Global capitalism’s current restructuring has allowed for greater integration of international production and trade (Gereffi et el 1994 :159). Transnational corporations (TNCs), which have been able to spread their operations across the globe, have become more flexible as a result of globalization. It has also helped break down geographic boundaries. Global commodity chains have become more complex and important. Hopkins and Wallerstein defined them as a network that combines labor and production to produce a final commodity (1986:159). Each input can be represented as a “node”, and each stage of the process is added value to the commodity. Gereffi et.al1994:159 This essay will examine the global nature and impact of coffee commodity chains, including Starbucks. The role of consumption will be addressed as a driving force behind global commodity chains. This will help to reinforce the often overlooked interconnection between consumer and producer. Starbucks was established in Seattle in 1971 (Ponte2002/11111). Since then, it has grown to become the most popular chain of coffeehouses in the world (Coe and al 2007:90). It is spread across four continents. It was home to 2,783 coffeehouses in 34 countries. This demonstrates its international success. Starbucks 2017a: The company’s coffee beans are sourced from plantations in Latin America, Africa and shipped to the US by wholesalers. Starbucks capitalizes on the increasing global market. Starbucks has opened 1,000th stores in Japan as well as China. Starbucks plans to continue to grow with future plans for ‘1,500 net additional stores in every region’ (Starbucks2013.2). This will enhance its market success. This highlights the changes in food production over the last 40 years. Their ability coordinate and control production in several countries, as well as manipulating geographic differences, gives them great control over global commodity chain (Dickens 2011;424). Starbucks has several commodity chains that allow them to transform the high-altitude Arabic bean into regular coffee. Starbucks will not stop looking for cheaper locations. Starbuck often invests in foreign direct investments to help develop the country’s economy. This is further supported by the fact that 20% Starbuck’s production countries fall within the low-income group (Wachalec 2015). Starbucks and other TNCs can play regional rivals in a race to the bottom to locate the most economically lucrative locations and lower production costs.
The Global Nodes of Commodity Chain: What are the Impacts? Coffee is a major source of income for many developing countries. Ponte (2002.1101) asserts that TNCs are making it difficult for farmers to sustain their livelihoods. TNCs have a significant influence on global markets and can fluctuate the prices of commodities like coffee. They also invest in technology and their functions in ways that local exporters are unable to match. Many smallholders are being forced or expelled to work for these multinational corporations (Ponte 2003). TNCs retain the power to choose suppliers, and can thus jeopardize economic development in dependent countries. This shows the shift from producers to consumers, as the TNCs headquarters are in these countries (Ponte 2002.1107). Ponte (2002) asserts that this shift is caused by a change within the coffee commodity chain, which has gone from a formal system with stable producers (1107) to an economically disadvantaged one (1107).
This would help to eliminate the imbalances in global coffee production. This would establish a minimum floor price that would allow local producers to recover some of their income (Ponte 2002). Starbucks recently reached the landmark of 99% ethically sourced coffee (Starbucks 2017b). Fair Trade has seen a rise in ethical consumption. People are more aware of where their food comes from and will pay more to support local producers (Ponte 2002,1116). It can also be seen to be a positive sign that commodity chains are transparent, revealing how the commodity was actually configured globally.
Starbucks recognizes the value of labor (Dicken 2015.121) in the commodity chain. They also acknowledge how important it is to the company’s financial success. Productivity is the ratio of worker output to wage. It is determined by education and training as much as capital equipment (Dicken, 2015). Starbucks has support centers for farmers in Costa Rica and Guatemala. It also launched C.A.F.E in 2004 to provide safe working conditions and fair wages (Wachalec, 2015). This shows that they are interested in their labor force’s well-being. Capitalists also know that it will increase productivity and motivation, and ultimately lead to greater outputs.
While coffee is an international commodity, it can also be considered a ‘local production’ because it is dependent on specific climates, soils and other socio-cultural conditions. Brazil, Vietnam (Dicken 2015,429) and Indonesia are four countries that produce 60% of all coffee exports. This shows how food manufacturing is fundamentally different to other industries. Starbucks, despite this strategic positioning, only operates in affluent markets to maximize profits. In this regard, TNCs are similar to capitalism. Starbucks distribution is concentrated in the UK, a country with high disposable incomes and strong cultural ties. This is leading to a growing divide in the commodity chains, where the Global South is associated more with production than the Global North. This is supported by the statistical fact that nearly 90% of coffee produced in developing nations (Ponte 2002 :1101).
Global Commodity Chains Driven by Consumption
Global commodity chains are driven largely by the consumption of commodities. Globalization has made it more difficult for consumers to have a variety of food preferences. This trend has been amplified by ‘commodification’. Products are inducing symbolic qualities and culturally embedded meanings to increase their consumption (Dicken 2010.20). Multinational firms like Starbucks have used these changing patterns to their advantage through their marketing strategies. This reflects the producers’ perceived need for increasing consumer fragmentation (Dicken, 2011:20).
Starbuck’s corporate website is a promotion of “specialty coffee” and sells 30 different kinds of coffee and tea. (Coe et.al2007:90). This encourages people to believe that coffee made in foreign countries is better. Ponte (2002.1111) asserts that Starbucks has had a “Latte revolution” due to increased coffee variety. Ponte calls this the “Starbucks effect” which he refers to as Starbucks becoming a “consumption adventure” and “de-commodified espresso” (1111). This capitalist strategy is most evident in coffee commodity chains (rather that producer-driven) because product design, marketing, and brand-name merchandisers play key roles in the chain.
It shows that Starbucks, like other corporations, has been able maintain control of its coffee chain by investing in advertising. (Dijk und al. 1998).
However, capitalism can hide the global nature commodity chains. Even though they are often unaware of it, UK consumers, for instance, are intimately connected with workers in Costa Rica’s coffee plantations. Coe et al (2007) state that brand names and price tags don’t reveal much about the production process. It also doesn’t disclose, for instance, the working conditions or working conditions, which can cause disconnections between the consumer and the producer. Coe and al. 2007:90 state that even someone drinking Starbuck coffee makes them complicit. To highlight the importance and interdependence between people, it is important to acknowledge the whole circuit of production, distribution and consumption (Watts 1999 :307)
It is important to remember that just one cup of coffee can have a significant impact on the coffee commodity chain. The coffee bean farmers, who are at the bottom, are suffering from extreme poverty and struggle to survive. Alternatives Journal claims that the price of coffee has fallen by 70% in five years. Recent research also shows that many coffee farmers are not able to afford food and medical treatment. In order to maximize their profits, these farmers often allow their wives or young children to harvest their crops. The Weather Channel studied child labor related to coffee production. It found that 14 countries including Guatemala and Mexico are cited by the U.S. Labor Department for tracking goods made using child labor in violations of international law. A six-year-old child would have shocked the average American if they knew. Unfortunately, this is not being acknowledged and it continues to worsen with the continuing drop in coffee prices.
Although global commodity chains can be used to chart the geographic journeys of commodities, they are not deterministic. TNCs adjust and manipulate supply chains in order to maximize profit and efficiency. This is usually achieved by shortening production times. Improvements in ‘circulation technologies’-transportation technology and communications technology have made it possible to overcome the space and time frictions. Harvey (1991), calls this “time-space compress” and refers it to capitalist approaches to commodity chains. He continues to try to reduce costs and prioritize revenue. This approach was repeated by Starbucks in 2008, when it realized that ‘outsourcing had caused significant cost inflation’ (Cooke 2010, 2010), and that the supply chain was struggling with demand. To lower transportation costs and deliver coffee faster to customers, the company regionalized its production and created five additional distribution centers in different parts of the world (Cooke 2010).
Starbucks makes sure that the commodity chain is simplified in order to avoid future mistakes. (Cooke 2010, 2010). However, this could pose a danger to globalized commodity markets as it makes it harder for the company and its employees to manage what happens in each “node” and compromises overall control. Cooke (2010) stated that Starbucks was in fact a victim to its own success.
Recent globalizations have led to a major shift in the distribution, production and consumption of commodities. Starbuck coffee has been used as an example. This essay shows how TNCs have the ability to exploit geographic differences in labor laws and labour to increase their profits and gain global power. The global coffee commodity supply chain has also seen significant changes.
