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Starbucks aims for continued supply ( 2003-11-18 17:05) (Reuters) Starbucks Corp., the world's largest coffee retailer, is working to guarantee its supply of quality beans as it plans for continued expansion, a company executive said on Monday.
Dub Hay, senior vice-president of coffee at Starbucks, said the company could open new agronomy offices in Indonesia and Africa to monitor consistent quality standards for beans it buys in those regions.
Starbucks announced recently it would open an agronomy office in Costa Rica in January to check the beans it buys in Mexico and Central America, one of its key supply regions.
"It's an investment in our future ability to get quality coffee," Hay said on the sidelines of Costa Rica's annual Sintercafe meeting of international industry players from producing and consuming nations.
"I would envision this being the first step and could imagine us having the same type of offices both in Indonesia and Africa, which are also important to our blend," he said.
Starbucks started out three decades ago as the brainchild of a few coffee aficionados interested in bringing specialty coffees to Seattle-area drinkers.
These days the company is an international coffee behemoth with thousands of stores in the United States and 32 other countries where it sells roasted coffee to retail and wholesale outlets.
One Starbucks store in Japan reaps some $4 million in annual revenue.
EXPANSION CHALLENGE
Now Starbucks, which has said it is only in the springtime of its expansion, is facing the challenge of maintaining quality standards as it moves into new markets and needs more coffee to serve its needs.
"That is the challenge," said Hay. "It is how do we not budge one nano-inch in quality and still be able to source that great coffee quality."
The world is in the fifth year of a global coffee crisis that saw prices fall below most growers' costs of production, driving many farmers from their plantations and forcing others to skimp on crop maintenance at the cost of quality.
"You can almost draw a line at an altitude level," said Hay, pointing out that farms located at below 3,000 feet tend to be suffering the most. "I've never seen more abandoned farms in my career. It's not so much the quality, it's just that the coffee has gone away."
And as quality beans become more scarce, Starbucks and other buyers of specialty and gourmet coffees are having to spend more and more time looking for farms that meet their standards. They are also paying more and providing guarantees to growers who can be consistent suppliers.
Hay said the company is also offering its best suppliers long-term contracts at the set prices. He said the company has contracts that extend as long as six years with certain farms in Costa Rica, for example.
Starbucks is in the midst of a push into Latin America, where it has opened stores from Mexico to Peru, and it is now looking for new origins to supply its growing customer base.
"We have a number that we are going to get into," Hay said.
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