Global Insight Perspective | |
Significance | Ethiopia, where coffee was first discovered more than 3,000 years ago, has recently overtaken Côte d'Ivoire to become the leading African coffee supplier, with an estimated 15 million Ethiopians depending on the cash crop to make their living. |
Implications | With proceeds from the key commodity still remaining relatively low, the Ethiopian government has been seeking to trademark its most famous coffee names internationally, in order to maximise its profit. However, according to the international non-governmental organisation Oxfam, Starbucks has played a leading role in getting the application being rejected in the United States, costing the impoverished country millions of dollars in potential lost earnings. |
Outlook | Although Starbucks denies any involvement in getting Ethiopia's application blocked, its implication in such a controversial—and which on the surface seems highly unethical—affair is bound to show the company in a negative light in contrast to the positive, "socially responsible" image it has been seeking to foster in recent years. |
According to the international non-governmental organisation (NGO) Oxfam, Starbucks has blocked Ethiopia's bid to trademark two types of coffee bean in the United States, denying the poor Horn of Africa country up to £47 million (US$88 million) a year in potential earning. The NGO claims the global retail chain asked its industry grouping in its home country—the National Coffee Association (NCA)—to lobby the U.S. Patent and Trademark Office (USPTO) to block Ethiopia's applications to trademark two of its most famous coffee types last year.
Oxfam claims that the Addis Ababa government, with support from the United Kingdom's Department for International Development (DFID), applied to trademark three of its most famous coffee types, Sidamo, Harar, and Yirgacheffe—named after the southern Ethiopian towns from which they hail—which would have allowed the country to gain more control over its coffee trade and a larger share of the earnings for millions of coffee farmers living in poverty. However, the USPTO approved only the application to trademark Yirgacheffe, rejecting Ethiopia's quest to do the same with Sidamo and Harar and creating serious obstacles for its project.
Starbucks has denied that any involvement in getting Ethiopia's application rejected by tipping the NCA, a claim corroborated by the industry group, which said that it sought to block the application on economic grounds. "For the U.S. industry to exist, we must have an economically stable coffee industry in the producing world," Robert Nelson, head of the NCA told the BBC.
Nelson also claimed that Ethiopia is "being badly advised" in seeking to trademark its coffee beans, suggesting that the Horn of Africa country would price itself out of the market, which would ultimately reduce the demand for coffee from the country.
Outlook and Implication
A global retailing giant and one of the most successful marketing stories of the new millennium, Starbucks' alleged involvement in getting Ethiopia's trademark application blocked, which Oxfam claims denies the country the ability to assert its rights and capture more value from its product, has all the makings of a public relations disaster for the U.S. company.
Another coffee giant, Nestlé, suffered a huge public backlash back in 2002 after it tried to sue the Ethiopian government to recover the assets of a local subsidiary that had been nationalised some 30 years earlier. Although the claim was legitimate in legal terms and the Addis Ababa government was seeking to negotiate a settlement without being dragged to court, the company's insistence on full compensation brought it much unwanted criticism, with development and humanitarian campaigners accusing the Swiss company of being immoral and unethical in seeking to extract full compensation at the time when the country was battling against the effects of another drought-induced famine (see Ethiopia: 24 December 2002: Nestlé Suffers PR Disaster in Compensation Claim Against Ethiopia).
Following the furore caused by the latest revelations, Starbucks claims that it wants to work with Ethiopia to establish a geographic certification for the coffee bean names, much as wine growers in France have done with the word "champagne". However, Oxfam has hit back, claiming that it is not up to Starbucks and the NCA to tell Ethiopia how to market or sell its coffee and arguing that the decision should be Ethiopia's alone.