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Starbucks reaches licensing deal with Ethiopia

Starbucks Corp. and the Ethiopian government said Wednesday they will work together to promote three of the African nation's prized specialty coffees under a deal that supports the country's bid to win trademarks it believes will benefit farmers.
/ Source: The Associated Press

Starbucks Corp. and the Ethiopian government said Wednesday they will work together to promote three of the African nation's prized specialty coffees under a deal that supports the country's bid to win trademarks it believes will benefit farmers.

The world's largest coffeehouse chain and Ethiopia's intellectual property office said their licensing, distribution and marketing agreement acknowledges the country's ownership of three coffee names — Yirgacheffe, Harar and Sidamo — regardless of whether they are trademarked.

The deal will not reap Ethiopia any royalty payments, officials said.

Last year, Starbucks refused Ethiopia's request that the company sign a voluntary licensing agreement saying the country owns rights to those coffee names even in markets where they are not trademarked.

Instead, Starbucks said it wanted to help Ethiopia establish geographic certification for the coffee bean names, similar to the designations assigned to Washington apples or Hawaii's Kona coffee.

Though the agreement announced Wednesday was a partial reversal of course for Starbucks, executives said the deal goes far beyond the legal machinery of licensing and trademarks.

"This agreement is broader than agreements that have been proposed in the past," Sandra Taylor, Starbucks' senior vice president of corporate social responsibility, told The Associated Press. "We are very excited about the opportunity to work cooperatively with Ethiopia in support of its coffee farmers."

Ethiopian officials hailed the agreement as a win for coffee farmers, the companies that do business with them and consumers.

"This agreement marks an important milestone in our efforts to promote and protect Ethiopia's specialty coffee designations," Getachew Mengistie, director general of Ethiopia's Intellectual Property Office, said in a statement released by Starbucks and Ethiopia. "Having the commitment and support of Starbucks will help enhance the quality of Ethiopian fine coffees and improve the income of farmers and traders."

Ethiopia has won trademark rights for three of its specialty coffees in Canada, it has trademarked two specialty coffees in Japan and the European Union, and expects a third to be trademarked soon throughout Europe, Getachew said.

In the United States, Yirgacheffe was trademarked last year, while applications for Harar and Sidamo are pending. Trademark applications also are pending in China, Brazil, India and South Africa, Getachew said.

U.S. consumers often pay top dollar for exotic coffees from Africa and other coffee-producing nations in the developing world, but many impoverished farmers struggle to make a living growing the beans that are eventually sold at Starbucks and other stores.

The international aid group Oxfam has cited estimates that Ethiopian farmers make between 60 cents and $1.10 per pound, in some cases grossing as little as $300 to $500 a year from their coffee crops.

Starbucks has not disclosed how much it pays for Ethiopian coffee beans, only that it paid $1.42 per pound on average for all the beans it bought during fiscal 2006 — more than one-third higher than the average commodities market price during the same period.

"The ultimate aim, of course, is for us to increase prices for our farmers, for our exporters, to align export prices to retail prices," Samuel Assefa, Ethiopia's ambassador to the United States, said in a phone interview from his office in Washington, D.C. "Our specialty coffees are treated as though they're generic."

Starbucks declined to speculate how much of a financial boost its deal with Ethiopia might give the country's farmers.

"We believe, and Ethiopia believes, that having a greater ability to control distribution of the coffee and having these kinds of licensing agreements will over time lead to stronger demand and better pricing for their specialty coffees," Taylor said. "And that, of course, is going to be good for coffee farmers and their communities."

Taylor said no other governments have approached Starbucks about lining up similar licensing deals. "Clearly, countries have different options available to them, and we'll address them on a case-by-case basis," she said.

Last year, Oxfam criticized Starbucks for not backing Ethiopia's bid to trademark its coffees, but on Wednesday praised the company for working out a deal the agency believes will benefit farmers in the long run.

"What the Ethiopians were after was not a quick profit but rather an engagement with Starbucks around a long-term strategic vision for where the industry could or should go and how coffee producers from developing countries could work with companies like Starbucks to change the terms of trade within the marketplace in order to make it work better for poor people," said Raymond C. Offenheiser, president of Oxfam America.