Starbucks and Ethiopia

So, I've been hearing a lot lately about Oxfam International's campaign against Starbucks (including the video they put on YouTube). Last month, Oxfam staged a demonstration outside Starbucks stores all around the world. At these demonstrations, activists announced that Ethiopian farmers who grow coffee for Starbucks only get 3 cents per cup of coffee. This certainly sounds like a disturbing figure, given that patrons pay anywhere from $2 to $6 for their cup of coffee in the store... and many patrons were up in arms over the number.

Without evaluating the very complicated issue of whether or not growers should be able to trademark a geographic region, I wanted to take a closer look at the "3 cents per cup" figure. Sure, it sounds awful, and it brought about a very emotional response in would-be Starbucks customers... but is it really that bad? I decided to see how much of my money goes to the merchant (not the grower) when I make a cup of coffee:

Step 1 - how many cups you can make with a pound of coffee?
A quick Google search yielded several anecdotal answers. The web site for Smith Farms says 32 cups. The web site for Quarter Maine Coffee Roasters says 40 cups.

Step 2 - how much for a pound of coffee beans?
At Green Mountain Coffee's web site I can buy a 12 oz bag of Ethiopian coffee beans for $8.69 (retail price). That comes out to $11.59/pound.

A web site called Coffee & Tea Warehouse sells Ethiopian coffee for $5.18/pound if you buy in bulk (25 lbs at a time).

Step 3 - do the math
Using the most expensive combination of numbers above, 36 cents of my money would go to the retailer per cup of coffee. The cheapest combination yields 13 cents per cup. I am sure the farmer gets far less than that (retailer and wholesaler each take their cut, import tariffs, distribution costs, etc). I couldn't find figures on what percent of retail prices go to farmers... but I did find a report stating that US Dairy farmers get about 40% of the retail cost of milk. For this argument, let's say 50% goes to the coffee bean farmer: 6.5 cents.

If a regular guy like me can get coffee beans for 13 cents/cup, with an estimated 6.5 cents going to the farmer, is it surprising that the one of the largest coffee house chains in the world should be able to get it for half that?

Not to me... in fact, Trans Fair USA (a Fair Trade certification agency) seems to agree. Their web site states that to be certified as Fair Trade, growers must get $1.26 per pound of coffee beans. At 32 cups per pound, that comes out to just under 4 cents per cup. Okay, so 3 cents is definitely less than 4 cents. But not enough less to generate the sort of responses Oxfam got to their claims.