is it really over? What can Ethiopia expect now? Despite the recent joint statement, some questions remain unanswered, argues SHLOMO BACHRACH, a United States (US)-based independent consultant who visits Ethiopia regularly. Mr. Bachrach, who was also a consultant for three years to the project that was meant to help Ethiopia gain its right over coffee trademarks, has a stunning revelation on the dispute." - Addis Fortune

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The Starbucks Affair

Shlomo Bachrach
Addis Fortune
July 09, 2007

During the past year, Ethiopia and Starbucks have been engaged in a controversial dispute. A successful public campaign against the global coffee giant highlighted Ethiopia's efforts to emerge from poverty while Starbucks enjoys huge profits from Ethiopia's coffees. The campaign portrayed Starbucks as an exploiter of coffee farmers, although Starbucks tries to present itself as a company with compassion and a social conscience.

Starbucks was arrogant and surprisingly clumsy in reacting to the campaign, which added credibility to charges of insensitivity and exploitation.

Ethiopians rejoiced recently when Starbucks and the Ethiopian Embassy in Washington DC announced an end to the company's stubborn opposition to Ethiopia's coffee trademark campaign. The statement recognised "the importance and integrity of Ethiopia's specialty coffee designations".

How did it begin?

In late 2003 a United States US-based NGO called Light-YearsIP was looking for a significant project to demonstrate the value of trademarks and other intellectual property (copyrights and patents) for developing countries. I suggested to CEO Ron Layton that Ethiopia's famous coffee names might be suitable if they were not yet protected. He accepted my suggestion, and the Ethiopia trademark project began.

At that time, Layton knew nothing about Ethiopia or coffee, while I knew nothing about trademarks. But Layton and the co-founder of LightYearsIP, Peter Bloch (who also resigned without participating in the final Starbucks negotiations), had a background in intellectual property. I had long familiarity with Ethiopia beginning in 1964 as a lecturer at Haile Selassie I University (now Addis Abeba University [AAU]).

Starting in 2004, Layton and I visited Ethiopia regularly. Fantaye Biftu, state minister of Trade and Industry, quickly saw the potential and directed us to the Ministry of Agriculture and Rural Development (MoARD) and the Ethiopian Coffee Exporters Association. In Washington, Ethiopia's Ambassador, Kassahun Ayele, a former minister of Trade and Industry, also became a strong supporter.

Other early supporters included Tadesse Meskela, general manager of the Oromia Coffee Farmers Cooperative Union, and Getachew Mengistie, director general of the Ethiopian Intellectual Property Office (EIPO), now responsible for managing the coffee trademarks.

The goal was to establish national ownership of Ethiopia's valuable coffee marks and then to license their use in the global coffee market. Starbucks was not on anyone's mind until, unexpectedly, Peter Bloch discovered that the company had applied to trademark Shirkina Sun-Dried Sidamo in many countries, including the US.

This was both a blow and, surprisingly, a benefit. The Ethiopian government, although enthusiastic in principle, had been slow to provide the official support needed to get funding from a donor agency. When he learned the Starbucks application would block Ethiopia's application for 'Sidamo' in the US, Tefera Walwa, minister of Capacity Building, immediately supported a funding request, which the British aid agency, Department for International Development (DfID) accepted.

Ethiopia's global registration of the trademarks began. Ambassador Kassahun wrote to Starbucks founder and Board Chairman, Howard Schultz, on March 18, 2005, suggesting a meeting to discuss the 'Sidamo' trademark. More than a month later (in April 21), he received a short, cold note from a Starbucks lawyer rejecting his request. The "Starbucks affair" had started.

Learning that Mr. Schultz would soon be in Washington, Ambassador Kassahun again suggested a meeting and was again rejected. Months later an Oxfam representative at a coffee conference finally convinced Starbucks to talk with the Ambassador.

In the meantime, a campaign to apply pressure on Starbucks was being discussed. Ambassador Kassahun addressed the first planning session at the Embassy in Washington in October of 2005. Oxfam, whose support was crucial, was an active participant.

Starbucks finally sent representatives to meet Ambassador Kassahun in December and rejected a compromise on trademarks. Representing Ethiopia were Ambassador Kassahun and the Washington law firm of Arnold & Porter, which has provided legal support to the Embassy from the start at no cost. Layton and I were also present.

Over the next months Ethiopia was granted trademarks in various countries, including ‘Yirgacheffe’ in the US, but its applications for 'Harar' and 'Sidamo', which the National Coffee Association, the major industry group in the US, had strongly opposed, were denied. Starbucks, a member of the organisation, claims that it had nothing to do with their opposition.

The Specialty Coffee Association of America (SCAA) submitted a protest to the granting of the ‘Yirgacheffe’ trademark, but Ethiopia mobilised support, including members of the Coffee Exporters Association, to persuade them drop their protest. Starbucks, the largest member of the SCAA, now realised that it had underestimated Ethiopia. The company abandoned its applications to trademark Shirkina ‘Sun Dried Sidamo’.

Ethiopia resubmitted its ‘Sidamo’ and ‘Harar’ applications in the US. Again, they were denied, but trademarks continued to be granted in other countries.

Trademark applications were still our primary objective, but the unexpected and unwanted "Starbucks affair" now absorbed most of the project's time and resources.

In October 2006, the Oxfam-led campaign against Starbucks began. Tens of thousands of angry emails condemning Starbucks were received from around the world. Newspapers, TV, magazines and radio covered the campaign, publicising Ethiopia's fine coffees and the low prices Starbucks paid for them. Thanks to Starbucks, Ethiopian coffee became big news.

Licensing the trademarks to coffee companies soon began, but the total impact was small. Without the participation of giant Starbucks, Ethiopia could not make an impact on the US market.

Starbucks tried to pressure Ethiopia to abandon its trademark programme. The CEO, Jim Donald, met with Prime Minister Meles Zenawi in November 2006. A former member of the Clinton White House staff, Rosa Whitaker, was asked by Starbucks to meet with Ambassador Samuel Assefa, who had replaced Kassahun Ayele. A prestigious consultant came to Addis in February, 2007, but was rejected. Ethiopia held its ground.

By late March, Starbucks was fed up with the bad press. Ambassador Samuel was invited to meet with Chairman Howard Schultz, who had unhappily seen his company's reputation battered by the campaign. The Ambassador reported that Schultz claimed he had been unaware of what was being done by his staff for more than a year - Starbucks is a very large company - and was shocked to learn how badly they had handled the situation.

Negotiators met in April, leading to the announcement on May 3, 2007, that Starbucks and Ethiopia had agreed, in principle, to end their dispute. Representing Ethiopia were its attorneys, Ethiopia's trademark chief, Getachew Mengistie, and Ron Layton, its trademark advisor.

This announcement immediately gave Starbucks what it wanted most - headlines reporting a friendly agreement with Ethiopia - which would end public criticism even before an agreement had been negotiated. From the company's point of view, the headlines were more important than the agreement itself.

But Ethiopia was now in a weak negotiating position. Starbucks had what it most wanted, so it had little need to compromise. Ethiopia, however, still had gained nothing.

The joint announcement of an agreement was made on June 18 and was widely praised. Oxfam USA's President, Ray Offenheiser, formerly a sharp critic of Starbucks, was among many who were enthusiastic.

"Congratulations to our Ethiopian coffee farming partners and to Starbucks on an agreement that recognises Ethiopians' right to control the use of their specialty coffee brands," says an Oxfam press release. "With this agreement, Ethiopians can build the value of their coffees and farmers can capture a greater share of the retail price."

But a close look at the announcement raises some questions. It does not say, for example, that an agreement was signed; only that it was 'concluded'.

If it has been signed, why not say that clearly? How does Ethiopia benefit? Will Starbucks become a member of the 'network of licensed distributors' of Ethiopian coffee that is being formed, and will it accept the same obligations as other members with respect to Ethiopia's trademarks?

The joint statement is vague and the agreement itself is still secret. A few reporters noticed that the announcement offers nothing for the farmers, though Oxfam's Offenheiser and most others overlook this.

The statement salutes Starbucks for its "exemplary display of global corporate citizenship".
Does it deserve such praise? The statement refers to marketing and distributing Ethiopia's coffees, but mentions no financial support from Starbucks.

Following the joint statement, an announcement ceremony was scheduled at the Embassy for June 20 at which Ambassador Samuel Assefa and "senior officials" of the company would formally present the agreement, followed by a reception at the Ambassador's residence. On the following day the ceremony and reception were abruptly "postponed". More than two weeks later, nothing further has been heard regarding the status and content of the agreement.

Starbucks recently made several other announcements of interest. It established an East Africa coffee research centre in Rwanda. Ethiopia, Africa's biggest coffee producer, might have expected to be the site of such a centre. Starbucks also announced plans for a coffee processing centre in Uganda, another small coffee producer. Ambassador Kassahun had suggested this to Starbucks years ago without success.

Will the agreement commit Starbucks to similar investments in Ethiopia's coffee sector? Until it is made public, we will not know.

The coffee project became two projects. One, "the Starbucks affair", affects mainly the US and may be reaching its end. The second is more important in the long run: to own Ethiopia's coffee trademarks globally and use them to increase its share of retail coffee prices, benefiting both farmers and exporters. This is less dramatic than a public dispute with a global giant.

Nevertheless, this was the initial reason for the project and remains its primary objective.
One thing is certain. Even if Ethiopia owns its trademarks, it will gain little from them without a well-designed campaign to make the trademarks known. This will require skill, money and time. If done properly, it can eventually repay the investment many times over. Without it, the trademarks will have little value.

Coffee marketing and brand name development are both highly specialised activities. Perhaps it is time for Ethiopia to engage prominent experts in these fields to advise the Ethiopian government, and let EIPO and its advisors concentrate on additional trademarks, registrations in new markets such as China and India, as well as overseeing the use of the trademarks.

Trademark expertise, though important, is not the same as the branding and marketing skills Ethiopia needs in order to benefit from the trademarks.