March 30, 2004
Sara Lee's (NYSE: SLE ) agreement to buy coffee certified by Utz Kapeh Foundation, a nonprofit group that promotes sustainable methods of coffee growing, provides some insight into the growing importance of "sustainability" in Corporate America.
Sara Lee (which sells the coffee brands Hills Bros., Chase & Sanborn, and Chock Full O'Nuts domestically) reportedly plans to start small by buying 2.5 million kilograms of the certified coffee, although it is also working with Utz Kapeh to evaluate its existing growers. As the third-largest buyer of green coffee in the world, Sara Lee may prompt other major coffee buyers, such as Kraft Foods (NYSE: KFT ) , Nestle SA (OTC BB: NSGRY), and Procter & Gamble (NYSE: PG ) , each of which already have their own sustainability initiatives, to follow its lead.
The coffee market has endured a multiyear slump that is only recently showing signs of lifting. Small farmers in the developing countries where most coffee is grown have suffered tremendously as prices remained mired at record lows. The anti-poverty group Oxfam America recently estimated that 25 million coffee growers and their families face starvation due to the poor market.
Even investors who couldn't care less about the plight of these farmers should applaud Sara Lee's new effort. Problems such as these have a nasty tendency of surfacing on the evening news or in investigative reports, and companies implicated in the troubles tend to suffer a public relations backlash that can be bad for business. In years past, both Nike (NYSE: NKE ) and Gap (NYSE: GPS ) have taken heat for labor practices. A similar story has been brewing for some time in the coffee segment. Earlier this month, Time Warner's (NYSE: TWX ) Time magazine featured a story on fair trade coffee that cited the disparity between the major buyers' profits and farmers' misery.
By taking this step, Sara Lee both has suggested that it has a social conscience and insulated itself against public outcry. Concerned citizens and investors can agree that's a good thing.
Mathew Emmert recommended Sara Lee for subscribers toMotley Fool Income Investor. You can take a free 30-day trial to find out more.
Fool contributor Brian Gormanis a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.