Written by: Andrew Nathan

Starbucks Coffee (Thailand) Co. Ltd.

Sustainability at Starbucks
Coffee Thailand: From
the Bean to the Cup
Finding Success by Marketing Your Company’s Values to all of Your Stakeholders

R
ight now, at your local Starbucks, you can have a great
cup of coffee that will not only make a wonderful dif-
ference in your day, but will positively impact the lives
of hilltribe coffee farmers in the north of Thailand. The name
of that coffee is ‘Muan Jai’ (which means ‘whole-hearted happi-
ness’ in the northern Thai Kum-Mueang language), and its story
demonstrates how brand value can be enhanced by letting values
drive strategic decision making.
If brands are about trust, then we know that trust is not
an entitlement but rather an incredibly valuable commodity that
has to be earned everyday. Our customers expect the best from
Starbucks. They want exceptional service, convenient locations,
pleasant surroundings and supreme quality coffee.
But there’s more to the story. Our customers expect us to con-
duct our business responsibly. While enjoying their favorite Star-
bucks coffee beverage, they want to know that we paid the farmers
a fair price for the beans; that the coffee was grown in an ecologi-
cally sound manner; and that we invested something meaningful in
the farming communities where our coffees are produced. Coffee break with Khun Ler Kankheaw at Huay Hom village.
These, too, are our expectations and we strive to meet them
on all fronts. Our actions are driven by Starbucks Guiding Prin- bica coffee, which flourishes in higher altitudes and has a more
ciples, and in particular the third principle – applying the high- refined flavor compared to the robusta varieties, which grow in
est standards to the purchasing of our coffee. It signals the lower elevations. Starbucks only purchases arabica coffee beans.
enormous emphasis we place on quality, and calls upon us to Arabica coffee is sold in two distinct markets – the commod-
embrace a socially, economically and environmentally responsi- ity and specialty markets:
ble approach to sourcing the finest coffees in the world.
• Commercial-grade arabica coffee is traded as a commodity
A SNAPSHOT OF THE COFFEE INDUSTRY in a highly competitive market on the New York “C” (the
Coffee is consumed all over the globe, making it one of the worldwide reference used by coffee traders for commercial-
most valuable primary products in world trade. It is an important grade coffee). During 2003, “C” prices for commercial-
source of income for an estimated 25 million people living in grade arabica coffee were as low as U.S.$0.55 per pound
more than 70 tropical coffee-producing countries. As an export, (U.S.$1.21 per kilogram).
it is crucial to the economies and politics of many developing • Higher-quality arabica beans are sold to the specialty coffee
countries, and in some cases accounts for 80% of their foreign market, which represents 10% of total worldwide coffee pur-
exchange earnings. chases. Specialty coffee is produced mostly on small-holder
There are two commercially important species of coffee – farms and can command much higher prices than commer-
robusta and arabica. About 75% of the world’s production is ara- cial-grade arabica.

18 ! Thai-American Business / July-August 2004

 In recent years, a variety of factors have stimulated a rise in
global coffee production, while consumption has remained rela-
tively static. The result is a coffee surplus that has driven prices
down to levels not seen in 30 years. This has been devastating
for many coffee farmers who produce commercial-grade coffee.
They are not earning enough to cover their costs of production
or make a profit. One encouraging sign is the rise in consumer
demand for high-quality specialty coffee. Since the early 1990s,
this segment of the market has grown dramatically, as consum-
ers have demonstrated their willingness to pay more for gourmet
coffee. As a result, farmers who produce high-quality coffee can
command better prices for their crops from Starbucks and other
coffee companies that buy only premium beans.
SUSTAINING COFFEE COMMUNITIES
Starbucks believes that by implementing a long-term, sustainable
strategy we will be able to improve conditions for farmers. We’ve
formalized our practices into a holistic approach that is focused
on helping farmers earn more, protecting the environment and
ensuring Starbucks demand for high-quality coffee continues to
be met. Our approach includes the following measures:
• Paying farmers fair prices and offering favorable terms;
• Rewarding farmers who adopt Starbucks Coffee Sourcing
Guidelines;
• Investing in social programs that benefit coffee-producing
communities;
• Purchasing certified and conservation coffees; and
• Providing farmers access to affordable credit.
• Practicing environmentally friendly cultivation, including
growing coffee under natural jungle cover and eliminating
the use of chemical pesticides and fertilizers;
• Gaining Fair Trade certification from the Japan Fair Trade
organization.
It was clear to us that not only had we discovered in North-
ern Thailand a coffee with potential to enter the Starbucks
line-up, but a group of highly motivated growers with whom we
could enter a long-term relationship built on the sustainability
of their coffee production. The first-ever Starbucks purchase of
Thai coffee was executed at the end of 2002. Starbucks paid the
Fair Trade benchmark price of U.S.$1.26 per pound, or about
three times the then-going rate.
CREATING ‘MUAN JAI’
Once the source of Thai coffee was found, the team then set out
to create a name, image and story about the coffee that would
not only appeal to Thai customers but would also appeal to a
global customer.
One key success factor of Starbucks is our ability to tell the
stories about our different coffees. Coffee has an incredibly rich
history, from the different growing regions all around the tropical
zones of the world, to the more than twenty-five million people
who base their livelihoods on producing coffee, to the many ways
that coffee can be prepared and enjoyed and finally to the great
variety of flavors and other characteristics of the coffee itself.

CONNECTING WITH FARMERS IN THAILAND

Last year, we were proud to introduce our customers in Thailand
to Muan Jai Blend. This coffee was the result of a project started
in January 2002, when Starbucks Coffee (Thailand) embarked
on an initiative to scour the northern part of Thailand in a search
for quality arabica beans that would meet the premium standards
of Starbucks Coffee while laying the ground work for a long-
term sustainable relationship with local coffee farmers.
Prior to 2002, Starbucks had never purchased coffee from
Thailand; indeed Thailand, while a coffee producer, was not
known as a coffee exporter. Generally, all of the coffee produced JWM (2...)
in the Kingdom was for local consumption and Thai coffee was
not known internationally as a significant producer for the spe-
1/4
cialty trade. 4 Colours
Despite the seeming lack of potential of Thailand as a green Note: ??
coffee supplier for Starbucks, due to our retail presence in the
Kingdom, we felt a special obligation to take a much more com-
prehensive survey than had been done previously.
Our search eventually took us to the hill tribe coffee farmers
of Huay Hom village, located in Mae Hong Sorn, and also con-
nected us with a local NGO, the Integrated Tribal Develop-
ment Program (ITDP). During this first visit, it was immediately
apparent that the farmers of Huay Hom, working with support
from ITDP, had already taken important steps to grow coffee
targeted for the specialty coffee industry:

• Creating a farmer’s cooperative to pool resources for credit,

investment, knowledge sharing, and marketing of the coffee;

American Chamber of Commerce in Thailand ! 19

 Imagine if all you knew or cared about wine was that it could
be red or white? For people who may once have thought that
coffee came only hot or cold, black or with cream and sugar,
discovering that there is a whole diverse world of coffee can be
nothing short of a revelation and an immense enrichment of
their daily cup.
The additional mission of the team was to not only tell the
story of Muan Jai Blend, but to use the coffee as a vehicle to
tell the broader story about the need in our industry to promote
sustainable coffee relationships between growers and roasters.
The Muan Jai message was targeted not only at consumers
but a variety of internal and external audiences in order to gener-
ate their interest and support:

• Starbucks Coffee employee/partners: This was the most

important group, because it is the job of the Starbucks baris-
tas in the stores to communicate directly with customers
about coffee. This group was involved from the very begin-
ning; in fact, the name of the new blend, Muan Jai, was the
outcome of an internal naming contest. Because of our per-
sonal relationships with the coffee farmers, several groups of
our ‘coffee masters’ have made the long trip to Huay Hom
village to stay over, help to pick coffee and to learn more
about the way of life of our partners in the coffee business.
Our partners were especially proud that their organization
was contributing in such a meaningful way to the nation and
demonstrated their enthusiasm for this coffee by helping to
quickly make it our top seller (after only espresso).
• Thai coffee farmers: Some of the farmers flew down to
attend the launch. For many of them, it was their first time
leaving their villages and the surrounding areas. In our stores,
they could see the care that Starbucks takes to prepare coffee
that is so painstakingly grown as well as our program to com-
municate to our customers all of the toil and passion that
goes into putting a ‘simple cup of coffee’ into their hands.
• Starbucks Coffee (Thailand) customers: We are often
asked, “If Thailand is a coffee producing country, then why
does Starbucks continue to import coffee for sale in Thai-
land?” As the world’s largest specialty coffee roaster and
retailer, of course it is the business of Starbucks to bring the
world of coffee to its customers all over the world. Our cus-
tomers responded very positively to being able to drink the
best coffee that their own country has to offer, as well gain-
ing a new understanding for all coffees through the story of
Muan Jai. The knowledge that 5% of all sales of Muan Jai
are set aside in a hilltribe community development fund only
makes the coffee more attractive.
• Government bodies and NGOs: These groups are often
advocates for the rights, welfare, economic, environmental
and social well-being of farmers, rural communities, ethnic
minorities, etc. Public/not for profit/private sector relation-
ships can help to further the goals of all involved parties.
• Starbucks Coffee International: Since Starbucks had not
previously purchased coffee from Thailand, it was incumbent
on us at the local business unit to provide the business case
for Muan Jai. Thanks to the unique and positive relationship
that our local retail business has with the farmers’ coopera-
tive Muan Jai could be positioned as a platform to tell the
broader coffee sustainability story. Our first year was so suc-
cessful that Muan Jai was featured prominently the compa-
Bangkok Starbucks staff.
ny’s FY2003 Corporate Social Responsibility Annual Report.
In addition, for this, the second year of the Muan Jai pro-
gram, Starbucks has increased its purchase of Thai coffee
tenfold and will be distributing Muan Jai Blend to five other
countries in Asia Pacific.
CURRENT STATUS
While Muan Jai Blend has been a constant feature in our stores
since its initial launch a year ago, we are now preparing for its
second year re-launch and the celebration of some important
new accomplishments.
This September, Muan Jai will be available not only in Star-
bucks stores in Thailand but also in five other countries in the
Asia Pacific region, most of whom will also be remitting 5% of
their Muan Jai sales back to the community development fund.
This year, greater emphasis will also be placed on programs to
support the hilltribe community and environment, while provid-
ing additional opportunities for participation and volunteerism
by our partners in the villages. At the end of August, the Star-
bucks Coffee Thailand leadership team will travel together to
Huay Hom to help with the construction of a new water system
for the village as well as the renovation of the school. And, as
with last year, we will again send our ‘coffee masters’ to partici-
pate during December and January in this year’s coffee harvest.
THE FUTURE OF MUAN JAI
With the continued support of our customers and in on-going
partnership with the hilltribe farmers in Northern Thailand, we
hope to soon put Thai coffee on the map and see Muan Jai
on store shelves in Seattle, New York, Paris and as many as pos-
sible of the more than thirty countries in which Starbucks Coffee
Company does business.
Andrew Nathan is Managing Director of Starbucks
Coffee (Thailand) Co. Ltd. He can be reached at:
andrew@starbucks-thailand.com

20 ! Thai-American Business / July-August 2004