Costco, Starbucks and Fair Trade Coffee

There are a few questions I have been mulling over that I am interesting in hearing what others may have to say in response:

  1. Did you know that Costco is now selling Fair Trade Certified coffee? (This may only be in select areas — they have it in San Luis Obispo, CA.)
  2. Did you know that the coffee, branded under the Kirkland name (Costco’s brand), is roasted by Starbucks (House Blend, Caffeinated and Decaffeinated)?
  3. If Starbucks is supplying that much Fair Trade Certified coffee to Costco, are the storefronts the next move?
  4. Despite Costco’s healthy employee focus as well as a dedication to offer organic products (vegetables and milk so far, though regionally there might be more/fewer offerings) as well as Fair Trade coffee, is it okay to shop there, or is Costco simply a less-bad Wal*Mart?

Costco
My wife and I have been Costco members for as long as I can remember, and although we primarily purchase business-related items there, we also do some personal shopping there as well (some trips more than others). In an attempt to come full circle in our effort to support local businesses and organic farmers (the local small ones as often as possible), we are seriously questioning whether or not we should continue to support Costco. Like most consumers who care about such issues but still compromise and make a few purchases there periodically, most of our decision to continue to shop there boils down to convenience and pure cost savings.

The compromise has been eating at me more and more over the past year, but I continually struggle with the point I make in the fourth question above. Costco is widely known (or reported) as a very employee-focused company. A quick search of “Costco and Walmart” turns up a number of articles and resources comparing the two companies. Here are a few that I found interesting:

One of the issues that keeps nagging me, and also helps me justify our patronage to Costco, is whether or not there is value in supporting a company like Costco that is making positive steps (big ones in my opinion) as a matter of pushing issues into the public eye more rapidly and effectively. The best scenario for my wife and I would be to give our money and time to only small local businesses that support issues that are important to us, such as Fair Trade, organic farming (includes produce and poultry/meat), fair-labor apparel companies, and other like organizations. However, is there value in showing Costco that if they offer Fair Trade coffee, organic produce and other similar items, that there is a strong market for such products?

I think it is possible to argue that there is quite a bit of value there. For all of those consumers that are not exposed, for whatever reason, to information about such movements, perhaps seeing a $10 bag of Fair Trade coffee at Costco will prompt them to buy it (it’s ~3 lbs. after all). And in buying the coffee, not only are they supporting the Fair Trade movement, both directly and also by showing Costco that if they stock such items, consumers will snatch them up, but they also stand a much higher chance of learning about the implications of their purchase. At some point, the price conscious consumer that snagged the bag simply because it was $10 will notice the “Fair Trade Certified” label and will do some digging. Perhaps that is the spark that will start the fire for that individual.

Starbucks & Costco
But is something more sinister happening? Costco also sells bags of Starbucks French Roast (again, it is stocked in the San Luis Obispo, CA store and may not be available everywhere), but for a much higher price per pound (don’t quote me on this, but I think it is somewhere in the range of $14-$17 for a ~2 lb. bag). Is part of this whole scenario an attempt to hike the price of Starbucks’ other roasts? I think it is a bit of a stretch (why wouldn’t the Fair Trade beans be sold at a premium?) but I figured I’d throw it out there.

Regardless, if Starbucks can produce the volume of Fair Trade beans to supply Costco (at least regionally), why haven’t they taken the next step to supply the storefronts with only Fair Trade beans? Are the FTC bags at Costco a result of pressure by the warehouse on Starbucks, or is this simply a precursor to a much larger commitment to Fair Trade by Starbucks? Quite frankly, I hope it is both!

I’ll do some more digging and see if I can come up with answers to some of the questions I have posed here. If anyone has any information or resources to point me to, I’d love to hear about them.

4 thoughts on “Costco, Starbucks and Fair Trade Coffee”

  1. I haven’t investigated this deeply in New Zealand, as I frequent Starbucks once a year (there are too many good cafés here), but I have a feeling our ones use mostly Fair Trade coffee. As to Costco, it’s doing the right thing, though the premium price is quite a lot to pay. I only buy eggs that have been independently certified as having come from hens that roam freely, and have noticed, as more people hop on to this bandwagon, the price per dozen drop dramatically as economies improve.

  2. A couple of years ago, the CEO for Costco (which is headquartered up here) earned a salary package of about $600,000. I’m not certain if that included all the options and incentives. I remember the article saying how unusual it was for a CEO to make such a reasonable amount of money. This while the company is profitable. Meanwhile, executives at sinking ships pocket millions.

  3. Jack: That would be great if New Zealand Starbucks offered mainly (or only) Fair Trade coffee! It would surprise me, but only a little as I have the impression (and I think it is valid) that New Zealanders tend to care a just a wee bit more about the environment and important social issues. …I wonder what the US would look like if Americans increased their awareness and action to the same level.

    “…as more people hop on to this bandwagon, the price per dozen drop dramatically as economies improve.”

    That is one of the most exciting aspects about this scenario. I think Costco (and other similar businesses) have huge potential to impact the world in a positive manner.

    John: The first link in my post lists the CEO salary + bonus (2004) at $350,000 (contrasted with $5.3 mil for Wal*Mart’s CEO). Any idea what year the $600,000 is from? I definitely agree that it is highly unusual for the CEO’s compensation to be so low for such a large company — it is one of the reasons (CEO pay + overall employee compensation) that we continue to shop there.

  4. The article I read might have been last year or three years ago. It all has started to run together recently. It’s also possible that the $600K number was not right, in that I remembered it incorrectly.

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