Starbucks renewed a commitment to fund loans for coffee farmers in a bid to strengthen the often wobbly supply chain for the bean that underpins its sprawling empire.
The coffee giant said it will allocate $30 million to a global fund for farmers to be distributed over the next five years, a follow-up to the program that has applied $20 million since 2010 toward loans made through microfinance nonprofits such as Root Capital. The loans are designed to help farmers with little access to traditional financing from banks.
Starbucks’ promise comes as coffee farmers in Central America and the Caribbean struggle to recover from a devastating epidemic of coffee rust and deal with the impact of climate change on their crop.
The company says some 62 cooperatives in eight countries — representing more than 40,000 farmers — were aided by the initial $20 million.
Such loans mean “farmers have the ability to make strategic investments in their infrastructure, offering the stability they need to manage ongoing complexities so there is a future for them and the industry,” said Craig Russell, Starbucks’ vice president for coffee, in a statement.
Starbucks didn’t disclose details about the loan terms, which are handled by its nonprofit partners.
The website of Massachusetts-based Root Capital describes two types of loans for farmers in developing countries — short-term loans up to 18 months designed to help farmers get through a harvest cycle, and longer-term loans for up to five years, used for investment in infrastructure.
Root Capital didn’t respond to a request for comment.
Starbucks’ profits have been galloping on the back of a big boom in demand for gourmet coffee, not only in the U.S., but also in China and India. Starbucks shares are trading 40 percent higher than a year ago, giving the company a market valuation of $80 billion. Last year it earned a record $2 billion in profits.
But this prosperity is founded on the far less profitable activity of producing coffee beans.
High demand has been met with even higher production. The International Coffee Organization, in a May report, cites forecasts of a global-supply surplus for this year’s harvest, putting downward pressure in the prices farmers get for their beans. Prices for Colombian mild varieties, a type sought after by specialty roasters like Starbucks, is down to $1.48 per pound, down 16 percent from late January, according to the ICO indicator.
There are also concerns that go beyond the financial. For example, a warmer climate makes it more difficult to grow quality coffee. A dearth of investment in the breeding of coffee plants — the result of decades during which coffee was a cheap and overlooked commodity — has led to poor genetic diversity and more vulnerability to climate swings and diseases.
So sustainability has become a concern for Starbucks, which last year bought more than 400 million pounds of coffee. The company has six farmer-support centers in Africa, Asia and Latin America, and in 2013 it bought a farm in Costa Rica to get better acquainted with the production process and to develop new, more resilient varieties of the coffee tree.
