The current restructuring of the world-economy under global
capitalism has further integrated international trade and production (Gereffi et el 1994:159). Globalisation has broken down geographical
boundaries and with improvements in transport and telecommunications, it has
allowed transnational corporations (TNCs) to disperse sections of their operation
across the globe. This has led to the growing importance and complexity of
global commodity chains, which have been defined by Hopkins and Wallerstein as
‘a network of labour and production processes whose end result is a finished
commodity’ (1986:159). Each input is represented as a ‘node’ (Gereffi et al
1994:159) and are linked together in networks, with each stage adding value to
the commodity. This
essay will explore the global nature of the coffee commodity chain, with
reference to Starbucks, to highlight the global power TNCs exert over commodity
chains and assess the subsequent implications on other key ‘nodes’. The
importance of consumption as a driving force of the global commodity chains will
also be discussed, reinforcing the interconnection between the producer and
consumer which is often overlooked.

Starbucks,
founded in Seattle in 1971 (Ponte 2002:1111), has become the largest chain of
coffeehouses worldwide (Coe et al 2007:90), stretching across four continents.
In August 2005, it had 2,783 operations dispersed across 34 countries, serving
an estimated 33 million customers each week (Coe et al 2007:90) which
highlights its vast global performance. The company sources its coffee beans
from plantations in Latin America and Africa where they are harvested and
bought from wholesalers before being transported to one of five distribution centres
in the US (Starbucks 2017a). Starbucks thrives off the growing global market,
opening its 1,000th stores in both China and Japan and continues to expand with
future plans to open ‘1,500 net new stores across every region’ (Starbucks
2013:2) which will add to its sales success market. This reinforces how food
production chains have changed in the last four decades, becoming increasingly
‘industrialized’ and ‘global’ (Dicken 2015:424) through the capitalist
interests of TNCs. Their ability to coordinate
and control production in more than one country, manipulating geographical differences,
gives them immense control over global commodity chains (Dickens 2011:16). One
of the main advantages for Starbucks to outsource and establish operations within
these export-orientated, developing countries such as Costa Rica is the cheap
labour and less strict regulations which are exploited to maximise profits. The
company controls several commodity chains that involve transforming the regular
‘Arabica bean’, grown at high altitudes, into regular coffee or for the growing
market of ‘speciality blends’ (Starbucks 2017a). However, Starbucks will always
search for the cheapest locations, stimulated through competition. The foreign
direct investment that Starbuck injects into the host country’s economy is
often pivotal to its economic development; reinforced by the fact that 20% of Starbuck’s producer countries fall in the low
income category (Wachalec 2015). Therefore, Starbucks and many other TNCs have
the power to play regions off from each other in a ‘race to the bottom’ to find
the most economically profitable location and drive down costs of production.The impact
TNCs have on different global nodes of the commodity chain

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On the other
hand, TNCs global dominance can cause negative effects on other ‘nodes’ in the
commodity chain, for example ‘production’ in the developing countries. Many developing
countries rely on coffee for a high proportion of their export earnings. Ponte
(2002:1101) argues it is TNCs priority of maximising profits that are causing
farmers to lose their source of livelihoods. TNCs influence global markets,
fluctuating the prices of commodities such as coffee and invest and upgrade in
their functional roles and technologies in a way ‘local’ exporters cannot compete
with. Consequently, many small holders are disappearing or are forced to align
themselves with such international corporations (Ponte 2002). However, this
also raises issues of dependency, as TNCs still have the ability to lock in or
cut out chosen suppliers from the commodity chain; jeopardising the economic
development of the dependent developing country. This highlights the shift of
power from producing countries to consuming countries, where the headquarters
of TNCs are located (Ponte 2002:1107). Ponte (2002) argues this is due to a
change in the coffee commodity chain which has moved from a formal and
relatively stable system where producers ‘had a voice’ (1107) to an economic
chain that disadvantages producer countries.

In order to resolve these imbalances of production
within the global coffee chain, perhaps producer country governments should
promote ”conscious consumption”, (Ponte 2002:1107) for example Fair
Trade. This would ensure a minimum floor price which would help local producers
regain some of the total income generated in the coffee chain (Ponte 2002). In
the case of Starbucks, it has recently achieved the milestone of 99% of its coffee being ethically sourced
(Starbucks 2017b). The increase of Fair Trade within food commodity chains is reflected
in the growth of ‘ethical consumption’. People are becoming increasingly
conscious of where their food has been sourced and willing to pay more for a
commodity to ensure local producers receive a just payment; thus supporting
their livelihoods (Ponte 2002:1116). It also highlights a growth of
transparency within commodity chains which can be seen as a positive move in
revealing how the commodity has in fact been globally configured.

Furthermore, Starbucks
recognises the importance of labour as a ‘production factor’ (Dicken 2015:121) within the commodity chain and how
its productivity is essential to the economic success of the company; arguably
more so than the cheap labour. Productivity refers to the scale of output per
worker for a given wage and is a
reflection of education and training as well as capital equipment (Dicken 2015).
For example, Starbucks has a number of farmer support centres in Costa Rica and
Guatemala and launched C.A.F.E (Coffee and Farmer Equity) practices in 2004 to ensure
fair wages and safe working conditions for its workers (Wachalec 2015). This demonstrates
an active interest and investment into the wellbeing of its labour force, with
the capitalist knowledge that it increases motivation and productivity in the
long term which will result in larger outputs and
thus profits.

Coffee
is clearly a global commodity but its production can also be seen as a ‘local
process’ as its bound to specific climate, soils and often socio-cultural
conditions (Dicken 2015:424). For example, four countries generate 60% of total
coffee exports: Brazil, Vietnam, Columbia and Indonesia (Dicken 2015:429),
showing how the food industry is literally grounded by ‘biophysical processes’
(424) and making it fundamentally different from other manufacturing
industries. Despite this, Starbucks, is globally strategic and only operates
within affluent consumer markets where the demand for coffee is high to ensure larger
profits. TNCs follow capitalism in this respect. For example, Starbuck’s
distribution is largely concentrated in Global North countries such as the UK,
where disposable incomes are high and coffee has strong cultural values. As a
result, there is a growing divide within the nodes of the commodity chain, as
the Global South is associated with production and Global North with consumption.
This is reinforced by the fact that statistically, over 90% of coffee
production takes place in developing countries (Ponte 2002:1101).

Consumption as a driving
force of global commodity chains

Consumption can be seen
as the driving force of global commodity chains as ultimately the processes are
based on the willingness and ability of a population to buy and consume the
product themselves (Dicken 2011:20).  In
recent years consumer demands have become more complex as globalisation has
increased choice on the market and resulted in people having widely varying
‘food agendas’ (Dicken 2015:431). Furthermore, this has been enhanced by the
rise of ‘commodification’, where products are induced with ‘symbolic qualities
and culturally embedded meanings’, (Dicken 2010:20) increasing the importance
of consumerism. In turn, multinational firms such as Starbucks have manipulated
these changing patterns through marketing strategies and highlights a direct
reflection of producer’s perceived need to meet the increasing fragmented
demand of a consumer (Dicken 2011:20). For example, Starbuck’s corporate
website promotes ‘speciality coffee’ and sells thirty different types of coffee
and tea, describing individual coffees as ‘exotic’ and ‘earthy’ (Coe et al
2007:90) which fuels ideas that coffee produced in foreign land is more
desirable. Ponte (2002:1111) argues the global coffee chain has gone through a
“Latte revolution,” through the increase in variety of beans, to the
extent that Starbucks has developed a specialist ‘lifestyle’ drinks market. He
refers to this as the ‘Starbucks factor’ where Starbucks has become a ‘consumption
experience’ and ‘de-commodified
coffee’ (1111). This capitalist technique is particularly evident in
buyer-driven commodity chains such as coffee, (rather than producer-driven) as product
design, advertising and brand- named merchandisers are key actors to this chain
(Ponte 2002:1100). It suggests that through this investment in advertising
their brands, corporations such as Starbucks have managed to keep control of
the coffee chain (Dijk et al 1998).

On the other hand, the
global nature of commodity chains can be concealed through capitalism. Although
often ignorant of the fact, UK consumers for example, are intricately connected
to labourers working on coffee plantations in Costa Rica as they both represent
key ‘nodes’ in the commodity’s journey. However, Coe et al (2007) argues that
price tags and brand names reveals nothing of this production process or for
example, the working conditions of the labourers and therefore disconnects the
consumer and producer. As a result, ‘even a person drinking coffee in Starbuck
makes the customer complicit’ (Coe et al 2007:90).  It is therefore important to recognise the
entire circuit of production, distribution and consumption as a ‘bundle of
social relations’ (Watts 1999:307) to highlight the importance of the
interactions between people, despite being geographically apart.

Global
commodity chains may be a way of charting the geographical journeys taken by
commodities but they are not deterministic. TNCs are constantly manipulating
and adjusting supply chains to maximise efficiency and thus profit. This is
often achieved by shortening the time between production and consumption which
has been enabled through improvements in ‘circulation technologies’ –
transportation and communications technologies, which overcome the frictions of
space and time (Dicken 2015:83). Harvey (1991) refers to this as ‘time-space
compression’ and represents a capitalist approach to commodity chains through the
continual attempt of driving down costs and prioritising revenue. Starbucks
echoed this approach in 2008 when it recognised ‘outsourcing had led to
significant cost inflation’ (Cooke 2010) and the supply chain was struggling to
keep up with demand. It regionalized its coffee production and established an
extra five distribution centres across different countries to reduce
transportation costs and get supplies to their stores faster (Cooke 2010). Starbucks ensures the
commodity chain is consistently simplified to avoid future errors and as a
result of the corporate strategy has been able to ‘save $500 million in the last
two years’ (Cooke 2010). On the other hand, this could also represent a
potential risk to globalised commodity chains because as the web of connections
expand, it becomes more difficult for the company to control what is happening
in each ‘node’ and overall control of the chain could be compromised. For
example, Cooke (2010) states Starbucks was arguably a ‘victim of its own
success’.

 

In conclusion, recent
transformations within the global economy have caused for a massive change in
the nature of production, distribution and consumption and have globalised
commodity chains. Through the analysis of Starbuck coffee as a case study, this
essay has demonstrated how TNCs are able to maximise their locational
flexibility and exploit geographical differences, in terms of labour and state
regulations, to ensure large profits and global power (Dicken 2015:242). In
turn, the global coffee commodity chain has undergone dramatic changes,
arguably becoming more globally complex, despite the growing of the commodity
being limited by climate.  

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