Putting Gulliver in strings: How purchasing power tied down Starbucks

List of abbreviations

CSR: Corporate social responsibility CEO: Chief executive officer NGO: Non-governmental organization USLEAP: US/Labor Education in the Americas Project TNC: Trans-national corporation ILO: International Labor Organization CAFE: Coffee and Farmer Equity Practices Program CI: Conservation International SCS: Scientific Certification Systems WTO: World Trade Organization

Globalization has not only linked countries all over the world closer together, but it

has also blurred the lines between global regulation through elected decision-makers

and global regulation through international standards or administrative principles of

trans-national corporations (TNCs). TNCs like McDonalds, Coca Cola, Nike,

Microsoft or Starbucks heavily influence the structure of the global economy and

often cannot escape the fact that their economic decisions are seen as political

decisions1. In return, under the influence of heavy marketing and branding, citizens

increasingly come to see a TNC as a political corporate citizen with a particular

worldview, political position and social responsibility2. This leads to a situation where

citizens take political decisions no longer only at the ballot box but also increasingly

when they “vote with their wallet” at the point of purchase: Opting for one product

over another is no longer a value-free transaction but becomes “a way for consumers

to vote on the company’s choices of civic engagement and have their voices heard on

a range of ethical, local, state, national, and global issues that they care about and

want to fix”3.

Making political choices through consumption behavior gains a particular

importance in international politics where, unlike in local, regional or national

elections, citizens cannot give a political mandate to an elected representative. To

enhance social development in a goods-exporting developing country, Vandenbergh

(2007) argues, consumers in a developed country therefore need to influence their

own government (directly or via a civil society organization), wait for it to influence

the government of the developing country, and observe how the developing country

government passes and implements more beneficial regulation for its citizens4. The

process is not only tedious but often riddled with political obstacles and conflicting

interests. Hence, the notion of “voting with one’s wallet” may be more effective to

improve social development in a developing country than the use of public decision-

making. Various NGOs such as Oxfam or TransFair USA have taken advantage of

this circumstance to target TNCs with pro-development communication campaigns5.

This paper attempts to add to the discussion by analyzing the effectiveness of

consumer-based campaigns in favor of social development in developing countries. It

                                                                                                               1 cf. Simon, 2011, p. 152. 2 Simon, 2011, p. 152. 3 Simon, 2011, p. 152. 4 Vandenbergh, 2007, p. 920. 5 MacDonald, 2007, pp. 798ff; Fridell, 2009, p. 87

focuses on the case of Starbucks and makes the claim that civil society initiatives in

consumer countries have obliged Starbucks to adopt ethical sourcing practices which

benefit social development in the coffee exporting countries Guatemala and

Nicaragua. For the purpose of this paper, social development is defined as

development that empowers small farmers and farm workers in developing countries,

strengthens rural communities and fosters decent wages, decent housing and decent

working conditions6.

To pursue its argument, this paper is structured in four parts. The first part

briefly outlines Starbucks’ corporate profile, its branding efforts and its supply chain

management. It also presents the degree of social development in Guatemala and

Nicaragua before Starbucks moved into the focus of civil society initiatives in 2000.

The second part focuses on the underlying reasoning and the strategy of civil society

initiatives to mobilize consumer support against Starbucks and to force the company

to work towards greater social development through its supply chain policies.

Borrowing from Argenti (2004), it notably defines two main NGO strategies vis-à-vis

Starbucks, confrontational and cooperative, and shows their advantages and

disadvantages7. The third part highlights the degree to which Starbucks’ change of

policy has improved social development in Guatemala and Nicaragua and discusses

the degree to which civil society initiatives have been effective. In the fourth part, the

author draws overall conclusions from the findings of the paper and deduces the

implications that they have for the validity of “voting power with one’s wallet”.

Starbucks’ supply chain management and social development in Guatemala and

Nicaragua

The American company Starbucks was founded in 1971 and developed into a major

global player under its CEO Howard Schultz who joined the company in 19878.

Starbucks spent time and effort to become more than just a coffee retailer. “(W)e

connect with, laugh with, and uplift the lives of our customers,” Starbucks says in its

mission statement9, adding that “(w)hen our customers feel this sense of belonging,

                                                                                                               6 cf. OECD, 2001, p. 36f 7 Argenti, 2004, p. 96. 8 Starbucks, 2011a, n.p. 9 Starbucks, 2011b, n.p.

our stores become a haven, a break from the worries outside”. It made a point of

entering the niche for high-quality coffee10 and “anointed itself as a corporate do-

gooder”11 through a comprehensive strategy comprising corporate social

responsibility (CSR) and a commitment to ethical sourcing of coffee beans12. It is one

of the sponsors of the “Business Ethics Awards” and has been repeatedly voted into

the list of the global “100 Best Corporate Citizens”13. It reached this level by, among

others, offering its employees (which it calls its ‘partners’) “basic medical, dental, and

vision coverage, as well as coverage for short-term counselling and basic mental

health and dependency treatment” and several job benefits such as a free pound of

coffee per week14. This leaves it with a much lower annual turnover rate (or rate at

which employees join and leave the company) than is the average in the restaurant

industry in the US (60% as compared to 220% in the restaurant industry), but still a

significantly higher turnover rate than in other sectors of the economy15.

With regard to ethical sourcing, Starbucks has made donations to international

charities such as CARE since 199116, and launched a series of its own projects such as

the Starbucks Foundation17 or the Starbucks Shared Planet Youth Action Grants18.

More important for the argument of this paper is the contact between Starbucks and

its suppliers in Nicaragua and Guatemala. The company established a long-term

relationship with a group of suppliers in both countries to be able to source high-

quality beans19. In 2000, for example, it paid an average of $1.20 per pound of

purchased coffee to its suppliers, which was well above the (wildly fluctuating)

market price20. However, most of its suppliers were trading companies like Atlantic

(ECOM Coffee Group) and CISA (Mercon Coffee Group) in Nicaragua, which

maintained the contact with the individual farmers and plantations21. Since Starbucks

had no system in place to make its suppliers accountable for social development in

coffee exporting countries until 200122, its supplier contracts were vulnerable to the

                                                                                                               10 Argenti, 2004, p. 97ff; Starbucks, 2011b, n.p. 11 Simon, 2011, p. 152 12 Starbucks, 2009, p. 3; Fridell, 2009, p. 87 13 Fridell, 2009, p. 93; Argenti, 2004, p. 99; 14 Fridell, 2009, p. 88 15 Argenti, 2004, p. 98; Fridell, 2009, p. 88 16 Pendergrast, 1999, p. 375, Starbucks, 2001, p. 5 17 Argenti, 2004, p. 98 18 Starbucks, 2009, p. 8 19 Lee et al., 2007, p. 395f 20 Argenti, 2004, p. 97; Seager, 2007, n.p.; MacDonald, 2007, p. 803 21 MacDonald, 2007, p. 802 22 MacDonald, 2007, p. 801f

principle-agent problem23. Suppliers had an incentive to decrease production costs to

retain the greatest part of the profit, and to manipulate the data on social development

sent to Starbucks.

Indeed, MacDonald (2007) and the US/Labor Education in the Americas

Project (USLEAP), assert that social development in both Nicaragua and Guatemala

was in a dire state in the 1990s. In Nicaragua, coffee production accounted for

roughly 30% of the economy’s total export revenues24 and in 1990, 39,34% of the

workforce was employed in agriculture or agriculture-related sectors25. Yet, permanent and seasonal workers describe their experiences of long working hours, poor food and deteriorating housing and sanitation infrastructure on farms, lack of access to health and education services, substantial barriers to freedom of association, and in some cases systematic subjection to sexual harassment and other forms of maltreatment or abuse26.

Plantation workers and smallholder coffee farmers also face severe poverty, asserts

MacDonald (2007)27. The situation is similar in Guatemala, where according to

USLEAP, the government “has consistently failed to meet the standard [demanded by

the WTO] in respecting worker rights”28. Official figures from the International Labor

Organization (ILO) show an average weekly working time of 45.26 hours in the

agricultural sector in 199029 and a non-fatal injury rate of 13,72% per year relative to

the total insured agricultural workforce in 199130. What is more, USLEAP holds that

trade unionists in Guatemala are severely repressed and occasionally even

murdered31. Starbucks engaged in two development projects in Guatemala in 1995 to

address problems in the country (one for the definition of working standards, the other

for rural water security)32, but did so reluctantly and without obvious improvements33.

In 2000, “a study ... financed by Starbucks […] found extensive labour violations” in

Guatemala, among others child labor34. Maybe it was for this reason that the first

                                                                                                               23 cf. Vanderbergh, 2007, p. 945 24 MacDonald, 2007, p. 795 25 ILO, 2011a. According to official estimates of the ILO, in 1990 441,500 workers in Nicaragua (of a total workforce 1,12 million) were employed in agriculture and related sectors. 26 MacDonald, 2007, p. 795 27 ibid. 28 USLEAP, 2003, p. 2 29 ILO, 2011b. 30 ILO, 2011c. 31 USLEAP, 2003, p. 3f 32 Starbucks, 1995, p. 3 33 USLEAP, 2011a, n.p. 34 Fridell, 2007, p. 90; also cf. USLEAP, 2011b, n.p.

major civil society campaign in 2000 targeted Starbucks’ sourcing practices in

Guatemala35.

Civil society initiatives against Starbucks: Strategy and structure

Since it entered the global economy, Starbucks has been targeted by many civil

society campaigns, many of which did not concern Starbucks’ purchasing policy at

all. Its fast economic rise commitment has put Starbucks into the position of being an

“icon of corporate power”36 that was perceive to have a lot of weight in the political

debate in the US. This unavoidably exposed Starbucks to political campaigns on the

local, national and international level37. At the same time, the company’s commitment

to CSR attracted a particular sort of customers who valued ethical corporate behavior

very highly and who could “be shamed into not buying Starbucks if that they found

out [sic] that the company’s deeds didn’t match its rhetoric”38. This, along with a

range of other factors39, made Starbucks an easy target for NGOs which even openly

admitted that “you couldn’t go after [the competing coffeehouse] Folgers . . . because

they didn’t care”40.

The overall purpose of civil society campaigns in the global North, it could be

asserted, is to channel the desires of citizens who want to advance global development

and who have given up the hope that traditional electoral politics could achieve this41.

NGOs, free from the need to make a profit from their activities, tend to be seen as

honorable fighters for sustainable social development in the world42. Their success,

MacDonald (2007) asserts, is based upon their ability to mobilize support among

developed country consumers for livelihoods of producers in the exporting country

with whom they enter into a sort of exchange at the point of purchase43. Although

NGOs engage in several activities such as research and advocacy to bring misguided

TNC behavior to the forefront, their success essentially rests on the effectiveness of

their communication campaigns, often appealing to consumers’ emotions rather than

                                                                                                               35 Argenti, 2004, p. 101 36 Simon, 2011, p. 152 37 Kirchbaum in Simon, 2011, p. 157 38 Simon, 2011, p. 159 39 Cf. Argenti, 2004, p. 100 40 Simon, 2011, p. 159 41 ibid. p. 147 42 Argenti, 2004, p. 93; SustainAbility et al., 2003, p. 37 43 MacDonald, 2007, p. 797

their mind44. If they are well implemented, communication campaigns can become a

“category killer” for a TNC, not only putting its sourcing strategy under pressure but

threatening to inflict lasting damage to its reputation and thereby bringing financial

harm upon the company45.

Argenti (2004) identifies two main strategies by which NGOs tried to force

Starbucks to comply with ethical sourcing standards, namely confrontational and

cooperative behavior46. The NGO Global Exchange was the first to threaten Starbucks

with a major confrontational communication campaign in 2000 to force the company

to purchase Fair Trade certified coffee47. The Organic Consumer Association (OCA)

followed suit in 2001, calling for a boycott of Starbucks because it used altered milk

and also calling for a greater share of Fair Trade certified coffee in Starbucks

branches48. Finally, Oxfam repeatedly targeted Starbucks in the framework of its

“Make Trade Fair” campaign that started in 2002 and continued beyond 2007 with the

aim of committing political leaders and TNCs to fairer global trade49. These

confrontational campaigns were based on more or less sophisticated communication

strategies and rather spectacular dramaturgy of demonstrations and citizen activities,

susceptible to be taken up by the media50. Global Exchange activists, for example,

firstly threatened to come together in front of Starbucks point of sales where

customers could not only buy coffee beans but also relax in the café, and secondly

planned to target the IMF and Worldbank annual meeting in 200051. Oxfam organized

its campaign via social media and a central website, and encouraged citizens to take

photos of themselves with their claims, to sign online petitions and to come to Make

Trade Fair concerts52.

The Global Exchange campaign was successful in obtaining a short-term

commitment from Starbucks to conduct its purchases through the “Fair Trade

regime”. The Fair Trade regime works with its own chain of accredited suppliers and

gives a higher share of the revenue back to the coffee farmer than a conventional

                                                                                                               44 Argenti, 2004, pp. 94, 97ff 45 Argenti, 2004, p. 94; Spar & La Mure, 2003, p. 81 46 Argenti, 2004, p. 96; cf. SustainAbility et al., 2003, pp.1ff, pp. 40ff 47 Argenti, 2004, p. 101 48 Simon, 2011, p. 159 49 Nordhielm et al., 2008, p. 3; MacDonald, 2007, p. 798; Oxfam, 2007, n.p.  50 Nordhielm et al., 2008, pp. 3ff; Simon, 2011, p. 160; MacDonald, 2007, p. 798; Argenti, 2004, p. 102 51 Argenti, 2004, pp. 100f 52 Nordhielm et al., 2008, pp. 3ff

supply chain53. Accepting the Fair Trade regime, however, meant that Starbucks had

to put its own supply chain on hold. Starbucks felt blackmailed by the

uncompromising Global Exchange campaign in 2000 but was afraid to lose its

reputation54. Global Exchange, on the other hand, derived part of its success from a

healthy neglect of the way in which a market worked and of the adaptation cost it

would impose on the company55. Three days before the Global Exchange campaign

was set to be launched, Starbucks reluctantly struck an accord with the NGO

TransFair USA to purchase and sell Fair Trade certified coffee in all its branches in

the United States for a year, pending an internal evaluation of the Fair Trade regime56.

Throughout the cooperation, Starbucks remained lukewarm and identified several

points of critique to the Fair Trade supply chain, among others a lack of economic

transparency, the fact that its habitual large suppliers could not participate in the Fair

Trade regime, and the fact that its consumers were not demanding as much Fair Trade

certified coffee as Starbucks was expected to source57.

After the one-year period had elapsed, Starbucks took matters in its own hands

by actively seeking to involve NGOs in its supply chain management. By doing so,

Starbucks arguably attempted to suppress further confrontational campaigns and tried

to direct NGOs into a more cooperative stance. Having given in to the demands made

by Global Exchange, Starbucks was afraid that other NGOs would seize their

opportunity to target the company with further demands58. Ensuing campaigns by

Oxfam, OCA and other NGOs proved it correct59. Henceforth, although it continued

to source some Fair Trade coffee60, Starbucks insisted to launch a sustainable supply

chain program of its own, the so-called Coffee and Farmer Equity (CAFE) Practices

Program in cooperation with the environmental NGO Conservation International

(CI)61. Together with CI, Starbucks developed 28 indicators for its CAFE Practices

Program that are concerned with quality, social responsibility, economic

accountability and the environment62. The program required “full traceability of

                                                                                                               53 MacDonald, 2007, pp. 797ff ; Fridell, 2009, pp. 87ff. 54  Argenti,  2004,    55 Argenti, 2004, p. 100 56 Fridell, 2009, p. 87; Argenti, 2004, p. 104 57 Argenti, 2004, p. 105, Fridell, 2009, p. 81f 58 Argenti, 2004, p. 104 59 Simon, 2011, p. 160; Fridell, 2009, p. 88; 60 Fridell, 2009, p. 87 61 Lee et al., 2007, pp. 396ff; MacDonald, 2007, pp. 801ff; Fridell, 2009, pp. 89ff 62 Nordhielm et al., 2010, p. 4; Starbucks, 2007, p. 3; Lee et al., 2007, pp. 397ff;

coffee from individual producers to Starbucks, and also what Starbucks considers to

be acceptable levels of ‘equity’ in distribution of profits across the supply chain”63.

Among others, it required farmers and plantation managers to document the

improvements taking place with regard to working conditions, housing, treatment of

waste water etc., through photos of the situation on the farms64. Rather than decreeing

compliance, Starbucks built the system around incentives for farmers, promising

preferential long-term contracts for those farmers who could meet 60% or more of the

requirements65. Not CI but a “global network of verification organizations”66, to be

licensed by Scientific Certification Systems (SCS), would then assess the entire

documentation67. This framework, according to MacDonald (2007), gave Starbucks

“substantial control over a broad range of both social and environmental variables at

the farm level”68, and thereby reduced its vulnerability to the principal-agent problem

mentioned above. It however also pulled Starbucks away from independent control

through the Fair Trade regime.

For NGOs, the move from confrontational to cooperative behavior had several

advantages69, but also severe disadvantages. While CI was associated to the drafting

of the quality indicators of the CAFE Practices Program70, Starbucks’ cooperative

stance initially suppressed other confrontational campaigns, instead allowing its

powerful marketing department to exploit success stories for the promotion of its own

brand71. After receiving data about a particularly successful development72, Starbucks

could tell its customers “that they [were] making a crucial difference through their

buying choices”73. The first mover advantage residing with an NGO in the case of a

confrontational campaign was now with Starbucks; to rectify data given by Starbucks,

all NGOs could do was to react once the information was already out.

Overall, the establishment of the CAFE Practices Program could be

interpreted both as a victory and as a defeat for Global Exchange’s and FairTrade

USA and their cooperative strategy. Even though Starbucks launched the CAFE

                                                                                                               63 MacDonald, 2007, p. 802 64 MacDonald, 2007, p. 803 65 Lee et al., 2007, p. 399; 66 Starbucks, 2007, p. 10 67 Lee et al., 2007, p. 399 68 MacDonald, 2007, p. 804 69 For examples, see Argenti, 2004, p. 107 70 CI, 2011, n.p. 71 Simon, 2011, p. 162; Fridell, 2007, p. 83 72 Starbucks, 2004, p. 23 73 Simon, 2011, p. 162

Practices Program as a direct response to pressure from these NGOs74, they failed to

achieve their original goal, namely to commit Starbucks to Fair Trade certified coffee.

Global Exchange and other NGOs have consequently resorted to confrontational

campaigns against Starbucks again from 200375 while Oxfam launched its biggest

confrontational campaign against Starbucks in 200776.

The impact of NGO campaigns and the CAFE Practices Program on social

development in Guatemala and Nicaragua

By 2010, a share of 84% of Starbucks’ suppliers were accredited through the CAFE

Practices Program77 and the company had committed to source 100% of its coffee

from suppliers accredited through the CAFE Practices Program, the Fair Trade regime

or other certification regimes78. By 2011, Starbucks had become the largest global

purchaser of Fair Trade regime coffee and thereby exerted a lot of power on the fair

trade market79. To a great extent, it was NGOs which, through both confrontational

and cooperative behavior, brought about this development.

There is reason to believe that both the CAFE Practices Program and the Fair

Trade regime were moderately successful in advancing social development in

Guatemala and Nicaragua. According to ILO statistics, wages in the agriculture and

forestry industry in Guatemala have increased 8.6fold in the period between 1990 and

200880 although coffee prices kept fluctuating81. In its Corporate Social Responsibility

Report 2007, Starbucks gives anecdotal evidence of a contract in Guatemala: In this contract, we bought coffee for $1.37 per pound from a local Guatemalan coffee exporter. The exporter paid $1.32 per pound to the producer who grew and milled the coffee. The exporter retained five cents per pound for financing, documentation and profit82.

                                                                                                               74 MacDonald, 2007, p. 801; Fridell, 2007, p. 90 75 Argenti, 2004, p. 106; 76 Seager, 2007, n.p.  77 Starbucks, 2010, p. 6 78 Starbucks, 2009, p. 3 79 Simon, 2011, p. 161 80 ILO, 2011d. According to official estimates of the ILO, the average monthly wage in agriculture in Guatemala was 180.33 Quetzal (or 16.09 EUR, calculated using the exchange rate of 19 December 2011) in 1990 and 1551.99 Quetzal (138.45 EUR) in 2008. However, the author has reason to believe that these figures may be fixed: When comparing the relationship between non-fatal accidents in Agriculture and Community & Social Services in Guatemala, the author noticed that the relationship remained at exactly the same percentage throughout the period from 1992 to 1998 (down to two digits after the comma), heavily suggesting that the numbers had been fixed. This may suggest that the government of Guatemala has fixed other figures, too. 81 Cf. Starbucks, 2007, p. 7 82 Starbucks, 2007, p. 7; also cf. Kramer, 2006, pp. 55f

Like the CAFE Practices Program, the Fair Trade regime also had a powerful allure

for coffee farmers in Guatemala, if not for its social development implications, at least

for the high price that it offers to coffee farmers83. Lyon (2007) and Murray, Raynolds

and Taylor (2006), have found high demand among farmers to become a Fair Trade

certified supplier, even though there was a general lack of understanding that the Fair

Trade regime also brought with it a degree of personal responsibility and

accountability for the farmers84. Nonetheless, some farmers used the structure of the

Fair Trade regime to set up farmer cooperatives which, once certified, gave a degree

of financial security and democratic empowerment to its individual members85.

In Nicaragua, according to ILO statistics, wages increased by 163,02%

between 1994 and 2004.86 As in Guatemala, many Nicaraguan coffee farmers entered

the fair trade market because conventional supply chains did not pay them enough to

sustain their livelihoods87. It proved to be very beneficial for the development of their

earnings and living conditions: According to a study quoted by MacDonald (2007),

participation in the Fair Trade regime has led to a household income increase of

around 10% relative to non-fair trade farmers in Nicaragua88. It also allowed farmers

to build stronger producer cooperatives and to support their activities through

capacity-building session from local Fair Trade representatives or buyers89. Another

study by Utting-Chamorro (2005) found out that the income of most small

Nicaraguan farmers had doubled since they had joined the Fair Trade regime,

allowing them to make improvements to their livelihood such as the use of electricity instead of fuel wood, better nutrition, physical improvements to their home, the ability to pay for their children's education and to buy uniforms, shoes, and books, the ability to purchase a vehicle and install a telephone in their home, and the ability to improve the condition of their farm, including purchasing inputs such as organic fertiliser, machinery, and other equipment, and hiring help90.

The CAFE Practices Program, although offering slightly lower remuneration than the

Fair Trade regime91, also gave a boost to social development in Nicaragua by

establishing positive incentives for coffee farmers and plantation owners. It                                                                                                                83 Murray, Raynolds & Taylor, 2006, p. 183 84 Lyon, 2007, p. 275; Murray, Raynolds & Taylor, 2006, p. 188 85 Lyon, 2007, pp. 249ff; cf. Murray, Raynolds & Taylor, 2006, p. 183 86 ILO, 2011e. Wages increased from 309,1 Cordoba (or 10.35 EUR, calculated with the exchange rate on 19 December 2011) in 1991 to 813 Cordoba (27,24 EUR) in 2004. 87 Utting-Chamorro, 2005, p. 588 88 MacDonald, 2007, p. 799 89 MacDonald, 2007, p. 800 90 Utting-Chamorro, 2005, p. 591 91 MacDonald, 2007, p. 802

encouraged them to work toward the social and environmental criteria stipulated by

the CAFE Practices Program and led some plantation owners to reconsider their

relationship with their workers92. For producers willing to make their farms more

sustainable, it offered capacity-building sessions in environmental practices,

economic planning and accounting93. The Program has also fostered modest improve

with regard to “working conditions and social infrastructure, such as housing, food,

washrooms and latrines”94.

Despite the many ways in which the CAFE Practices Program and the Fair

Trade regime contributed to social development in Guatemala and Nicaragua, both –

the CAFE Practices Program in particular – have been criticized for failing to deliver

on their goals. MacDonald (2007) criticizes that Starbucks “is largely avoiding

dealing with the ‘hardest’ and most sensitive dimensions of disempowerment within

the plantation model of production – in particular the issue of freedom of association

of workers”95. The achievements that have been made in Nicaragua by way of the

CAFE Practices Program are said to be “minor”96, as it only gives secondary

importance to sharing of responsibility between actors as well as principles of

accountability and empowerment97 and disproportionately focuses on environmental

criteria at the expense of social criteria98.

A second and equally important point of criticism concerns Starbucks neglect

of the Fair Trade regime. Given a rather small price difference between the Starbucks

price per pound of coffee ($1.20 per pound in 200499, $1.56 per pound in 2010100) and

the Fair Trade regime price ($1.26 per pound in 2004101, a minimum of $1.40 per

pound in 2011102), Starbucks’ decision to maintain a supply chain of its own cannot

have been determined only by financial reasons. The CAFE Practices Program was

arguably more beneficial to social development in coffee exporting countries than its

prior regime, but it essentially constituted a competing infrastructure to the Fair Trade

                                                                                                               92 MacDonald, 2007, p. 804 93 ibid.  94 ibid. 95 MacDonald, 2007, pp. 804f; cf. Fridell, 2007, p. 90 96 MacDonald, 2007, p. 804 97 MacDonald, 2007, pp. 805f 98 Fridell, 2007, p. 90 99 Argenti, 2004, p. 102 100 Starbucks, 2010, p. 6 101 Argenti, 2004, p. 102 102 Fair Trade Labeling Organization, 2011, p. 1

regime in the niche of highly-priced coffee103. The two parallel structures, together

accounting for 3% of global coffee trade in 2007 certainly increased pressure upon

other suppliers to look into ethical sourcing practices104, but they also give large

suppliers with fairly sustainable practices the possibility to play them off against one

another. Besides, MacDonald (2007) observes a “tendency of Starbucks’ marketing to

obscure the distinction between its own system of supply chain governance and that

of Fair Trade”105, thereby giving itself more legitimacy in the eyes of the final

consumer and possibly directing the consumer’s purchases away from an investment

in Fair Trade regime coffee.

A third point considers the fact that “(i)n Starbucks’ view, fair trade, like other

aspects of its CSR programme, is primarily a public relations and marketing tool”106.

Thus, Fridell (2007) holds that the verification agents of the CAFE Practices Program

are “hand-picked and trained by Starbucks”107, thereby channeling all information

about Starbucks’ supply chain management through its own marketing department

and restricting NGOs’ access to information. In the event of a confrontational NGO

campaign, this leaves Starbucks with the option of appeasing activists through a

minor, but well-publicized adjustment of its supply chain which, rather than solving

the problems, “covers them up with a band-aide”108.

It follows from these observations that Starbucks through its CAFE Practices

Program and its purchases of Fair Trade regime coffee has advanced social

development in Guatemala and Nicaragua in a rather patchy manner109. While the

CAFE Practices Program has allowed select farmers, plantation owners and producer

cooperatives to access affordable credit and to benefit from higher revenues as long as

they fulfilled 60% of the sustainability criteria, it closed its eyes to human rights

issues such as the empowerment of farmers. Contrary to its mission statement that

“(w)e’re passionate about […] improving the lives of people who grow [the

coffee]”110, Starbucks’ first rationale is to retain access to high-quality beans through

its own supply chain, to maintain its reputation and to minimize the damages that a

                                                                                                               103 Fridell, 2007, p. 92; Murray, Raynolds 2006 p. 187 104 MacDonald, 2007, p. 806; 105 MacDonald, 2007, p. 803; also echoed by Fridell, 2007, p. 91 106 Fridell, 2007, p. 91 107 Fridell, 2007, p. 92 108 Simon, 2011, p. 162 109 MacDonald, 2007, p. 808 110 Starbucks, 2011b, n.p.

confrontational NGO campaign could inflict. It thereby cleverly outmaneuvered

Global Exchange, TransFair USA and other NGO campaigns, but it was again

targeted by a severe confrontational Oxfam campaign in 2007 which led it to devote

an entire page of its Corporate Social Responsibility Report 2007 to the conflict111. It

appears that pressures by NGOs remains necessary to constrain Starbucks to work

towards social development in coffee exporting developing countries.

Conclusion

It can be inferred from the example of Starbucks that the idea of “voting with one’s

wallet” has a lot of validity. The success of a “do-good” TNC like Starbucks is very

dependent on its international reputation. Starbucks attracts a particular type of

customers that values corporate social responsibility very highly. These consumers

are very likely to change their purchasing behavior when they are confronted with

negative evidence about the company. In turn, consumer behavior empowers civil

society initiatives to use purchasing power as a weapon. Well-publicized

confrontational campaigns can be a sting that induces the TNC to make concessions

and to change its purchasing strategy. It has also been shown that cooperative civil

society behavior can be effective to make a TNC change course, but not to the same

degree as a carefully crafted confrontational campaign.

It can also be concluded that “voting power with one’s wallet” is dependent on

the existence of several underlying power structures112. A single citizen will bring

about little change with his decision in favor or against a Starbucks product. However,

if he takes his decision as part of a larger campaign that uses the sophisticated

structure, the communicative power and the reputation of an NGO, his political power

suddenly becomes much more important. This requires the ability to gain the media’s

interest and the ability to mobilize enough consumers to make the TNC fear economic

harm.

In terms of political power, this paper therefore reinforces the idea that citizens

need to be embedded in a network of some sort to give significance to their

consumption choices. It also presupposes the idea that citizens want to use their

                                                                                                               111 Starbucks, 2007, p. 6 112 Simon, 2011, p. 163

purchasing power to influence political decisions. However, this is where the concept

of “voting with one’s wallet” finds its limitations. Despite several civil society

campaigns pushing for more Fair Trade, it must be noted that overall demand for Fair

Trade coffee has remained very low113. While a number of citizens can be stimulated

to boycott a TNC, this does not necessarily translate into widespread consumer

awareness or interest about social development in developing countries. Many

consumers do not have the time or the willingness to familiarize themselves with the

consumer choices they could make in favor of social development; others altogether

refuse the idea that their purchase is a political choice. To induce these consumers to

make pro-development choices, it appears that communicative power is not sufficient.

Instead, it appears that other market instruments like taxes or subsidies would be more

appropriate.

                                                                                                               113 cf. footnote 104

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