Thursday, March 09, 2006
15 Minutes of Fame
November 2 0 0 1
Social Responsibility
The following is the text of our own Robert Fulmer's address on social responsibility, presented at Sintercafe in Costa Rica earlier this month:
Good afternoon. First of all, I want to thank all the folks involved with Sintercafe for inviting me to speak today. The topic of today is social responsibility. When I sat down to think about how to approach this topic, I kept coming back to a line my accountant likes to repeat, That is: No good deed in business goes unpunished.
But I think there are good deeds in business that contain their own rewards.
When I hear people from the World Bank say that Brazil and Vietnam are the most efficient producers, I think they are right. When I hear people say the invisible hand of the market place will define the winners and losers. I think they are right. When people tell me they think the Fair Trade model is flawed, I think they're right. So why am I in favor of social responsibility? Because I don't make my living off of efficient cups of coffee. Because I believe that social responsibility will become a vital component of the Specialty Coffee Business And because I believe it is in the best interest of the specialty coffee business to remain dynamic.
My dad, whom many of you know, was in the coffee business for 50 years. He retired just last year. He spent his whole career in the coffee business and loved every moment. He would be the first to tell you business in his era was different. He got into the business just about the time the supermarkets were turning coffee into a loss leader. Coffee was weight. It was for selling, not drinking. Back in the 1960's when he was working in Singapore, he used to get bids from overseas buyers that were good for a week. There were only a couple of Telex machines in the entire country, which had to be shared by international businessmen. Making a phone call was an incredibly expensive, long, drawn-out ordeal. In this environment, roasters knew very little about the growers, and the growers knew almost nothing about prices beyond the local market. This lack of transparency, as you can imagine, made for good business. My Dad always said he wished he could have been a pirate. Business in 1968 Singapore was not quite as good as it was in sixteenth century Europe, when traders could make 3000% profits on cloves brought back from the Spice Islands, but you get the idea.
Today, of course things have completely changed; my Indonesian suppliers saw the 9/11 Trade Tower attack before I did. Instant communications and globalization are the way it is.
Consumers will find out if their tennis shoes have been made by prison labor. They will know if the cacao in their candy bar was harvested by a 12 year-old who wasn't paid the 50 cents per day he was promised.
I recently read a great quote in the New Yorker magazine that said transparency is to a broker as light is to a vampire. More and more, by necessity, that is becoming untrue. If I am going to ask my customers to pay me 1.50/lb. in a .40-cent C market, naturally they will want to know that the lion's share is going to go to the grower.
Going forward, persuading people that they need the services of Royal Coffee will depend, as it always has, on our ability to find them great coffees. But I am convinced that there is more we will have to do. Helping producers develop and market coffee that is environmentally friendly, for which they get paid a fair price, may determine whether we stay in business.
Royal Coffee depends on roasters for survival. Most of them are interesting and unique. For example, the White Horse Coffee Company located in Sutherlin Oregon. I've never seen their shop, but I am told it is a roastery, a coffee store, an art gallery, a hair salon with two chairs, and a lawnmower-sharpening business all in one. They buy just a few bags per month, but they always ask for the best beans we have. Whatever Royal can do to help them be successful is in our interest.
I don't think it is in our interest, as one of our British customers said: "to be waddling about in suits while our suppliers starve to death." So what do we do?
At Royal we advise our customers to sell organic coffee, to sell fair trade and relationship coffees, to support single farms with prices that are above production costs, to carry a wide selection of coffees from many parts of the world, to try to build a connection between farmers and their customers, to educate their customers about geography and culture, to sell the romance, and most importantly to provide the best product possible. Simply having the cheapest coffee was an outdated business model long ago. Selling coffee that does not address social responsibility may soon be outdated as well.
Is it going too far to say social responsibility is going to be required to be successful? I don't think so. Specialty coffee needs to be about protecting the environment and providing more than adequate livelihoods for coffee growers and workers.
Again, I am not saying this strictly out of altruism. Countless focus groups and studies have shown that while the tongue may be the receptor of taste, it is the brain that is the final arbiter.
In other words, what your brain knows affects how your tongue tastes. Let me give you an example. There was a study done at the University of Auburn comparing regular, all-beef, high-fat-content hamburgers against hamburgers where seaweed was mixed into beef to make a low-fat burger. When both these hamburgers were cupped blind against each other, surprisingly, the low-fat seaweed hamburgers consistently won.
When the hamburger ingredients were revealed to the tasters in advance, the results were reversed...
Given our brain's large role in determining taste, doesn't it make sense that when quality is equal, a cup of coffee that protects the environment and the income-levels of the people that grew and picked it will taste better than one that doesn't?
As I mentioned earlier, I think the marketplace will separate the winners from the losers. I think you're all aware, and the statistics will support, that in the coffee industry, specialty has been the only real winner lately. If making coffee cheaper and cheaper is such a good idea, why has the only growth in the last 20 years been in the specialty sector? Specialty roasters recognized twenty years ago the importance of quality. Ten years ago, they began the organic movement. In both cases, critics predicted they would never be successful. But time has proven the critics wrong. The time now has come for linking social responsibility and quality. Pro-active companies will simply embrace the new ideas, while reactive ones will continue to wait for consumers to create demand.
Given the long history of international commerce, and especially that of the coffee industry, it might seem that paying more for coffee than you have to is a strange and radical concept.
But in the words passed along by Michael Glenister, who recently sent an e-mail regarding Fair Trade: seemingly contradictory thoughts can be sustained by the agile mind. Although the issues surrounding social responsibility and fair trade are complex, it doesn't take a rocket scientist to figure out that social responsibility and profitability are not in conflict. In fact, your success in the future might be determined by how well you integrate social responsibility into your business.
On the plane down here, I started reading a book about globalization written by Thomas Friedman, the foreign affairs correspondent for the New York Times. He said this about Globalization: It's inevitable like the sunrise. Generally speaking, the sun coming up in the morning does more good than harm, however if you are going out in the sun you might want to wear sunglasses and use sunscreen. With the structural changes occurring with in our industry right now, I view Fair trade and social responsibility as sunscreen and sunglasses.
I will leave you with that thought and would be happy to answer any questions.
Thank You
-Robert Fulmer
Social Responsibility
The following is the text of our own Robert Fulmer's address on social responsibility, presented at Sintercafe in Costa Rica earlier this month:
Good afternoon. First of all, I want to thank all the folks involved with Sintercafe for inviting me to speak today. The topic of today is social responsibility. When I sat down to think about how to approach this topic, I kept coming back to a line my accountant likes to repeat, That is: No good deed in business goes unpunished.
But I think there are good deeds in business that contain their own rewards.
When I hear people from the World Bank say that Brazil and Vietnam are the most efficient producers, I think they are right. When I hear people say the invisible hand of the market place will define the winners and losers. I think they are right. When people tell me they think the Fair Trade model is flawed, I think they're right. So why am I in favor of social responsibility? Because I don't make my living off of efficient cups of coffee. Because I believe that social responsibility will become a vital component of the Specialty Coffee Business And because I believe it is in the best interest of the specialty coffee business to remain dynamic.
My dad, whom many of you know, was in the coffee business for 50 years. He retired just last year. He spent his whole career in the coffee business and loved every moment. He would be the first to tell you business in his era was different. He got into the business just about the time the supermarkets were turning coffee into a loss leader. Coffee was weight. It was for selling, not drinking. Back in the 1960's when he was working in Singapore, he used to get bids from overseas buyers that were good for a week. There were only a couple of Telex machines in the entire country, which had to be shared by international businessmen. Making a phone call was an incredibly expensive, long, drawn-out ordeal. In this environment, roasters knew very little about the growers, and the growers knew almost nothing about prices beyond the local market. This lack of transparency, as you can imagine, made for good business. My Dad always said he wished he could have been a pirate. Business in 1968 Singapore was not quite as good as it was in sixteenth century Europe, when traders could make 3000% profits on cloves brought back from the Spice Islands, but you get the idea.
Today, of course things have completely changed; my Indonesian suppliers saw the 9/11 Trade Tower attack before I did. Instant communications and globalization are the way it is.
Consumers will find out if their tennis shoes have been made by prison labor. They will know if the cacao in their candy bar was harvested by a 12 year-old who wasn't paid the 50 cents per day he was promised.
I recently read a great quote in the New Yorker magazine that said transparency is to a broker as light is to a vampire. More and more, by necessity, that is becoming untrue. If I am going to ask my customers to pay me 1.50/lb. in a .40-cent C market, naturally they will want to know that the lion's share is going to go to the grower.
Going forward, persuading people that they need the services of Royal Coffee will depend, as it always has, on our ability to find them great coffees. But I am convinced that there is more we will have to do. Helping producers develop and market coffee that is environmentally friendly, for which they get paid a fair price, may determine whether we stay in business.
Royal Coffee depends on roasters for survival. Most of them are interesting and unique. For example, the White Horse Coffee Company located in Sutherlin Oregon. I've never seen their shop, but I am told it is a roastery, a coffee store, an art gallery, a hair salon with two chairs, and a lawnmower-sharpening business all in one. They buy just a few bags per month, but they always ask for the best beans we have. Whatever Royal can do to help them be successful is in our interest.
I don't think it is in our interest, as one of our British customers said: "to be waddling about in suits while our suppliers starve to death." So what do we do?
At Royal we advise our customers to sell organic coffee, to sell fair trade and relationship coffees, to support single farms with prices that are above production costs, to carry a wide selection of coffees from many parts of the world, to try to build a connection between farmers and their customers, to educate their customers about geography and culture, to sell the romance, and most importantly to provide the best product possible. Simply having the cheapest coffee was an outdated business model long ago. Selling coffee that does not address social responsibility may soon be outdated as well.
Is it going too far to say social responsibility is going to be required to be successful? I don't think so. Specialty coffee needs to be about protecting the environment and providing more than adequate livelihoods for coffee growers and workers.
Again, I am not saying this strictly out of altruism. Countless focus groups and studies have shown that while the tongue may be the receptor of taste, it is the brain that is the final arbiter.
In other words, what your brain knows affects how your tongue tastes. Let me give you an example. There was a study done at the University of Auburn comparing regular, all-beef, high-fat-content hamburgers against hamburgers where seaweed was mixed into beef to make a low-fat burger. When both these hamburgers were cupped blind against each other, surprisingly, the low-fat seaweed hamburgers consistently won.
When the hamburger ingredients were revealed to the tasters in advance, the results were reversed...
Given our brain's large role in determining taste, doesn't it make sense that when quality is equal, a cup of coffee that protects the environment and the income-levels of the people that grew and picked it will taste better than one that doesn't?
As I mentioned earlier, I think the marketplace will separate the winners from the losers. I think you're all aware, and the statistics will support, that in the coffee industry, specialty has been the only real winner lately. If making coffee cheaper and cheaper is such a good idea, why has the only growth in the last 20 years been in the specialty sector? Specialty roasters recognized twenty years ago the importance of quality. Ten years ago, they began the organic movement. In both cases, critics predicted they would never be successful. But time has proven the critics wrong. The time now has come for linking social responsibility and quality. Pro-active companies will simply embrace the new ideas, while reactive ones will continue to wait for consumers to create demand.
Given the long history of international commerce, and especially that of the coffee industry, it might seem that paying more for coffee than you have to is a strange and radical concept.
But in the words passed along by Michael Glenister, who recently sent an e-mail regarding Fair Trade: seemingly contradictory thoughts can be sustained by the agile mind. Although the issues surrounding social responsibility and fair trade are complex, it doesn't take a rocket scientist to figure out that social responsibility and profitability are not in conflict. In fact, your success in the future might be determined by how well you integrate social responsibility into your business.
On the plane down here, I started reading a book about globalization written by Thomas Friedman, the foreign affairs correspondent for the New York Times. He said this about Globalization: It's inevitable like the sunrise. Generally speaking, the sun coming up in the morning does more good than harm, however if you are going out in the sun you might want to wear sunglasses and use sunscreen. With the structural changes occurring with in our industry right now, I view Fair trade and social responsibility as sunscreen and sunglasses.
I will leave you with that thought and would be happy to answer any questions.
Thank You
-Robert Fulmer
