Examination of Witnesses (Questions 40
- 59)
TUESDAY 27 FEBRUARY 2007
MS SANDRA
TAYLOR, MR
CLIFF BURROWS
AND MR
MIKE BARRY
Q40 Chairman: I thank you for coming
along. Perhaps you would briefly introduce yourselves for the
benefit of everybody here. We will then follow it up. We have
heard the background of Fairtrade from the movement and the participants'
point of view. I guess that it is now the UK end in which we are
engaged.
Mr Burrows: Chairman and Members
of the Select Committee, my name is Cliff Burrows. I have been
a director of Starbucks UK for some six years. My current responsibility
including the UK stretches across Europe, the Middle East and
into Africa.
Ms Taylor: I am Sandra Taylor,
Starbuck's senior vice president for corporate social responsibility
based in Seattle, Washington. I appreciate the opportunity to
be here today.
Mr Barry: My name is Mike Barry,
head of corporate responsibility at Marks & Spencer.
Q41 Chairman: Thank you for coming.
I start with the specifics, which will not come as a surprise
given that the Committee has recently visited Ethiopia and an
agreement with its government has just been concluded. First,
could we explore that? One of the matters which I confess I have
not quite got my head round is the trade-marking concept compared
with other things. Does Starbucks accept that Ethiopian coffee
has distinct and attractive characteristics? After all, you do
market brand names relating to Ethiopia. Does Starbucks accept
that fundamentally there is something about Ethiopian coffee that
is distinctive and, presumably, adds value to its business?
Ms Taylor: We do believe that
Ethiopian coffees are distinct. Our customers love and demand
Ethiopian coffee, and we believe that Ethiopia should have the
opportunity to brand its coffee names. We have expressed our public
opposition to trade-marking because we are persuaded by 58 years
of evidence of geographic certification of agricultural names.
We have suggested that to the Ethiopian Government as an alternative.
Recently, we reached an agreement with that government to pursue
our shared vision around the promotion of Ethiopian coffees.
Q42 Richard Burden: You objected
to the trade-marking of Ethiopian products. Do you still object
to the trade-marking of those products?
Ms Taylor: We recently reached
agreement with the Ethiopian Government that we would not oppose
its trade-marking. We greatly regret the misunderstanding regarding
our position. We look forward to research that is currently being
conducted by economists from the World Bank and at a university
in Costa Rica regarding the economic benefits of certification.
We believe that geographic certification provides certainty of
origin, direct value to the farmer and assurance to the consumer
as to the quality of the product.
Q43 Richard Burden: Is it still your
advice to Ethiopia not to go for trade-marking but you respect
its right to do so if it so wishes?
Ms Taylor: Absolutely.
Q44 Richard Burden: As I understand
it, at the time that you appeared to be against trade-marking,
perhaps through a misunderstanding, the opposition to trade-marking
in the United States came directly from the National Coffee Association.
That body opposed trade-marking, did it not?
Ms Taylor: That is correct. The
National Coffee Association took a position in opposition to trade-marking.
We are one of 183 members of that association and have one vote.
The US Patent and Trade Mark Office has made a decision regarding
trade-marks for Ethiopia.
Q45 Richard Burden: You are a member
of the National Coffee Association. At the time it took the decision
to oppose trade-marking in the United States did you support it?
Ms Taylor: As any member of a
trade association, we see this issue as an industry matter, not
one confined to a single company. Of course, we would work through
a trade association in that regard.
Q46 Richard Burden: But even if you
have only one vote you are a pretty significant member of that
association. As I understand it, it still opposes trade-marking.
Therefore, as a member of that association do you support that
continued opposition to trade-marking?
Ms Taylor: No, we do not. As I
indicated, Starbucks has one vote in the organisation. Despite
the fact that we have many stores and a very well-known brand
we buy only 2% of the world's coffee. There are members of the
National Coffee Association who buy much larger volumes of coffee
than we do.
Q47 Richard Burden: But you still
have a voice within it. Within the NCA are you making representations
that it should change its position?
Ms Taylor: We have not sought
to change its position. We have indicated to the Ethiopian Government
that we will not oppose its efforts to trade-mark—we respect
its right to choose that as an option—nor will we block
or try to inhibit the Ethiopian Government from forming a group
of licensed distributors.
Chairman: I do not want this to go on
for too long. It is a specific point and, having been to Ethiopia
and had discussions on this matter, it is helpful to have your
point of view.
Q48 Richard Burden: To make a last
point on the NCA, you say in your written evidence: "Starbucks
respects the right and choice of the Government of Ethiopia to
trade-mark its coffee brands and to create a network of licensed
distributors."[5]
There are different views about whether certification can be effective.
Do you think that the NCA should also respect the right and choice
of the Government of Ethiopia to trade-mark its coffee brand and
create a network of licensed distributors?
Ms Taylor: I do.
Q49 Chairman: Starbucks does?
Ms Taylor: That is correct.
Q50 Mr Bercow: That may have resolved
the dilemma. Listening to Ms Taylor's answers to my colleague,
I was slightly anxious that, although she was immensely courteous
and forthcoming, no clear and very clear position appeared to
emerge. You said that you did not support the NCA in its opposition
to trade-marking, to which the obvious follow-up question would
be: if you do not support the NCA in that mission do you oppose
it?
Ms Taylor: I believe that we did
express opposition to trade-marking. As we look at the positions
that governments around the world have taken regarding trade-marking
of geographic names there are different views. Starbucks believes
that this is really a matter for other governments and the WTO.
The Australian Government has taken one position; the EU has taken
a different one, as have Canada and the US Patent and Trade Mark
Office. We believe that this is a matter for trade-related intellectual
property rights. For our part, we are very committed to Ethiopian
farmers and look for ways to enhance their livelihoods and expand
our purchases of coffee from that country.
Q51 Mr Bercow: I appreciate that.
I was slightly concerned because on the one hand I feel that Starbucks
is and would consider itself to be a very significant market operator
and global player but, on the other hand, it is sometimes characteristic
of large organisations faced with a political difficulty, if I
may say so politely, to adopt a tone of self-effacement that is
not altogether characteristic of its usual public utterances or
behaviour. You said that Starbucks was one member of the Association,
that it had its views but was just "little us", but,
as my colleague Mr Burden pointed out, you may have one vote but
you are very significant players. It is important to be clear
about that. If you want to exert influence you can; if you feel
that politically and diplomatically in a sense you want to try
to get out of what is a rather embarrassing situation that is
a legitimate stance to take, but I am not sure that self-effacement
and Starbucks go together, if I may say so. You talked about how
you looked forward to forthcoming serious weighty evidence and
so on, and yet you admitted to the Committee that as an organisation
you had recently changed your position on trade-marking. I refer
to the announcement on 20 February.[6]
Ordinarily, one observes the evidence and then considers whether
or not to change one's position. You appear to have changed your
position in advance of publication of the evidence to which you
say you look forward. Therefore, I believe we are entitled to
ask: why did you change your position?
Ms Taylor: There is 58 years'
evidence regarding geographic certification. I can refer to Colombian
coffee, Antigua Guatemala coffee, Jamaica Blue Mountain coffee,
Kona coffee, Florida oranges and Parmesan cheese. There are many
examples of geographic certification of agricultural products
and names. We were persuaded by those examples that that had created
both quality and value for those producers, as well as certainty
for consumers as to the origin and quality of those products.
That is the evidence to which I refer. We very much value our
relationship with Ethiopian farmers. We regret the misunderstanding
that has arisen between Starbucks and the Ethiopian Government,
and we respect the right of that government to choose the direction
that it feels is right for it. Respectfully, we have expressed
our view that geographic certification would be better for farmers,
but that is based on the experience we have had with other coffees
in other countries. But we respect the right of the Ethiopian
Government to choose that direction. It is not our decision whether
or not a trade-mark is granted; that is for governments around
the world.
Q52 Joan Ruddock: As a matter of
history, one wonders whether it was Starbucks that raised with
the NCA its own objection to trade-marking of Ethiopian coffee
or whether the Association had taken a position and Starbucks
fell in line with it.
Ms Taylor: We expressed our position
to NCA. The NCA's position was based on other members' perspectives
and points of view.
Q53 Joan Ruddock: But Starbucks raised
it with the association first?
Ms Taylor: I believe that we were
asked our opinion by the NCA. That is correct.
Q54 Chairman: We have an article
written by Professor Douglas Holt of the Saïd Business School
of the University of Oxford, of which you are probably aware.[7]
The tenor of his article is that this did deep damage to the image
of Starbucks as a fair trading company. Is that the case, and
is that the reason you changed your position? The whole row over
the Ethiopian trade-mark damaged your position which Starbucks
has articulated over a long period of time, namely that Starbucks
is proud of its fair dealings in coffee and this row compromised
its credibility in the area of fair trade. Is that a factor?
Mr Bercow: I believe some of us
feel that it is a repeat play of the McDonald's saga of some years
ago. Eventually, the PR damage from conflict with smaller players
is such that it is thought to be politic to shift one's position.
I do not personally think there is anything dishonourable about
that in itself, but it is perhaps better to be candid about it.
Politicians do it all the time. If that is at least part of the
reason for changing your position why not say so?
Ms Taylor: Starbucks has had at
its core from the start, and for the past 35 years, a social consciousness.
It has always sought collaborative relationships with farmers
and to pay premium prices. We are the largest purchaser of Fairtrade
coffee in North America. Last year that amounted to 18 million
lbs. We believe in fair trade. We purchase a lot of certified
and organic coffee. Three years ago we launched our own ethical
purchasing guidelines covering coffee and farmer equity practices.
We do this because we want a partnership with farmers. As we grow
we want farmers to grow. We have invested in agronomy centres
in Costa Rica. We have recently announced that we shall be opening
a farmer support centre in East Africa primarily to help farmers
throughout that region improve their quality for Starbucks purchasing.
We care about what farmers think about our position and the point
of view of African governments about our business. We have always
wanted to have this kind of relationship with farmers. Our primary
concern is not to have Ethiopian farmers or farmers in East Africa
question our commitment to continued purchases of coffee. I can
say that that is the reason why we articulated a different position
and agreed not to block any efforts by the Ethiopian Government.
Chairman: We shall also explore your
fair trade credentials and how your company and Marks & Spencer
can promote it. We will now move on to that.
Q55 John Battle: To broaden the question
to include the representatives of both Starbucks and Marks &
Spencer, Ms Taylor used the phrase "social consciousness"
which is one that we ought to explore a good deal further. It
may also include basic economic justice. In that spirit perhaps
I need to be convinced that fair trade is not an add-on, an upmarket
niche development or corporate standard in the northern world,
but is a consumer choice and a means of transforming mainstream
business to ensure that markets are fairer, that, as the Prime
Minister of Dominica suggested, farmers adopt best practices,
that fair prices, terms and conditions are in operation and there
is protection of the environment. We want that cluster of social
and economic responsibilities to be built in all the way from
the farm to the table. Is that the purpose and aim of your interest
as retailers in this whole business, or are retailers and corporations
simply responding to some new consumer demands when it comes to
supporting ethical and fair trade production? Do you really have
at heart the transformation of social and economic consciousness?
Mr Barry: That is an excellent
question. Perhaps I may take the Committee on a two-minute journey
to answer that question. To take the Marks & Spencer business
model, we have 2,000 factories supplying us with products and
10,000 producers whom we know and with whom we work directly.
But there are certain parts of our business model that use commodities
such as cocoa, coffee, tea, sugar and cotton in particular where
for historical reasons we have never had the level of traceability
to put standards in place that we want to as in other parts of
our business. For us Fairtrade brings three very clear benefits.
First, it allows us to burrow deep into commodity-driven supply
chains into areas where we have, to be fair, little development
experience. It gives us a model to work directly with tens of
thousands of primary producers in some of the poorest parts of
the world. Just in terms of how we manage our business and the
kind of relationship that we have with our supply chain, even
before Fairtrade becomes a consumer-tracing benefit, it gives
us huge benefits internally. The second benefit that we have talked
about all morning relates to the consumer. Today, about 80% of
British consumers are at some form of tipping point in terms of
interest in social and environmental issues. This morning a very
good question was raised about what consumers are asking for.
I believe Ms Lamb said that today it is more than just price.
We agree. Customers look for value for money which is a function
of price, quality, trust, sustainability or whatever word we want
to use to define it. Therefore, the FAIRTRADE Mark gives consumers
certainty. In a market-place where there are lots of different
brands offered to the consumer and retailers with their own standards
there is one standard that everybody understands. The other benefit
in that consumer space is that it becomes self-supporting. If
you look at the advertisements during Fairtrade Fortnight, Sainsbury
has said some very important words about Fairtrade, as has Marks
& Spencer. We took a four-page ad in British newspapers yesterday
to talk about our commitment. It carries the Fairtrade logo. It
supports the Marks & Spencer business model and everybody
else's, so Fairtrade has some huge benefits in the consumer space.
The third big benefit of Fairtrade for organisations such as Marks
& Spencer, which sells 35,000 different product lines, is
that it makes things much more efficient for us. We as a retailer
do not want to set up our own fair trade system for every single
commodity that we sell. It would be mad. We would need teams of
20, 30 or 40 people doing the supply chain management, the outreach
to producers, the setting of fair prices and auditing it. For
us Fairtrade has huge benefits. Clearly, it is possible to do
Fairtrade only when one has core standards in place across the
whole of one's business.
Q56 John Battle: Marks & Spencer
started off in a wheelbarrow in Leeds. There is still an argument
about the quality and standards in Leeds market in terms of the
conditions for the traders there now. The roof leaks and all the
rest of it. In addition to sorting out prices and being responsive
to consumers, do you seriously suggest that your bottom line is
driven by labour standards and environmental protection?
Mr Barry: To be absolutely clear,
in January our chief executive Stuart Rose stood up and committed
the business to a £200 million five-year plan with 100 points
on it to address these very issues. We have a strong track record
of delivery in the past. We are clear that for the future that
is not enough and we shall do more. Rose has clearly tied Marks
& Spencer's future business prospects to the delivery of great
quality products at great prices in great stores but also with
sustainability and trust built into it.
Ms Taylor: At Starbucks we have
had relationships with farmers for the 35 years of our existence.
We have always wanted to deal direct with farmers and build long-term
relationships with them. Many of these relationships preceded
the establishment of the fair trade movement or system. Many of
these suppliers either would not or could not qualify for Fairtrade
because they were large farms or estates. But we believe that
fair trade is a really important way to support the farmer. Primarily,
we buy high quality, specialty Arabica coffee produced above 3,500
ft. We need a continuing supply of that high quality specialty
coffee as we grow. Therefore, it is in our business interest for
farmers to continue in business. We have a range of programmes
including fair trade that helps us supply that sustainable production.
We are also very much committed to the environment. Our coffee
and farmer equity practices were the result of a programme we
started with Conservation International. We were concerned about
biodiversity hot spots. We began with a project in Chiapus, Mexico,
with Conservation International and were very successful in helping
farmers to provide shade, to reduce pesticide use and at the same
time realise a higher value for their production on the international
market. We considered trying to do that in every biodiversity
hot spot of the world and felt that a more viable alternative
was to develop our own coffee and farmer equity practices with
a focus on economic transparency, social equity and environmental
sustainability. We believe that that combination of programmes
helps farmers to stay in business, makes a real contribution to
communities and provides the high quality coffee that our customers
expect.
Q57 Chairman: How does it compare
with the principles applied by the Fairtrade Foundation? Do you
compare notes or are you on a separate track?
Mr Burrows: I believe that there
are lots of similarities with the Fairtrade Foundation. We would
certainly applaud what has been done particularly in the UK to
raise awareness of Fairtrade with a capital "F" or fair
trade with lower case "f" and "t". For all
of the coffee that we purchase we look to many of the same elements
of the Fairtrade Foundation. Today, fair trade in the world accounts
for about 2% of the coffee, and we purchase about 14% of that.
We have seen that grow year on year. As my colleague has said,
we apply many of the same principles to existing farmers with
whom we have had relationships for 35 years across the globe in
some 60 countries. There has been investment to help them grow
better quality coffee, build long-term contracts and give social
awards back to those communities. Indeed, work has been done with
those communities to invest either in washing stations, which
improve the price that the product can attract, or social and
educational facilities similar to those referred to by Ms Lamb
earlier today. For us it is not a case of either/or; they are
very much complementary programmes.
Q58 Mr Singh: Mr Barry, Marks &
Spencer has just decided to convert its whole tea and coffee business
to Fairtrade and only those products will be sold in your in-house
cafés. A number of questions arise from that. Why have
you done it? Does it imply that when you were buying non-Fairtrade
products you were dealing unfairly with those producers? Has there
been an economic impact on Marks & Spencer as a result of
doing it and, if so, how is that being absorbed?
Mr Barry: As a point of clarification,
we use coffee and tea in three ways. In our 500 food stores we
sell about 38 different lines of coffee and tea. We serve it in
our 200-odd cafés—our Café Revive operation—and
serve it to 65,000 employees in our offices and stores. Every
single cup is Fairtrade coffee or tea today. That is a conversation
which has taken place over the past 18 months. I think that we
have provided 430 million cups of coffee and tea over the past
12 to 18 months. Why did we do it? We thought long and hard about
whether we wanted to do Fairtrade two or three years ago. Once
we decided that it was the right thing to do, for the reasons
I have outlined, we had to work out where to start it. We decided
to start with coffee and tea for a few reasons. First, when we
looked at the supply chain we found that the suppliers already
met many of the attributes of Fairtrade. There were bits and pieces
that did not, but it was a supply chain within touching distance
of being Fairtrade, so it was a good place to start. Second, we
wanted to look at ourselves in the market-place. Our sales of
coffee and tea were declining. We did not have the significant
point of difference that we wanted, so we decided that Fairtrade,
which was very popular with consumers, might be something that
we wanted to do. We launched this piece of work and it took about
two years, and it started from a supply chain that was in a fairly
good situation. One of our big concerns was quality. We literally
put all our eggs in the Fairtrade basket. We do not sell anybody
else's coffee or tea. If we had got it wrong we would have got
it very badly wrong. We had to make absolutely sure that quality
did not suffer. It did not. As a consequence of that, long term
we have seen an uplift in sales of 6%, which was exactly what
we were looking for as a business. For us it has been a very good
learning experience; it has given us the confidence to turn to
much more challenging areas, such as cotton production.
Q59 Mr Singh: What has been the economic
impact on Marks & Spencer?
Mr Barry: I think that in the
current very competitive market-place we are very pleased with
a 6% uplift in sales.
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