BUILDING VALUE CHAIN EFFICIENCY
WITH A GLOBAL COMPANY
The Case of STARBUCKS Shade Grown
Mexico Coffee

Edward Millard
Senior Advisor, Sustainable Landscapes
Conservation International

January 19, 2006

PRESENTATION OVERVIEW

1. The Partnership between Starbucks, Conservation
International and Chiapas Coffee Farmers
2. Value Chain Analysis

3. Interventions and Results
4. Impacts
- Power
- Learning
- Benefits
- Scaling Up

1. THE PARTNERSHIP: OBJECTIVES

Create social and environmental sustainability in
Starbucks supply chain
Improve benefits for Chiapas coffee farmers

Conserve natural resources
Learn what works and apply learning to other regions

1.THE PARTNERSHIP: CONTEXT

73,000 smallholders producing one third of
Mexico’s coffee
Live close to poverty line
Coffee only source of cash income
Project focused on farms located near to protected areas 2.VALUE CHAIN ANALYSIS: INDUSTRY STRUCTURE
International Market

Importers / Roasters

Quality Testing, roasting and sale

Importing, Roasting and Packing

Exporters

Purchase of coffee or fulfillment of export service contract

Payment and Export
Quality testing and milling

Extension
Service
Providers

Processors
Quality Control and Milling

Weighing and storage of parchment coffee.

Training and Evaluation

Producers
Financial
Services
Institutions
Credit to farmers

Production and Processing

Production and first stage processing by cooperatives
Training and evaluation of
Conservation Coffee Best Practices
Credit and government subsidies

2. VALUE CHAIN ANALYSIS
CONSTRAINTS
End Markets

Low price; no market presence

Enabling Environment

Entrepreneurial under-development

Horizontal Linkages

Cooperatives lack buying capacity

Vertical Linkages

Mistrust between cooperatives and traders Supporting Markets

Few service providers

Firm Level Upgrading

Farmers inexperienced in business

Power

Farmers unable to control main factors affecting their income

Learning

Concept of Conservation Coffee new

Benefits

Low price + little power = low income

2. VALUE CHAIN ANALYSIS
OPPORTUNITIES
End Markets

Growth of specialty coffee market

Enabling Environment Interest of reserve authorities
Horizontal Linkages

Investment to strengthen cooperatives

Vertical Linkages

Market power of lead firm

Supporting Markets
Firm Level Upgrading
Power
Learning
Benefits

Partners committed to sharing learning

3. INTERVENTIONS AND RESULTS
End Markets
Brand growth: 1998
2000
2002

2 containers
14 containers
44 containers

Starbucks designed sustainability program to leverage impact in its supply chain
Starbucks committed to buy 60% of all its coffee under C.A.F.E. Practices by 2007

3. INTERVENTIONS AND RESULTS
Inter-firm cooperation- Horizontal Linkages
Tradition of cooperatives in Chiapas
Cooperatives inefficient: members dispersed, officers rotated
CI unable to strengthen cooperatives sufficiently

3. INTERVENTIONS AND RESULTS
Inter-firm cooperation- Vertical Linkages
2003: Starbucks asked cooperatives to export through AMSA
Purchasing contracts stated prices paid throughout value chain