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Who Wins When Starbucks Loses?

Colorlines, Commentary, Kim Fellner Posted: Sep 20, 2008

When I first wrote about Starbucks for ColorLines in 2004, the company was riding high. Its stock was dancing near $40 and its expansion goals were projected at 40,000 stores worldwide. Today, Starbucks is clawing to keep its hold on $15 a share and has posted its first quarterly earnings loss since it went public in 1992. What continues to draw the most chatter, though, is its recent decision to close 616 underperforming stores, representing nearly 9 percent of its 7,200 U.S. company-operated venues.

Wall Street offers kudos, viewing the closures as necessary belt-tightening to bolster the companys sagging stock. Indie coffee shop owners gloat, feeling sweet vindication as the Goliath stumbles. And chic small-is-beautiful types and cool anarchists celebrate the triumph of individualism and greater virtue against the evils of cultural hegemony and capitalism.

Not so fast! The analysis of Wall Street may be in keeping with free market mythology, and that of the Left gleefully snarky, but coffee farmers, service sector workers and striving Main Streets, arent necessarily winners when Starbucks loses.

The irony is that Wall Street and the companys detractors are equally dismissive of Starbucks real value. Practically from the moment Howard Schultz took over in 1987, Starbucks cultivated an effort to blend cappuccino, profitability and a higher standard of social conscience than is common in corporate America. Starbucks was an early pioneer of healthcare benefits for part-timers and domestic partners. When the coffee market tanked in the early part of the decade, it innovated above-market pricing that saved thousands of coffee farmers from penury; and its the largest Fair Trade coffee purchaser in North America.

Wall Street was more or less willing to indulge Starbucks do-gooder tendencies so long as the company grew and profited. But it may grow less tolerant now that the companys fortunes are faltering. Meanwhile, the Left has always disparaged Starbucks better practices as nowhere near good enough and extolled the higher virtues of independent coffee stores. But my research revealed that the narrative about indie cafs obscures some complicated truths.

Most of the wannabe caf entrepreneurs I met were motivated not by counterculture but by the capitalist dream, frequently inspired by the very success of the Green Mermaid. My non-scientific sample confirmed that fair trade was often low on their list of concerns. Alas, many didnt even serve better coffeeor charge lower prices. And compared to Starbucks, independent coffeehouses almost always provide lower employee pay, fewer benefits and virtually no opportunities for advancement.

The owner of my favorite Pittsburgh indie caf sees her business as in between a labor of love and an income-making venture. One young woman, who worked there on and off for more than eight years, said her respect for the owners trumped her need for healthcare; not everyone though has that luxury. The young worker at my local Starbucks giggled when I asked about the companys mission statement, confessing that she couldnt remember the details, but she knew that she became eligible for the health plan in a few days and was grateful for it.

Moreover, the employees at independent coffeehouses are almost always white and often economically and educationally privileged. Many Starbucks employees also fit that profile, but the chains workforce is far more multiracial. According to the companys 2007 corporate responsibility report, which is distinguished by its use of actual numbers and an assessment of whether the company reached its goalspeople of color comprised 31 percent of the companys U.S. workforce, 14 percent of its executives (vice presidents and higher) and 18 percent of its senior executives.

Even the cultural narrative about Starbucks vs. the indies is open to examination. While there are still funky independents eking out a living on the retail margins, most coffeehouses and designer roasters are niche markets, like purveyors of artisan cheeses, hand-painted T-shirts and limited-edition sneakers. They appeal to those on the trendy, cutting edge and survive by exclusivityby pleasing a small, loyal and financially privileged. Starbucks, on the other hand, has been able to risk expansion from urban business cores and upscale suburbs into more modest settings, where it often provides the only meeting place that is neither a noisy fast-food restaurant nor a bar and that is often surprisingly multiracial.

The Starbucks in the shopping Center at Baileys Crossroads in a Virginia suburb of DC is always packed with Ethiopian and Somali men sharing coffee, political conversations, and chess games. When I first took over, most of the guys who worked here had no idea about the background or the culture, so there were language barriers and cultural issues, former manager Kokeb Teferi told me. And then there were sometimes conflicts between different ethnic groups. But in short order, Teferi organized and cajoled the staff and the regular customers into a different way of being, set up ground rules, and created a haven that blends the American host culture with the familiarity of home. Now when someone from Somalia or Ethiopia is new in town, chances are theyll end up here to make contacts and catch up on the news, she said. And she also urged her multiracial staff to sign up for the company health care program and mentored a crew of younger workers. No wonder that places like downtown Newark and North Miami are fighting to save their local Starbucks stores, although the downturn in the companys fortunes suggests that employees may face a less promising future and fewer benefits, at least in the short term.

Believe me, Im no fan of market capitalism, and I havent been drinking caffeinated Kool-Aid. I recognize Starbucks is a corporation with serious flaws, whose current woes are an icy blend of self-inflicted arrogance, some bad decisions and a worse economy. But, on balance, Starbucks remains a pretty good deal. Unlike our serious corporate malefactors, it produces neither arms nor excessive pollution; people arent dying because of what it makes or sells; it doesnt lobby against minimum wage increases or bully its employees to vote Republican; and given that no one is going to expire for lack of a Frappuccino, it doesnt price people out of necessities. In a world of rapacious global conglomerates and McJobs, it remains a cut above.

And if thats not enough, just try to remember what airport and turnpike coffee was like before Starbucks opened the Arabica floodgates.

Kim Fellner is the author of Wrestling With Starbucks: Conscience, Capital, Cappuccino (Rutgers University Press). She works in the labor movement.

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