OPERATIONS STRATEGY - CASE ANALYSIS

Starbucks and Conservation International

Submitted By Group 7 Bharath Arava - 13PGP010Vanamamalai R - 13PGP058Gugan N - 13PGP080Gautham Jayan - 13PGP123

Submitted ToProf. Parikshit Charan

OverviewStarbucksFounded in 1971 in Seattle selling dark-

roasted coffees and teasAcquired by Howard Schultz in 1987 for

USD 3.8 millionWent public in 1992Revenue of USD 2.7 billion in 2001, 5,500 (4,000 in US) stores globally in 2002

and expanding rapidly

OverviewChiapas ProjectPromote shade-grown coffee productionTechnical assistance to improve coffee qualityOrganizational assistance to effectively

market the coffeePartnership extended in 2000 with a

commitment of USD 600,000 over 3 years and 7.5 million over 3 years in 2008

Purchases of coffee increased to 1.5 million pounds in 2002 from 76,000 pounds in 1998

1. What lessons can be learned from the Chiapas project?

Importance of SustainabilityConcern of biodiversity due to the intensive

plantations as a result of comoditisation of coffee

Understanding the strengths of the company and staying focused on what its best at.

Mutual Trust and UnderstandingThe need to have common goal and

involvement from both parties when going into collaboration

Incorporating a monitoring and assessment frameworkThis also includes providing the necessary

insights to the plantation workersThe overwhelming response from both up and

down the supply chain shows relevance of the project

2. Was the approach replicable?

The Chiapas project is highly resource intensiveEncourage other parties to involve in the

collaboration to minimise the investment load on each party

Allow greater information sharing with the members involved

Replication is possible if all the stakeholders understand, trust each other and stick to their

common goals

3. What should the ongoing strategy be for Mexican Shade-grown coffee?

Mexican Shade-grown StrategiesTraditionally GrownDecreased number of IntermediariesPromoting the effects of large scale low

quality coffeeSupport from CI

FundingLearningQuality Control

Direct selling to roastersAiding in the replantation of rainforest and

other affected areas

Promotion of Environmental Safe Coffee ProductionThey should compare and contrast the

different methods of productionHigh quality Shade-Grown

BiodiversityBalance of nutrients in the soilOrganic fertilizersSocial awareness of the farmers

Low Quality Large scale ProduceAgrochemicalsDeforestationEnvironmental Imbalance

4. How might CI and Starbucks replicate the success of Mexican shade-grown coffee in other biodiversity hotspots with less

commitment of their own staff time?

Primary Measures Finding a suitable partner who is willing to

involve themselves in the plantation / community

Tie-up with NGO’s or other institutions with good social influence

Sustaining the Program Periodic monetary reward schemes for

adhering to the guidelines Inviting other major players to join the

program (eg; Hyatt and United Airlines procured shade-grown coffee)

5. How should the new coffee – purchasing guidelines be implemented

• To launch the guidelines, Starbucks will enlist the support of coffee suppliers who are sustainability advocates.

• Starbucks has instituted a flexible point system that rewards performance in sustainable categories. – Points will be accrued based on a supplier's

ability to meet the guidelines, and earning more points in the program will ensure higher purchasing preference when Starbucks purchases green coffee.

• Starbucks should also implement a verification process for ensuring quality, environmental, social and economic aspects.

6. How should Starbucks and CI approach the roasters to adopt the sourcing guidelines

Starbucks and CI should approach only roasters who are known to meet certain standards when it comes toEnvironmental RequirementsEthical StandardsSocial StandardsEmployee Standards

They should be eyeing for long-term relationships in order for the program to be economically viable for all partiesSupplier Incentive

Starbucks’ certifications would make the supplier more attractive to other potential buyers as well.

7. How might the Fair Trade coffee operations be related to the Shade-grown conservation coffee operations

Major focus and differences between the two programs

Fair Trade Focus on - small farmers or plantation workers, who are

meticulous about their business and highly attentive to their crop

It has been setup to help lift the working conditions and improve the lives of millions of people that work in the coffee growing dependent communities in the developing world

Shade-grownFocus on - biodiversity and enabling coffee growing in

harmony with the environmentEncourages the preservation of trees native to the area or

re-planting of trees that once stood on the land to provide this essential shade

OperationsIn the shade grown process CI staff were in direct involvement with the plantation

Programs for farmersSamplingGradingTracing

There was an element of trust between Starbucks and CI in their collaboration with the shade grown plantations in Chiapas.In the fairtrade process the

8. How valuable has the Starbucks- CI alliance been to both, and what should its future be ?

CI- Starbucks AllianceHelped achieve CI’s MissionStarbucks

Enormous coverage (Mention in USA Today)New Market

Financial contribution received for the Chiapas Project (Low-interest Funds from various organisations)

Positive Synergy between both the partiesMutual Trust and Understanding

Overall – Project was a success from both CI’s as well as Starbuck’s point of view.

FutureThere should be more organisations coming

up to support such programs, the investments made by CI and Starbucks alone will not be able to develop the initiatives in other areas

Sustainability is only going to be accomplished by expanding internationally – Repeat the success in Mexico in other countries

Both the companies should continue the alliance

9. What were the benefits / risks for a corporation that portrays itself as socially responsible?

BenefitsGood Public relationship – Socially aware / conscious

customersCreates Brand awarenessCustomer’s perception of being environmentally friendlyStrengthens relationship with environmentalists and

even foreign supplierMore investors

RisksThe results may require huge investments

Inability to withdraw in some circumstancesCynics and environmentalists constantly challenging

every effortMarket doesn’t value CSR

THANK YOU