The better part of the pie
Even then, as explained at MarginalRevolution.com, the whole Fair Trade movement is hardly fair. Here is how it works. It segregates the coffee market into normal and Fair Trade coffee, roughly creating two distinct price ranges. The more conscientious of us will pay for Fair Trade, with the promise of better treatment of coffee farmers; others will opt for regular coffee. Either way, profits go up and production increases.
But input prices remain the same, and coffee farmers put in the same hours – perhaps even more because demand will have risen. And the more the Fair Trade movement catches on, the harder they will have to work to meet this demand. In the long run, the profit from Fair Trade may not be enough to sustain them. From the development optimist’s point of view, Starbucks will always have the better part of the pie.
Survival of the fittest
Turn any corner in Seattle and a Starbucks will present itself, beckoning you to fork your dollars over for coffee (in a tall cup that is actually short). Starbucks has been touted the McDonalds of coffee shops, and for good reason. They are everywhere, and local coffee shops – and the families they sustain – are getting written off the map. Starbucks dominates by gentrification, or as the IWW Starbucks Union describes it, “market cannibalization.”
Although gentrification is an issue with most large establishments, Starbucks seems to have a distinctly unethical way of doing it. According to the same article, the company employs Darwinism as its business model – only the strongest survive – and as trends show, indie coffee shops simply cower at the presence of a Starbucks. While it works in their favor, it kills local industries in the process and promotes corporate imperialism.
Wherever there is a successful local counterpart, Starbucks puts up a shop or two to compete. Agents scout the town, take pictures, and study demographic potential like your typical bully business. Here’s where they start to play dirty.
Starbucks finds the town’s leading coffee shop, buy out their property, and build their own outlet. If they refuse to sell, Starbucks retaliates by building outlets on practically every corner, and drawing in customers with heavy promotion and advertising. Other times they occupy their own commercial buildings, and purposely rent it out to competitors of local businesses to further run them down.
When they have successfully driven local shops out of business, the town is left with so many Starbucks franchises that it becomes unsustainable. Eventually this tactic goes full circle on them, and the outlets have nothing to compete with but each other. New outlets eat up the sales of the old ones, and because the stores are so densely clustered, there is no profit loss on their part. In fact, according to the company’s 2002 report filed at the Securities and Exchange Commission (SEC), this tactic has earned them a 24% revenue growth in the said year.
Injustice in a cup?
So what really goes in to a cup of Starbucks coffee? What constitutes the Starbucks Experience? Starbucks sells the feeling of class for sipping $3 coffee in a world where $1 can feed an entire family for a day. At least according to its detractors, it sells injustice – injustice to the working class, to its underpaid laborers, and to the millions of drinkers who blindly believe that they are ingesting an innocent cup of coffee.
(contributed by June An Ruivivar)