SRI Investors: Another Compelling Reason to Invest in Starbucks

When it comes to corporate social responsibility, Starbucks (NASDAQ: SBUX  ) rarely disappoints. It's why I'm an investor. Well, that and the fact that Starbucks also rarely disappoints when it comes to business performance metrics. You really need both sides of the equation, don't you? A CSR superstar is all well and good, unless the fundamentals of the company make it a place your money is going to languish, or even vanish in.

But Starbucks is a superstar at both ends of the spectrum, and it has just given SRI devotees another reason to invest: The company just announced it will open its first Asia-based, farmer-support center in Yunnan, China. 

Coffee, tea, or a joint venture?
Almost all of the coffee consumed in China comes from Yunnan Province, a mountainous region in the country's south that borders on Vietnam, Laos, and Myanmar. Traditionally known for tea production, it's becoming more and more known for its coffee.  But though Yunnan is a big deal for coffee-growing locally, it's still small beans in the world's coffee market. That may be about to change, however.

In early 2012, Starbucks teamed up with AiNi Coffee Company, one of the province's most-established coffee operators and agricultural companies, to establish the Starbucks AiNi Coffee Company: a joint venture that Starbucks hopes will one day provide the bulk of the coffee needed for its ever expanding China operations.  Now, lots of big companies are happy to cut deals with suppliers in emerging markets to meet their product needs, deals that may or may not be so good for the health, wealth, or welfare of those suppliers.

In this case, those suppliers are typically poor farmers. (Ever heard of a rich one?) So rather than helicoptering into China, cutting a deal that benefits only itself, and not caring about what happens to the hard-working people at the very bottom of the supply chain, Starbucks has opened this farmer-support center. With it, Starbucks agronomists and quality experts will work directly with Yunnan's coffee farmers: providing resources and expertise to not only promote processing methods that improve the quality of the beans, but also to promote responsible coffee-growing practices and to improve the livelihood of the farmers and their families.  

Making money while making a difference
Speaking of helicoptering in, cutting a good deal, and then hoping for the best, there are some high-profile companies that could learn a lot about CSR from Starbucks. Let's start with Apple (NASDAQ: AAPL  ) and Amazon.com (NASDAQ: AMZN  ) . It's well-known that both companies source some of their most high-profile tech products, like the iPhone and Kindle , from Foxconn: the Chinese manufacturer famous, or rather infamous, for installing nets around its building to keep workers from throwing themselves off .

We can also mention Wal-Mart (NYSE: WMT  ) in the same breath, which sourced apparel from two companies that were producing garments at the Tazreen garment factory in Bangladesh, which was rated for high-risk safety concerns, and where 112 workers died in a fire in November. 

"Starbucks Yunnan Coffee Project is about creating a positive change for local China farming communities," said president of Starbucks China, Belinda Wong. "Our vision is to leverage our global coffee leadership, sharing our coffee knowledge and expertise to elevate the Yunnan coffee industry and help local farmers develop localized, high-quality coffee." 

Of course, Starbucks wants to make money, and it wants to develop this up-and-coming coffee-growing region in China so that it doesn't have to cart beans from halfway around the world to supply what will almost undoubtedly be an enormous market for the company. But Starbucks still doesn't have to go to the lengths it's going to for these farmers.

Of course, from the company that helped bring the world the Coffee and Farmer Equity Standards, or C.A.F.E. -- a comprehensive set of social, economic, environmental, and quality guidelines developed by Starbucks in collaboration with Conservation International -- I would expect nothing less.

Thanks for reading, and for thinking. Looking for other great businesses that blend performance and social responsibility? If you made it to the bottom of this article, you almost certainly are. In which case, Whole Foods might be just what you're looking for. So while you're here, check out our new report on the organic foods pioneer. In it, our analysts walk you through the key must-know items for every Whole Foods investor, including the axial opportunities and threats facing the company. We also provide a full year of regular analyst updates to go with it. Get your copy today by simply clicking here.


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  • Report this Comment On December 14, 2012, at 1:31 PM, CharlieTav wrote:

    There is an interesting article that was published in Forbes Apr 28, 2010 entitled "China's Coffee Culture" written by Maura Elizabeth Cuningham

    The article addresses Starbucks in China and is somewhat pessimistic about their future existence. I will not comment anymore about the article , you should read it and draw your own conclusions.

    The Chinese will open up their own coffee shops as referenced in article mentioned. In China where nutrition is a problem , coffee is one luxury that the Chinese will not pay for; they could probably buy a couple days supply of rice for their family instead of spending money on over-priced coffee.

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