Uncommon Grounds Part 14

Ugandan coffee was indeed the country's economic mainstain. Unfortunately, dictator Idi Amin relied on coffee earnings to fund his genocidal regime.

When Folgers rolled East to challenge Maxwell House in the 1970s, a clever cartoonist portrayed Mrs. Olson duking it out with Aunt Cora, the Maxwell House busybody.

In this Far Side cartoon, Gary Larson lampooned health concerns over caffeine, which peaked in the early 1980s.

Young coffee idealists like Don Schoenholt, shown here in 1981, led the specialty revolution. "Rise up, my fine buckos, and a.s.sert your will," Schoenholt advised.

Fair Trade coffee organizations urge consumers to buy coffee that has been grown by well-paid workers, often using guilt-inducing tactics such as this Equal Exchange ad.

By the early 1990s, caffeine addicts were loud and unrepentant.

In serial episodes ranging over months and years, Sharon flirted with her neighbor Tony over the freeze-dried coffee in commercials positively dripping with s.e.xual innuendo, sensuality, and intrigue.

In Starbucks modern incarnation, the original mermaid logo (left) has been sanitized as a demure New Age coffee maiden.

Not everyone loved Starbucks. Critics accused the chain of using aggressive, predatory tactics to put smaller coffeehouses out of business, as in this 1996 cartoon.

Inspired by a trip to Italy, Howard Schultz spread the espresso/cappuccino/ latte gospel through the Starbucks Experience, taking over the company in 1987 and taking it global.

Those concerned about preserving habitat for migratory birds can buy shade-grown coffee. This label shows that Golden Valley Farms is certified as 'Bird-Friendly' by the Smithsonian Migratory Bird Center.

During the 1990s, environmentalists and birders created a market for "bird-friendly coffee" grown in shaded plantations that provide important habitat for migratory birds and other rain forest animals.

Coffee retailer Bill Fishbein's first visit to poverty-stricken Guatemalan farms in 1988, inspired him to found Coffee Kids, which provides micro-credit loans to promote alternative income in coffee communities.

Courtesy Coffee Kids.

This Fair Trade logo a.s.sures consumers that the coffee beans they pruchase were grown by democratically run cooperatives of small farms that receive a decent price for their beans. There are also other certifications and ways to help farmers.

Some think that coffee addiction is no joke, though "Too Much Coffee Man" cannot endure his ba.n.a.l and meaningless existence without it.

Whole Beans and Gorgeous Women As the major corporations gobbled other companies, innovative specialty outfits invaded grocery stores. Bernie Biedak bought all manner of things at U.S. Customs auctions and sold them at his hip store in Ashland, Oregon. In 1978 he bought two bags of confiscated Guatemalan green coffee beans, had them roasted, then sold the beans for a huge profit. He bought more beans from Gary Talboy at Coffee Bean International and installed clear-plastic gravity-flow bins in the produce aisle of Oregon supermarkets. He hired gorgeous professional models to deliver the coffee and maintain the grinders. Biedak sold the beans at $3.99 a pound, providing the store managers a much larger profit than did canned coffee-and the beautiful delivery women didn't hurt either. By 1983 Biedak had expanded to San Francisco.

Starbucks' Jerry Baldwin sold bulk wholesale beans through his Blue Anchor division. Baldwin, a purist, didn't like the supermarket business, where he couldn't completely control quality. Phil Johnson, who left Goodhost when Nestle bought it, purchased Blue Anchor, making his company, now called Millstone, one of the largest whole-bean supermarket players. In Southern California, stores featured Sark's Gourmet Coffee. In Fort Bragg, California, Paul Katzeff put Thanksgiving Coffee into bulk bins in supermarkets, while Steve Schulman did the same in northern California with his Hillside gourmet beans.

Across the country in rural New Hamps.h.i.+re, Marty Elkin and manager Mike Sullivan introduced the Cafe Du Jour brand in gravity-feed bins, one-way valve bags, and innovative two-ounce miniature sample brick packs. Green Mountain Coffee Roasters was also expanding. Already a millionaire from creating and selling EZ Wider papers for marijuana smokers, Bob Stiller was blown away by the gourmet coffee he tried one day in 1981 in the Phoenix Restaurant in Waitsfield, a Vermont ski town. Stiller bought out the original small roasters and dramatically expanded the business.

The major roasters realized they were missing something. "The big boys began to show up at Fancy Food shows and crawl all over us," Donald Schoenholt recalled. "We were all outraged. At the same time, we thought it was funny in a scary way. All you had to do was look at these people to see that even with the ideas right under their noses, they didn't get it."

Quotas and Quagmires Even with new International Coffee Agreement quotas in place, the early 1980s witnessed substantial price volatility. In 1981, the first enforcement year, prices dropped below $1.15 a pound, triggering four successive quarterly quota cuts. Even so, the price briefly fell below $1 a pound for the first time in five years. The following year, it rose to a $1.25 level and hovered there long enough to secure a new agreement, good until 1989. Under the Reagan administration, with its emphasis on free trade, the United States reluctantly ratified the 1983 ICA.

"Tourist coffee" now sold to nonmember countries at discounts of 50 percent or more, and most consuming countries were not happy, though West Germany and France made a great deal of money from the tourist coffee that flowed in and out of the tax-free ports of Hamburg and Le Havre. Smuggling and counterfeit certificates of origin abounded. In 1983 U.S. Customs confiscated $26 million in illegal beans.

As the decade wore on, ICA regulations frustrated roasters who sought high-quality beans. The "other mild" countries (Kenya, Ethiopia, Central America, Peru) were not allowed to export more of their better beans.

Rollinde Prager, the U.S. delegate to the annual quota renegotiation in 1985, objected strenuously to the two-tier price system and Brazil's deliberate unders.h.i.+pment of quotas. An agreement was struck literally at the last moment, with the United States casting the only negative vote. "The outcome may not bode well for the future of the International Coffee Agreement or our partic.i.p.ation in it," Prager said ominously.113 Guerrilla Wars, Coffee Disasters In Angola, due to civil war, coffee exports had tumbled from 5.2 million bags in 1974 to fewer than 300,000 bags in 1984. "Stories from the surrounding countryside tell of fast-growing elephant gra.s.s coursing through neglected coffee fields," wrote a reporter. In Central America, three countries with a legacy of coffee oligarchies and poverty-stricken campesinos descended into prolonged internal struggle. "We are barefoot, but we are many," a Guatemalan peasant magazine declared in 1980. "We produce the riches that the landowners and all the powerful count, enjoy, and waste. Therefore, when we stop working, the wealth that they enjoy stops as well. Without us, they are nothing." Though that may have been true, the military and oligarchy still held the true power. Guatemalan General Fernando Romeo Lucas Garcia ruled with an iron fist and mounted a campaign against guerrillas that by 1981 amounted to genocide. "I saw the soldiers cut open the bellies of pregnant women and throw the unborn babies on the fire they had built," a fourteen-year-old witness recalled. While the guerrillas committed their share of atrocities, the vast majority were committed by the army. Many Indians had joined the guerrillas, but soldiers felt free to kill any Indian they met.

In 1982 a military coup ousted Lucas Garcia, replacing him with General Efrain Rios Montt, a born-again Christian. Rios Montt first declared an amnesty, but he soon resumed the b.l.o.o.d.y war of extermination. In 1983 the Inter-American Human Rights Commission cited the Guatemalan army for the "very gravest violations of human rights, including the destruction, burning, and pillaging of entire villages."

Most coffee growers tried to avoid taking sides, praying that their fincas fincas would be spared. Among them was Walter Hannstein, owner of would be spared. Among them was Walter Hannstein, owner of La Paz La Paz. Whenever the military asked Hannstein for a truck, he always made an excuse that it was broken. Then the guerrillas insisted on talking to him. "My mother said that they might as well do it in a civilized manner," Betty Hannstein Adams recalled. "So they served coffee and pastries while they talked." When the military heard about the meeting, they decided that Hannstein was too friendly with the guerrillas, so they bivouacked three hundred men on the farm. Once the army left, the guerrillas concluded that Hannstein was too friendly with the army, so they burned his farm.

A coup replaced Rios Montt with another military dictator in 1983, but the death squads continued to roam. "The blunt presence of armed men is everywhere," a visitor observed. Overhearing this comment, a bystander laughed. "If you think there are a lot of guns here, you ought to see El Salvador."

Indeed, violence and repression in tiny neighboring El Salvador were at least as bad as in Guatemala. About the size of New Jersey, El Salvador, with over 4 million people, was the most densely populated country in the Western Hemisphere. The life of the campesino had become intolerable. "It is better to die quickly fighting than to die slowly starving," one guerrilla fighter said. Throughout Latin America, but particularly in El Salvador, liberal Catholic clergymen spoke out against the inst.i.tutionalized violence. As a result, many priests were a.s.sa.s.sinated.

The United States did not take a firm moral stand against the killings. Fearful that all of Central America would fall to Communist influence (as had Nicaragua), the United States supported the repressive governments of El Salvador and Guatemala with helicopters and anti-insurgency training while trying to nudge them toward mild reforms. The U.S. Agency for International Development (AID) dumped money into ameliorative social programs while Congress authorized millions in military aid.

In 1980, under pressure from the Carter administration, a much-trumpeted land reform law was pa.s.sed in El Salvador, but it barely touched the coffee oligarchy. At the same time, the reforms served as a cover for greater repression by the troops supposedly sent to enforce land division. On March 23, 1980, Archbishop Oscar Romero delivered a powerful sermon. "We should like the government to take seriously the fact that reforms dyed by so much blood are worth nothing," he preached. "In the name of G.o.d, in the name of our tormented people who have suffered so much and whose laments cry out to heaven, I beseech you, I beg you, I order you, in the name of G.o.d, stop the repression stop the repression." The next day, as Romero celebrated a memorial ma.s.s, he was shot and killed.

Romero's death signaled the beginning of ever-more savage attacks. "For the death squads, death was not punishment enough," wrote Tom Buckley in his 1984 book, Violent Neighbors Violent Neighbors. "Bodies often bore the marks of torture. It was nothing exquisite-fingers and joints crushed by hammerblows, flesh burned away by blowtorch, large areas of skin removed by the flayer's knife." Feuding guerrilla movements banded together to form the FMLN, a united rebel force, and open warfare began in 1981.

Right-wing Major Roberto D'Aubuisson, widely rumored to be a.s.sociated with the death squads and the founder of the conservative ARENA (Alianza Republicana Nacionalista) party, led a coalition that won control of the Const.i.tuent a.s.sembly in the 1982 elections. Even though Duarte's Christian Democrats technically ruled, it was clear that the repressive right wielded the real power. The pattern for years of bloodshed was set.

Having ceded power to the military years ago to maintain repressive order, the coffee oligarchy found that it had created a monster over which it had insufficient control. The majority favored peace negotiations, limited democracy, and free markets. A sizable minority of coffee growers, however, led by Orlando de Sola, lobbied for another matanza matanza (ma.s.sacre) to restore order. He dismissed the 75,000 killed in the early 1980s by army terrorists and death squads as "Communist stooges" who deserved to die. (ma.s.sacre) to restore order. He dismissed the 75,000 killed in the early 1980s by army terrorists and death squads as "Communist stooges" who deserved to die.

ARENA was closely identified with both coffee factions. Ricardo "Rick" Valdivieso, who cofounded the party with D'Aubuisson, was a coffee grower with a long Salvadoran pedigree. In 1985 Alfredo "Fredi" Cristiani, one of the country's largest coffee growers, replaced D'Aubuisson as the ARENA head. Even with a coffee man in a position of power, El Salvador's government continued to profit from INCAFE (Inst.i.tuto Nacional del Cafe), the nationalized coffee monopoly that sold the country's beans at international prices in dollars, while paying producers in local currency equivalent to one-half or less of its real value. Distressed by low domestic prices, coffee growers stopped applying fertilizer, and some abandoned their farms completely.

As in Guatemala, the farmers were caught between the guerrillas and the death squads, with the large producers more at risk. A doc.u.mentary filmmaker followed guerrillas onto the Regalado Duenas plantation. "They are multimillionaires," one rebel explained. "So we are burning this estate because they mistreat their workers." Many Salvadoran farmers came to secret accommodation with the guerrillas, agreeing to pay their workers more and contributing to the rebel FMLN, which controlled a quarter of the coffee-growing regions by 1985.

In neighboring Nicaragua, most coffee growers had supported the 1979 Sandinista revolution that overthrew the hated Somoza regime. The new regime nationalized coffee exports through ENCAFE, a new government agency that paid the producers only 10 percent of the international market price. After taking all the profits, the Sandinistas supplied easy credit, but this only drove the farmers further into debt.

At the beginning of the revolution, the Sandinistas had taken over the vast Somoza coffee holdings, administering the farms as state-run enterprises. Unfortunately, the urban intellectual Sandinistas knew little about growing coffee. In an attempt to eliminate roya roya, the leaf rust disease, they cut down all the shade trees, selling them for lumber. They failed to fertilize or prune properly. At that time the government inst.i.tuted the CONARCA program, in which they took over farms with the announced intention of "renovating" before returning them to the owners. Renovation meant ruination, timber harvesting, and neglect. Few farms were ever returned.

Anyone who questioned Sandinista politics or policies was labeled a capitalist parasite. Throughout most of the 1980s, any farms that did not produce sufficiently, or whose owners were too vocal, were confiscated. In May 1982 Roger Castellon Orue, one of the most enthusiastic Sandinista supporters, attended his son's graduation at a private Miami high school, where he got a call from a friend. "Don't come back. They have confiscated your farm and declared you an enemy of the people." Castellon had left over $1 million worth of processed coffee back in Nicaragua. All of it was gone, along with his house, beneficio beneficio, and personal possessions. He found work in Kmart's plant department. His experience was far from unique. Another farmer's land was expropriated when he left the country for medical treatment.

Disaffected expatriates formed the Contra movement and, supported by the U.S. government, made incursions from bases just across the Honduran border. The Sandinistas did improve the lot of the urban poor, with literacy programs and medical services, but the plight of the campesino worsened. The coffee growers could not afford to pay their workers decent wages. Those who allowed laborers to cultivate subsistence plots were afraid of their farms being confiscated because they were not using them "efficiently." Many campesinos turned to crime or joined the Contras. "Who are the real exploiters of the poor?" one farmer asked. "They [the government] only allow my workers four ounces of rice a day. I want to give them more, so who is exploiting the workers?"

The Sandinistas recruited urban high school and college students to harvest the coffee, along with liberal volunteers from the United States and Europe. They were slow and inefficient. The Contras stepped up raids to disrupt the coffee harvest, killing not only Sandinistas but lowly harvesters, including women and children.114 There were no death squads in Nicaragua, however. One coffee grower suspected of aiding the Contras was arrested, stripped naked, and interrogated for hours, but he was not physically harmed. Compelled to relocate entire communities into "controlled zones," the Sandinista army forced 200,000 peasants off their land. Many fled across the border to Honduras, seeking protection from the Contras. Eventually, a half-million Nicaraguans-one-seventh of the population-lived in exile.

Responding to the defections, the Sandinistas began giving land to campesinos. "We gave them land and a gun and said, 'This is yours. Now defend it,'" recalled General Joaquin Cuadra Lacayo, the Nicaraguan Army chief of staff. "We called it 'agrarian reform,' but the logic was strictly military. We wanted to stop them from joining the contras contras." With no management experience and little profit incentive, they let the coffee rot.

By 1986 most of the large coffee producers hung on simply from inertia. "We have no choice," observed one grower. "We have a huge investment tied up in the trees and can't leave them." Yet they were losing money, able to continue only through bank loans. Many farmers simply practiced minimal maintenance and harvesting to avoid confiscation. "One day the bell tolls for my neighbor, the next day for me," a farmer said fatalistically. "There isn't any future for private producers in Nicaragua. We are just subsisting."

Fair Trade Coffee In April 1985 Paul Katzeff flew to Nicaragua at the invitation of UNAG, the pro-Sandinista coffee organization. For Katzeff, owner of Thanksgiving Coffee in Fort Bragg, California, the visit was a "life-changing event," reconnecting him to his social worker roots. "I hung out with the Sandinistas in the mountains, where they were fighting the contras contras. I met with three commandantes of the Revolution. I was educated about the relations.h.i.+p between coffee and revolution." Back in California, he changed the company slogan to "Not Just a Cup, But a Just Cup," and he packaged the Nicaraguan beans he roasted as "Coffee for Peace," donating 50 cents per pound to the Sandinistas.

One month later, the Reagan administration banned the import of all Nicaraguan goods. The flamboyant Katzeff sued Ronald Reagan, and he got around the embargo by having his Nicaraguan beans s.h.i.+pped and roasted through Canada. That year, Katzeff was co-chair of the Specialty Coffee a.s.sociation of America. Without consulting Dan c.o.x, his co-chair from Green Mountain Coffee, Katzeff invited a Sandinista and two other activists to take part in a panel on coffee and human rights. c.o.x was not happy. "I told Paul, 'I like this country. I'm not against our government.'"

Specialty coffee men had concentrated only on providing the "perfect cup." Now they were challenged to consider the inequities built into the system of coffee cultivation, processing, and export. The beans that produced their high-priced cups were harvested by poverty-stricken campesinos. In 1986 three Ma.s.sachusetts idealists who had worked in food co-ops formed Equal Exchange. "We aim to create a process," wrote cofounder Jonathan Rosenthal in 1986, "that allows people to reconnect with the people who grow much of the food and with the ecology from which it comes."

With help from investors, Equal Exchange got off the ground, providing "fair trade" Cafe Nica, their Nicaraguan coffee, primarily to food cooperatives. Their goals were to pay a guaranteed minimum price, buy directly from democratically run cooperatives of smallholders, help with credit, and encourage ecological farming practices. In Canada, Bridgehead, founded in 1984, also sold Sandinista coffee.

Around this time, two Dutchmen working in Latin America independently concluded that a better market mechanism was needed for fair trade coffee. In 1987 Franz van der Hoff, a priest who worked with UCIRI (a coffee cooperative in Oaxaca, Mexico), approached Solidaridad, a Dutch organization, asking for marketing help. At the same time, Bert Beekman, who had worked in Honduras and Nicaragua, returned to the Netherlands in frustration. "I concluded that over half of the development money was simply thrown away. There was no viable market for what these farmers had worked so hard to produce."

Supported by Solidaridad, Dutch churches, and the media, Beekman entered into a public debate with Douwe Egberts, the dominant Dutch roaster, owned since 1978 by the U.S. food firm Sara Lee. "They were quite open as long as it was just a debate," Beekman recalled. "But when it came to results and agreements, they delayed and delayed." The fair trade advocates decided to create their own collective brand. A survey revealed that 15 percent of the Dutch population would support a fair trade coffee mark. "In Holland, coffee is the center of social life," Beekman observed, "so it was the perfect product."

Having raised $4 million, the fair trade groups were prepared to launch their own brand when a group of smaller roasters-compet.i.tors of Douwe Egberts-approached Beekman. "Why don't we cut a deal? You create a certification label, and we we will launch your coffee." Beekman agreed, and in November 1988 Max Havelaar Quality Mark coffee was introduced, taking its name from the 1860 Dutch novel that protested the inhumane treatment of Javanese coffee growers. The fair trade coffee garnered enormous publicity and a 1.6 percent market share during its first year, subsequently achieving a steady 2.5 percent level. Within a few years, the Max Havelaar seal appeared in Switzerland, Belgium, Denmark, and France. In Germany and Austria, where the Dutch name did not resonate, it became Transfair Coffee, and Fair Trade became an officially certified trademark. will launch your coffee." Beekman agreed, and in November 1988 Max Havelaar Quality Mark coffee was introduced, taking its name from the 1860 Dutch novel that protested the inhumane treatment of Javanese coffee growers. The fair trade coffee garnered enormous publicity and a 1.6 percent market share during its first year, subsequently achieving a steady 2.5 percent level. Within a few years, the Max Havelaar seal appeared in Switzerland, Belgium, Denmark, and France. In Germany and Austria, where the Dutch name did not resonate, it became Transfair Coffee, and Fair Trade became an officially certified trademark.

Blood in the Salvadoran Cups?

In the United States late in 1989, concern over coffee and human rights s.h.i.+fted to El Salvador, where Robbie Gamble (great-great-grandson of the founder of Procter & Gamble) had lived for two years. Deeply disturbed by the violence there, he felt personally implicated because Folgers purchased coffee beans from El Salvador. In protest, he gave away his inheritance. Then, in November 1989, six Jesuit priests and two female workers were slain by death squads in El Salvador. Neighbor to Neighbor, a San Francis...o...b..sed activist group, immediately launched its long-planned boycott. Nestle, which had endured a lengthy boycott because of its controversial infant formula sales in developing countries, quickly announced temporary suspension of purchases from the troubled Central American country. Robbie Gamble's younger brother, Jamie, announced his support of the boycott, and Neighbor to Neighbor narrowed its focus to Procter & Gamble.

When Procter & Gamble CEO Ed Artzt refused to meet with the activists, they sponsored an inflammatory television spot. "Boycott Folgers Coffee," actor Ed Asner ordered viewers in May 1990. "What it brews is misery and death." As he spoke, blood oozed from under an inverted coffee cup. When a Boston station aired the spot, Procter & Gamble yanked its advertising, worth $1 million a year to the station, restoring it only when the station declined to run the activists' spot again, saying that it made "unsubstantiated claims."

By this time the Specialty Coffee a.s.sociation of America had come of age. Ted Lingle had become its full-time executive director in Long Beach, California, and the SCAA was holding its second independent convention at the Claremont Hotel in Oakland. Neighbor to Neighbor protested the convention, even though few specialty roasters bought the mediocre Salvadoran coffee. Paul Katzeff led a march through the meeting with banging drums before dumping buckets of red-stained water on the steps.

Neighbor to Neighbor formed an alliance with the International Longsh.o.r.emen's and Warehous.e.m.e.n's Union (ILWU), whose dockworkers refused to unload Salvadoran coffee from a freighter when it docked in San Francisco, then Vancouver, Seattle, and Long Beach. Tipped off by the dockworkers, Neighbor to Neighbor organized impressive picket lines with signs denouncing "Death Squad Coffee." The freighter eventually turned back to El Salvador. Under intense pressure, Red Apple, New York City's largest supermarket chain, temporarily agreed to suspend Folgers purchases and then to display Neighbor to Neighbor literature. Pizzeria Uno stopped using Folgers. The Evangelical Lutheran Church and the Commission on Social Action for Reform Judaism supported the boycott.

The campaign, waged by an underfunded gra.s.sroots organization, garnered huge media coverage. El Salvador's President Alfredo Cristiani, himself a coffee grower, called Neighbor to Neighbor a Communist organization. The CEOs for the major coffee roasters-Procter & Gamble, Nestle, and Philip Morris (which had bought General Foods in 1985)-met with U.S. State Department officials, begging them to facilitate the Salvadoran peace process that the Bush administration had subverted. The U.S. coffee companies took out ads in Salvadoran papers favoring a negotiated settlement. Negotiations for a peace settlement began in New York in September 1991. Soon afterward, early in 1992, the twelve-year civil war that had killed 80,000 people and sent over a million into exile finally ended. As part of the settlement, about 20 percent of El Salvador's coffee lands were given to campesinos in areas already controlled by the guerrillas anyway, providing at least a modic.u.m of hope and reform.

The violence, social inequities, and land distribution problems of Central America were far from over, but at least for the time being, the worst of the atrocities had stopped. Coffee growers now could worry primarily about such mundane matters as producing quality beans and securing a decent price for them.

The Big Boys Try to Get Hip In 1984 General Foods introduced the Swedish whole-bean Gevalia Kaffee to the United States through an ingenious direct-mail program. The company had bought Victor Theodor Engwall & Company, which produced Gevalia, still the dominant Swedish coffee, in 1970. General Foods executive Art Trotman, with the help of direct-mail guru Lester Wunderman, supervised a marketing effort modeled after record clubs in which members were induced to join with a hefty premium gift, then automatically received new products on a regular basis. "The plan relies on people's basic inertia," Trotman observed. At first, Gevalia customers received a free canister. Then, in 1987, new members got an automatic electric drip coffeemaker. "That's when sales doubled in two years," Trotman recalled.

The advertis.e.m.e.nts for Gevalia, placed in upscale venues such as Vogue Vogue and and Bon Appet.i.t Bon Appet.i.t, emphasized the coffee's Swedish heritage, "the magnificent obsession that produced coffee favored by kings," and its preparation by a master roaster. Customers had no idea that they were buying a General Foods product, since that fact was carefully obscured. The all-arabica blend was roasted in Sweden, hand-packed in one-way valve bags, s.h.i.+pped to a fulfillment service in the United States, and mailed out. General Foods never touched it, other than to take a sweet profit.

In 1985 General Foods decided to launch gourmet whole beans in U.S. supermarkets. Mary Seggerman put together a five-person "entrepreneurial attack team" that developed a line of seven whole-bean and ground coffees, including Kenya AA, Colombian, Breakfast Blend, French Roast, and several others. They wanted to set up kiosks in airports to sell espressos and cappuccinos, but that plan got nixed. Instead, they settled for gourmet beans sold in selected upscale supermarkets in one-way valve bags.

In the 1985-1986 Evanston, Indiana, test market, they named it the Maxwell House Master Collection and aired a television pitch featuring cla.s.sical music and references to Bach's Coffee Cantata Coffee Cantata, a.s.serting that this was "coffee even finer than that which inspired Bach." Focus groups showed that consumers confused it with Maxwell House Master Blend, the cheap, high-yield coffee. So they renamed it Maxwell House Private Collection and launched in high-income areas around the United States. The end-aisle display units featured shelves and a grinder.

Seggerman planned to have specialty food distributors deliver and supervise the beans. Just before the launch, however, General Foods hired an outside consultant, who concluded they should use "direct distribution"-that is, the packaged beans would go to a supermarket chain's warehouse, where they would be treated like any other product.

"It was a big mistake," Seggerman lamented. The French Roast and Colombian beans moved better than the Kenyan AA, which meant that grocers simply dropped the Kenyan product. With no one supervising the shelf s.p.a.ce, it looked disheveled. Worse, local specialty roasters-who distributed their own products-placed their beans on the empty shelves, right next to the Maxwell House Private Collection.

Even so, the program was a moderate success, grossing $45 million the first full year in 1986. "But that wasn't enough for General Foods," Seggerman said. "Unless a new product garnered at least $200 million annually by the third year, they considered it too small to worry about." After three years, General Foods killed Private Collection. Seggerman transferred out of coffee in 1989 and left the company the following year. "If they had only let me do it properly, I really believe I could have saved the Maxwell House Coffee Company, which is deader than a doornail today," she said. Others think that the name, not the distribution system, was the kiss of death. Few consumers believed that a true gourmet coffee product would have a "Maxwell House" preface.

The A & P was more successful in introducing its Eight O'Clock Royale Gourmet Bean Coffee in one-way valve bags. While in London, Paul Gallant, who headed Compa.s.s Foods, an A & P subsidiary, dropped in on H. R. Higgins Ltd., British coffee purveyors to the royalty. Entranced with the sn.o.b appeal, Gallant copied Higgins's elegant script, cribbed Loewenbrau Beer's lions, and produced a stunning product in a gold one-way valve bag. "I only steal from the best," Gallant explained. The A & P specialty product took off.

In line with its strategy of extension-by-acquisition, in 1987 Nestle purchased California-based Sark's Gourmet Coffee and slowly began to expand that brand's whole-bean supermarket coverage.

Procter & Gamble ignored the upscale market while making other changes. Procter & Gamble mounted one of its most effective lifestyle image campaigns, with the tagline "The Best Part of Waking Up Is Folgers in Your Cup." The ads, which ran from 5:00 A.M. until noon, targeted both men and women.115 Procter & Gamble finally brought out Folgers Decaffeinated Instant Coffee, a long-overdue brand extension that quickly overtook its High Point Decaf. Procter & Gamble finally brought out Folgers Decaffeinated Instant Coffee, a long-overdue brand extension that quickly overtook its High Point Decaf.

As the specialty market swelled, Folgers played both ends of the quality spectrum. Procter & Gamble didn't go for whole beans, opting instead for Folgers Colombian Supreme, later changed to Folgers Gourmet Supreme. At the same time, however, it rolled out Folgers Special Roast Flaked Coffee, a new high-yield version that used even less less coffee in an 11.5-ounce can claiming to match a regular pound's brewing capacity. The company also came out with Folgers Singles, "freeze concentrated" coffee in a bag, ready to brew in microwave ovens or boiling water in one minute, though marketers insisted it was not instant coffee. coffee in an 11.5-ounce can claiming to match a regular pound's brewing capacity. The company also came out with Folgers Singles, "freeze concentrated" coffee in a bag, ready to brew in microwave ovens or boiling water in one minute, though marketers insisted it was not instant coffee.

Coffee and Cigarettes In fall 1985, Philip Morris, the multinational cigarette manufacturer, bought General Foods. By that time, it was clear that the U.S. tobacco business, while incredibly profitable, was a chancy proposition. The cigarette executives knew that their products contributed to lung cancer. Buying General Foods for $5.8 billion allowed Philip Morris to diversify while establis.h.i.+ng itself as the largest U.S. consumer products company. The savvy tobacco executives soon became disenchanted with General Foods, however-especially the Maxwell House division, which accounted for a third of General Foods sales. The General Foods managers were "dead from their ankles up," complained a Philip Morris man. "Their arrogance was exceeded only by their sloth."

Shortly after the purchase, Philip Morris CEO Hamish Maxwell visited the Maxwell House wing of General Foods, in White Plains, New York, and asked for a cup of coffee. Certainly. Did he want Gevalia or Yuban? No, he wanted a cup of Maxwell House. Since no one drank the stuff, none was brewed. It took some time for someone to find a can opener and make a cup. "That was his first clue that there was a problem," Seggerman recalled.

Philip Morris was unhappy with its 1986 results, in which General Foods accounted for 40 percent of the corporation's gross sales but only 20 percent of the profits. With Folgers eating into Maxwell House market share with its "Wake Up" campaign, weren't they just pouring money down the drain with a $70 million annual coffee advertising budget? In April 1987 General Foods announced a 25 percent ad budget cut, lopping $17.5 million, then cut even more by year's end, putting more money into trade discounts and coupons than advertising. Bob Seelert, appointed senior vice president in charge of coffee and food service, focused strictly on the Maxwell House name, marketing all coffees as a brand extension. He saw no future in the whole-bean Private Collection.116 The slashed Maxwell House ad budget was a sure sign of troubled business in an era when the U.S. economy in general suffered from stagflation, soon to be followed by a recession and widespread unemployment. Maxwell House had to beat retail prices in 1988 when it restored its ad budget but still lost $440 million that year. Folgers countered by entirely replacing its regular pound cans with a thirteen-ounce "fast roast," insisting that it was not a high-yield coffee. "The one-pound coffee container," one journalist noted, "is going the way of the Edsel." By 1989 Procter & Gamble's regular ground coffees had overtaken General Foods to claim the number-one spot.117 In 1988, Phillip Morris anted up $13.1 billion for Kraft Inc., an Illinois food conglomerate with a sterling record, and folded its two acquisitions into one unit called Kraft General Foods, placing Kraft executive Michael Miles in charge.

As the decade drew to a close, Maxwell House was clearly flailing to find direction. In a last-ditch effort, Ogilvy & Mather hired former TV news anchor Linda Ellerbee and TV weatherman Willard Scott to s.h.i.+ll for Maxwell House. "In a national test, people said they liked Maxwell House better than Folgers Coffee," Ellerbee intoned at her news desk, then turned it over to Scott in the field, where a fireman told him he preferred Maxwell House for its "rich taste." In a scathing review, journalist Bob Garfield dismissed the ever-cheerful Willard Scott as a "human squirting-boutonniere" and lambasted Ellerbee for disguising advertising as real news. "It is misleading. It is cheap. It is wrong."

The jinxed ad aired during a controversial NBC drama, Roe vs. Wade Roe vs. Wade, about the landmark court decision to legalize abortions. As a result, antiabortion advocates threatened to boycott Maxwell House. A few days later, Maxwell House dumped Ogilvy & Mather in favor of D'Arcy Masius Benton & Bowles-the descendant of the firm that had created the enormously successful radio show Maxwell House Show Boat Maxwell House Show Boat during the Depression. during the Depression.

The Collapse of the ICA In fall 1985, prices rose dramatically with news of a Brazilian drought that would affect the 1986 crop. Volatility was exacerbated by the growth of hedge funds that traded in commodity futures and options. Managers dramatically affected prices when buying or selling thousands of contracts. As green bean prices reached $2.30 a pound, Brazilian thieves began to hijack coffee trucks rather than robbing banks.

In February 1986 the ICA quota system was suspended automatically because the average price had stayed above $1.50 for forty-five market days. Coffee futures plunged in antic.i.p.ation that producers would dump surplus stocks onto the world market, then firmed up when Brazil restricted exports. Brazil announced that it would import import African robusta beans, supposedly to supply domestic consumption and release higher quality beans for export. The Brazilians in fact were trying to maintain high price levels. By the end of 1986, with 45 million surplus bags overhanging the market and world consumption slumping, the price fell below $1.40 a pound, then drifted toward $1.20 by February 1987. African robusta beans, supposedly to supply domestic consumption and release higher quality beans for export. The Brazilians in fact were trying to maintain high price levels. By the end of 1986, with 45 million surplus bags overhanging the market and world consumption slumping, the price fell below $1.40 a pound, then drifted toward $1.20 by February 1987.

Technically, prices below $1.35 were supposed to trigger quotas again, but reaching an agreement proved difficult. The United States was angry that Latin American producers had formed a mini-cartel to limit exports, outside the ICA. Furthermore, the United States wanted a quota reallocation that would favor higher quality arabica beans. After March negotiations in London failed, prices sank to around $1 a pound.

The United States agreed to a new International Coffee Agreement in October 1987, again for political reasons. With civil wars still raging in coffee-growing countries of Central America and Africa, the United States knew that economies devastated by low prices would exacerbate the misery and intensify the conflicts.

The new ICA left all of the old issues unresolved. Brazil took a minuscule quota cut, from 30.55 percent to 30.48 percent of the total. Prices rose, hovering around the $1.20 ICA bas.e.m.e.nt target. As tourist coffee reemerged in the two-tier market, the National Coffee a.s.sociation abandoned its support of the ICA in February 1988, calling for "free and unrestricted trade in coffee." In April, the head of the U.S. delegation to the ICA announced that the government had not yet decided whether it would renew members.h.i.+p in the agreement when it expired in September 1989.

Rumors of the ICA's possible demise, then hopeful reports that a new agreement was near, sent coffee prices reeling up and down throughout the rest of 1988 and early 1989, but they sank gradually as Brazil and the United States squared off over tourist coffee and selectivity. With reformer Mikhail Gorbachev in the Kremlin and the Sandinistas recently voted out of power in Nicaragua, cold war fears no longer provided a compelling reason for the United States to support the agreement. Brazil's economy now relied more on the export of soybeans, oranges, weapons, mahogany, and ballpoint pens than coffee. The deadlocked negotiations became so bitter that the ICA did not even survive until the September expiration date. When no coalition could summon the necessary votes to renew the quarterly quotas, the International Coffee Organization suspended all export limits on July 4, 1989.

By the end of July, prices had fallen to 85 cents a pound. Prices went down more steeply as panicked producers rushed to the market with beans, hoping to sell before the price dropped lower. In October, members voted to maintain minimal funding of the ICO, without quotas. With this news, prices dropped to 70 cents a pound. Only Maxwell House, Folgers, Nestle, and the men screaming themselves hoa.r.s.e in the futures pit were happy. The big roasters were slow to lower retail prices, taking a breather from the interminable price wars, while they built a gigantic stockpile of cheap beans.

The Coca-Coffee Connection and a Black Harvest Under pressure from the Bush administration to crack down on cocaine processing and smuggling, Colombian President Virgilio Barco Vargas complained that the drop in coffee prices imperiled his fight against drugs. In 1988 Colombia had earned $1.7 billion from coffee exports, just over the estimated $1.5 billion in illegal cocaine sales. Now Colombia stood to lose some $500 million from the coffee price decline, and many of its 3 million citizens who made a livelihood from coffee might well s.h.i.+ft to growing coca.118 In January the Colombian amba.s.sador testified before a U.S. Senate subcommittee chaired by Joseph Biden that the Andean nations had lost nearly $750 million in revenue because of the ICA collapse. "How can we ask farmers in South America to grow coffee instead of coca leaves," Biden asked, "when the price they are getting for their coffee has been slashed in half over the past year?"

Despite the U.S. willingness to take another look, however, even the producers were ambivalent about another ICA. No one had been satisfied with the flawed system, which had limped through twenty-seven years from 1962 until 1989. In the new free-market atmosphere of the 1990s, government control boards either were disbanded or radically weakened, allowing some farmers to keep a greater percentage of the market price. In 1990 the Brazilian Coffee Inst.i.tute (IBC), with its staff of 3,500 and a $15 million annual budget, was summarily abolished.119 In Africa, the In Africa, the caisse de stabilisation caisse de stabilisation boards fell by the wayside. By late 1993 efforts to revive the ICA failed, and the United States officially withdrew from the lame-duck International Coffee Organization just as the growers in desperation created the a.s.sociation of Coffee Producing Countries (ACPC) to initiate a retention scheme to boost prices again. boards fell by the wayside. By late 1993 efforts to revive the ICA failed, and the United States officially withdrew from the lame-duck International Coffee Organization just as the growers in desperation created the a.s.sociation of Coffee Producing Countries (ACPC) to initiate a retention scheme to boost prices again.

Coffee growers had suffered through four years of bas.e.m.e.nt prices. Even for efficient plantations, prices remained below the cost of production. 120 120 As in previous bust cycles, many farmers stopped pruning or fertilizing. Others ripped up their trees to plant other crops. Although world coffee exports averaged 8.4 million bags a year more than in the late 1980s, average annual revenues As in previous bust cycles, many farmers stopped pruning or fertilizing. Others ripped up their trees to plant other crops. Although world coffee exports averaged 8.4 million bags a year more than in the late 1980s, average annual revenues fell fell from $10.7 billion to $6.6 billion-a staggering loss of over $4 billion a year. The dramatic price drop devastated small growers around the world. from $10.7 billion to $6.6 billion-a staggering loss of over $4 billion a year. The dramatic price drop devastated small growers around the world.

In the highlands of Papua New Guinea, for instance, the Ganiga tribe had staked its future on a new coffee plantation co-owned with Joe Leahy. In Black Harvest Black Harvest, a film doc.u.mentary, Leahy told tribal leader Popina, "With good prices, you'll be up to your necks in money." Instead, the bottom dropped out of the market. The bewildered Popina observed, "I feel like selling my big pig and traveling to where they make these decisions. This affects all of us. We'll never be millionaires." The Ganiga refused to harvest for lower wages, and the berries blackened and rotted on the trees. By the end of the film, the Ganiga had reverted in frustration to tribal warfare, and Leahy was considering a move to Australia.

Big Coffee: Ice Cold In the consuming countries, few roasters thought much about the plight of growers. They stockpiled cheap beans, even as the merger mania continued in the industrial coffee world. In 1990 Philip Morris bought Jacobs Suchard, the dominant European coffee-chocolate conglomerate, for $3.8 billion. At the same time, Maxwell House announced the closing of its Hoboken roasting plant due to declining sales. All roasting would be s.h.i.+fted to a Jacksonville, Florida, facility. Maxwell House switched ad agencies again, back to Ogilvy & Mather. In 1991 Kraft General Foods barely managed to regain a slight lead in the ground-roast segment, holding 33 percent of the market versus 32.7 percent for Procter & Gamble. Folgers as a brand still trounced Maxwell House.

In the first few years of the 1990s, the major roasters continued to battle one another without much to show for it, other than an innovative Taster's Choice campaign-and even that was cribbed from British commercials for Gold Blend, the Nestle brand of freeze-dried coffee in the UK.121 The commercials featured mini soap operas in which Tony, a soulful bachelor, met Sharon, his lovely British neighbor, when she knocked on his door to borrow Taster's Choice because of its "sophisticated taste." In serial episodes ranging over years, Tony and Sharon flirted over the freeze-dried coffee in commercials dripping with s.e.xual innuendo, sensuality, and intrigue. The advertis.e.m.e.nts catapulted the instant coffee to first place in market share by 1993, when Tony and Sharon finally kissed onscreen to great media hoopla. A romance novel based on the couple hit the best-seller list in England. The commercials featured mini soap operas in which Tony, a soulful bachelor, met Sharon, his lovely British neighbor, when she knocked on his door to borrow Taster's Choice because of its "sophisticated taste." In serial episodes ranging over years, Tony and Sharon flirted over the freeze-dried coffee in commercials dripping with s.e.xual innuendo, sensuality, and intrigue. The advertis.e.m.e.nts catapulted the instant coffee to first place in market share by 1993, when Tony and Sharon finally kissed onscreen to great media hoopla. A romance novel based on the couple hit the best-seller list in England.

Maxwell House came out with a refrigerated liquid coffee concentrate, then tried Maxwell House 1892, purportedly the original slow-roasted formula. Both bombed. Next it launched Cappio, one of many iced coffee drinks that were heralded as the new wave of caffeinated beverages; it didn't do well either. Coca-Cola and Nestle announced a joint worldwide venture to market cold coffee drinks-excluding j.a.pan, where c.o.ke already dominated the market with its Georgia Coffee. Nestle came out with a Nescafe Mocha Cooler, followed by Chock O'Cinno from Chock full o' Nuts and a number of smaller specialty entrees. None of the iced-coffee products caught on the way Snapple and other "New Age" drinks did.

By the mid-1990s it was clear to industry observers that the major roasters had lost their way, while gourmet small-scale coffees were booming. In 1995 Forbes Forbes summarized the fate of the big coffee merchants in a one-word headline: "Oversleeping." The message the magazine conveyed to Maxwell House, Folgers, and Nestle: "Wake up and smell the freshly ground coffee." summarized the fate of the big coffee merchants in a one-word headline: "Oversleeping." The message the magazine conveyed to Maxwell House, Folgers, and Nestle: "Wake up and smell the freshly ground coffee."

18.

The Starbucks Experience According to legend, Merlin was born in the future and lived backward in time, moving toward the past. He must have often felt out of step with his time, moving toward the past. He must have often felt out of step with his contemporaries, filled as he was with unconventional notions of what might contemporaries, filled as he was with unconventional notions of what might be. I'm no sage, but sometimes I think I know how he must have felt. be. I'm no sage, but sometimes I think I know how he must have felt. My vision for the future, my aspirations for what kind of company Starbucks My vision for the future, my aspirations for what kind of company Starbucks should be, are so easily misunderstood. should be, are so easily misunderstood.

-Howard Schultz, 1997

By 1995 one specialty roaster had emerged as the definitive leader in the dynamic, fragmented market. Starbucks, the pioneering Seattle company begun in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker, had been transformed into a national phenomenon in an astonis.h.i.+ngly short period of time. Without paying for the publicity, Starbucks Starbucks had become synonymous with fine coffee, hip hangouts, and upscale image. had become synonymous with fine coffee, hip hangouts, and upscale image.

In 1980 Zev Siegl sold out to pursue other interests. By that time, Starbucks was the largest roaster in Was.h.i.+ngton, with six retail outlets. It also sold its beans to restaurants, other retailers, and supermarkets, and sold espresso machines, grinders, and brewers. Jerry Baldwin sold the Blue Anchor supermarket division to focus primarily on sales in his own stores. He also gave up the equipment accounts, but in 1982 he hired Howard Schultz, a New York salesman who had supplied the coffee firm with drip-brewing thermoses, as his new head of marketing. "You've got a real jewel," Schultz told Baldwin. "Starbucks could be so much bigger."

In 1983 Baldwin got a call from Sal Bonavita, who had bought Peet's in 1979. Bonavita wanted to sell. "I was so excited I could hardly sit still," Baldwin recalled. Here was his chance to own the store that started it all. "I wanted to see Peet's and Starbucks together." In 1984 Starbucks bought Peet's, putting the company deeply into debt. Baldwin found himself juggling two company cultures and commuting between Seattle and San Francisco.

Howard Schultz was agitating to take Starbucks in another direction. In spring 1983 Starbucks sent Schultz to an international housewares show in Milan, Italy. There, like Alice Foote MacDougall sixty years earlier, he found a vibrant coffee culture. Milan, a city the size of Philadelphia, supported 1,500 espres...o...b..rs, and there were 200,000 in all of Italy. "Buon giorno! " a barista (bartender) greeted Schultz one morning, as he handed a tiny demita.s.se of espresso to one customer, then deftly created a perfect cappuccino. "The barista moved so gracefully that it looked as though he were grinding coffee beans, pulling shots of espresso, and steaming milk at the same time, all the while conversing merrily with his customers," Schultz recalled. "It was great theater." In Verona, Schultz had his first caffe latte, a drink with more steamed milk than espresso. " a barista (bartender) greeted Schultz one morning, as he handed a tiny demita.s.se of espresso to one customer, then deftly created a perfect cappuccino. "The barista moved so gracefully that it looked as though he were grinding coffee beans, pulling shots of espresso, and steaming milk at the same time, all the while conversing merrily with his customers," Schultz recalled. "It was great theater." In Verona, Schultz had his first caffe latte, a drink with more steamed milk than espresso.

Schultz was inspired. Why not take great Starbucks beans and brew such drinks? Why not create community gathering places like those in Italy? Back in Seattle, Schultz received a chilly reception. Jerry Baldwin didn't want to dilute his mission to sell whole beans.