“Responsible coffee, Starbucks style”

Matt Stone

VLADIVOSTOK, Russia – About an hour from North Korea, one can order a cappuccino with cinnamon in a decidedly Western coffee shop for 80 rubles. At roughly $3, most Russians cannot afford to visit CafǸ Presto more than once a month, but nevertheless, it’s continuously bustling with customers, the most recent gossip about town, the aroma of coffee and all the major Russian newspapers.

In Vladivostok, CafǸ Presto is one of a kind: Western, slightly pricey, relaxed, friendly. That business model has been outrageously successful. But soon, it will be facing some heavy-hitting competition.

Last month, Starbucks opened its first Russian store in Moscow. The company intends to expand throughout the country within the next three years, eventually including Vladivostok.

With over 10,500 locations around the world and stores in 37 different countries, Starbucks is a global giant. China will soon become Starbucks’ second-largest market after America. Plans are in the works for expansion into Brazil and India. And in America itself, Starbucks intends to double its number of outlets to 15,000. In Washington, D.C., separate Starbucks are often located within sight of each other – sometimes across the street.

Starbucks is often reviled by the coffee snobs of the world, but its success is grounded in two core principles not regularly heard from corporate executives: a “”passion”” for coffee and a “”sense of humanity.””

In this regard, Starbucks might be on to something. The company pays its growers an average of 23 percent above the market price for their coffee beans.

A corporate commitment to ‘social responsibility’ will inevitably be the way of the future.

All employees working 20 hours or more per week are treated to stock options and comprehensive health insurance. In 2005, Fortune magazine named Starbucks one of the best companies to work for.

But Starbucks certainly has not monopolized a commitment to “”social responsibility.”” Whole Foods Market, a chain of grocery stores, publishes what every employee is paid in order to correct injustices in its pay scale. Whereas the average Fortune 500 firm dishes out 75 percent of stock options to its top five executives, Whole Foods provides only 7 percent of stock options to its top 16 executives and the remaining 93 percent to everyone else.

Other companies, such as Timberland and Patagonia, have also adopted “”social responsibility”” as a profit-generating strategy.

And it has worked. Since 1992, when Starbucks went public, its stock has skyrocketed by 6,400 percent. Whole Foods went public at roughly the same time; its stock has climbed 3,000 percent since then.

A corporate commitment to “”social responsibility”” will inevitably be the way of the future. As globalization continues to undermine the effectiveness of nation-states and their institutions, public goods – once the sole domain of governments – must be provided by a cross-section of stakeholders.

The clearest example today is the failure of the U.S. government to provide decent, comprehensive health care for its citizens. Instead, companies must create solutions, or rather, in a cost-cutting crusade like Wal-Mart’s, toss social costs on already-weakened government health programs by avoiding the issue altogether.

As Klaus Schwab, founder of the World Economic Forum in Davos, Switzerland, recently wrote, “”In the new form of global governance, multi-stakeholder networks, public-private partnerships and informal alliances of different actors will be the norm rather than the exception.””

Starbucks has already discovered how this concept of corporate global citizenship is applicable to its profit-generating business model. Other companies are starting to catch on.

At CafǸ Presto, the looming fight with Starbucks is being met with ambivalence. Some customers are angry that a homegrown company will be forced to compete with a gigantic multinational. Others are excited by the new choice. Management is decidedly apprehensive. And the employees, while remaining silent, are probably wondering what kind of salary they could earn at Starbucks.

But in America, small family-owned coffee houses have prospered greatly during the reign of Starbucks as new customers develop a taste for coffee. If that experience is any indication, and if Starbucks sticks to its vision of “”social responsibility,”” Vladivostok (and CafǸ Presto) might be in for more of a good thing.

Matt Stone is an international studies and economics junior studying this semester in Vladivostok, Russia. He can be reached at letters@wildcat.arizona.edu.