Starbucks reaches truce with Ethiopia over coffee licensing

June 20, 2007 (SEATTLE) — Starbucks Corp. (SBUX) 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 countries 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.

Starbucks did not acknowledge to reversing course with the deal announced Wednesday.

“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 all three of its specialty coffees in some countries. In the United States, it has gotten Yirgacheffe trademarked, but trademark applications for Harar and Sidamo are still pending.

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 coffee farmers make between 60 cents and $1.10 per pound.

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 average commodities market price during the same period.

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,” she said, “and we’ll address them on a case-by-case basis.”

In recent late trading Starbucks shares rose to $27.35 from the Wednesday close of $27.32, down 1%.

(AP)