Starbucks gives a jolt to TransFair USA

Starbucks (NASDAQ:SBUX) in October announced that it is committed to doubling the amount of Fair Trade Certified coffee it purchases in 2009 to 40 million pounds. The move makes Starbucks the world’s largest purchaser of Fair Trade Certified coffee in the world–by a long shot.

In 2007, TransFair USA, the only independent, third-party certifier of Fair Trade Certified products in the United States, reports that out of 3.1 billion pounds of coffee imported into the country, approximately 66 million pounds was Fair Trade Certified. Starbucks purchased 352 million pounds of coffee that same year, the company says.

Starbucks made the commitment to double its Fair Trade in an effort to reach a goal to sell only “responsibly grown and ethically traded,” coffee by 2015, according to the company. It also initiated a goal to make 100 percent of the company’s cups recyclable or re-usable and contribute more than 1 million volunteer hours each year by 2015.

Currently, the bulk of Starbucks’ ethically traded coffee is certified through its own program called Coffee and Farmer Equity (C.A.F.E.) Practices. C.A.F.E. is administered by Scientific Certification Systems, a third-party certifier. In 2007, 65 percent of Starbucks’ coffee purchases were reportedly certified C.A.F.E Practices protocol.

As part of the agreement between Starbucks, Fairtrade Labelling Organizations International (FLO) and TransFair USA, Starbucks is exploring ways to integrate the Fair Trade system into its own C.A.F.E. practices. Fair Trade guarantees a minimum price and addresses community development, direct trade and environmental stewardship while C.A.F.E focuses more on quality and economic transparency requirements, says Nicole Fallat, a Starbucks spokeswoman, in an e-mail. She adds the company wants to make certification under both protocols more efficient for farmers and cooperatives.

Fair Trade Certified coffee must include a price premium however, and Starbucks’ ability to pay more for coffee beans in the coming year is questionable,. In July 2008, the company announced the closure of 600 U.S. stores due to decreased earnings and an overall worldwide economic slowdown. Its third quarter earnings report, released in July, announced a net loss of $6.7 million for the quarter. During the same period last year, the company reported almost $160 million in net income.