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Ethiopian Coffee Wakes Up To Global Battle for Profits
The Washington Diplomat / May 2008

By Larry Luxner

For most ambassadors in Washington, coffee is no more than a nice hot beverage enjoyed at diplomatic receptions or on the job. But for Samuel Assefa and the country he represents, it's a matter of economic survival.

Assefa, Ethiopia's envoy to the United States, has spent a good part of his one year here working with the Ethiopian Coffee Trademarking & Licensing Initiative — a worldwide, grassroots effort aimed at forcing huge multinationals like Starbucks to share their profits with struggling coffee farmers living on less than $1 a day.

"Usually, African ambassadors in the U.S. tend to be preoccupied with political matters," Assefa told the Diplomat in a recent interview. "But Washington is also the capital of the largest economy in the world. And as ambassador of a poor country, you have pangs of conscience if you don't deliver on the economic front."

With 85 million inhabitants, Ethiopia is now Africa's second-most populous nation after Nigeria, having recently overaken Egypt. Yet it's also steeped in poverty. A devastating war with neighboring Eritrea combined with a drop in world coffee prices in 2002 ravaged Ethiopia's once-proud coffee industry, forcing millions of farmers into other cash crops including the narcotic qat leaf.

"Harar coffee was once very famous," said Assefa, calling it the "mother of all coffees" valued by exporters, buyers and distributors the world over. "In the Middle East, they bought only Harar. But after 2002, everything was uprooted. This incredible coffee with its powerful berry flavor is virtually gone."

In the last five years, world commodity prices have recovered and exports are climbing back up. In the 2006-07 season, Ethiopia — widely acknowledged as the birthplace of coffee — exported 187,000 tons of coffee beans worth $450 million, up 2 percent from the $427 million worth of beans it shipped abroad in 2005-06. Coffee now accounts for around 35 percent of Ethiopia's $1.4 billion in total annual exports.

Yet those numbers mean little to the average Ethiopian coffee farmer. Despite projected GDP growth of 8 percent in 2008, Ethiopia's annual per-capita income is a miserable $229 — the eighth-lowest on Earth, and not even enough to buy 60 lattes a year at Starbucks.

"About 15 million people depend one way or another on coffee," said Assefa, an academic from Addis Ababa whose father and grandfather were also ambassadors. "Many of them are the poorest of the poor, who actually carry sacks of coffee on their backs. Some are more fortunate; they have a mule."

That's why the trademarking and licensing initiative is so important to Ethiopia. Its goal is to achieve more equitable leverage for Ethiopian coffee producers, provide brand security to importers and retailers, and boost consumer awareness and demand.

In March 2005, Ethiopia filed with the U.S. Patent and Trademark Office (USPTO) to trademark Yirgacheffe, Harar and Sidamo — the names of its three finest coffee-growing regions. Without legal protection, Addis Ababa argued, Ethiopia had no way to capitalize on a system that allowed Starbucks to charge $26 a pound for gourmet coffee produced by farmers earning only $1.45 from that same pound of coffee.

"Retail prices were going up for our specialty coffee, but export prices remained the same. There was nothing we could do about this," Assefa said. "Before, we just threw up our hands. But then we decided to establish an intellectual property office. Usually the developing world is thought not to be favorably inclined toward IP. One has this superficial image of IP being in the interests of the well-to-do, and the fight against it to be in the interests of the developing world.

"We decided that IP can work for us as well, by branding our coffees. But in order to do that, we'd have to exercise some ownership in order to be able to control distribution."

At first, Starbucks, the world's largest coffee retailer — with over 15,000 stores in the United States and abroad, refused to go along with the idea — arguing that Ethiopia would be better served by seeking geographical certification for its coffees rather than trademark protection. The Seattle-based coffee giant even tried to get the USPTO to reject Ethiopia's application and launched a media counter-offensive to defend its actions.

But for all its lobbying, Starbucks — with 2007 revenues of $9.4 billion — didn't earn much sympathy around the globe.

Fortune magazine called the standoff between the world's largest, most profitable coffee retailer and one of the world's poorest countries "a potential public-relations disaster," while the British nonprofit group Oxfam attacked Starbucks as being selfish in its attempts to deny Ethiopian farmers millions of dollars in potential income.

"We resisted the pressure to go the geographical certification route," said Assefa, arguing that this would have disqualified Ethiopia from trademarking its coffee regions. "It became an embarrassment [for Starbucks], though there were many aspects of this controversy, and Starbucks was not alone in refusing to recognize our trademarks and intellectual property rights."

Assefa added: "This was becoming a real issue, and the fairtrade movement focused on powerful stories. It made for wonderful sound bites, and then Oxfam came on board. They were very critical. In Ethiopia, this mobilized everybody's attention, but it came to a happy ending in a relatively short time."

Following a meeting in Addis Ababa between Starbucks CEO Jim Donald and Ethiopian Prime Minister Meles Zenawi, the coffee company announced it had reached an agreement with Ethiopia, though the details are still somewhat sketchy.

It appears that Ethiopia's Intellectual Property Office has dropped its initial demand for royalty fees. The licensing agreement as it was finally signed by Starbucks acknowledges Ethiopia's ownership of the names Yirgacheffe, Harar and Sidamo, and sets the basis for joint marketing promotions and overall brand enhancement of these coffee brands. It also allows for convenient sublicensing of subsidiary distributors.

"The goal of the initiative is not to try to charge licensees to use the Ethiopian fine coffee names; rather, the intent is to create a basis on which to work together to enhance their value," according to an IPO press release. "The aim is a stronger, mutually beneficial relationship between Ethiopia's coffee farmers, exporters and promoters and those who distribute Ethiopia's fine coffees in international markets."

To date, Ethiopia has secured trademarks in 28 countries and signed licensing agreements with more than 70 companies; besides Starbucks, the list includes Vermont-based Green Mountain Coffee and 40 other U.S. importers, roasters and retailers. Ethiopia's efforts have also earned the backing of the Specialty Coffee Association of America, and the country will be honored at the SCAA's 20th annual conference in Minneapolis this May.

"One of the things we had to overcome was the feeling that this was a battle against globalization and multinationals," he said. "We didn't want to be bashing the system; we wanted to be part of it. Oxfam also played a very responsible role; they called it a win for Ethiopia, and a win for Starbucks."

Assefa said the embassy had no hired guns lobbying on its behalf; an attorney working with Arnold & Porter represented Ethiopia on a pro bono basis.

The ambassador declined to say how much his government is spending on coffee promotion.

"I don't think we've been in the business of promoting Ethiopian coffee," he conceded. "Usually, individual exporters might be doing some promotion here and there, but there hasn't been any real promotion. It hasn't been uppermost in people's minds."

He did say Starbucks has agreed to establish a "farmer support center" — the first of its kind in Africa — in Ethiopia, and that in the past two years, Starbucks has increased its purchases of Ethiopian coffee by 400 percent. The company now accounts for just under 10 percent of the company's total coffee purchases.

Ron Layton, a Washington attorney who works with the nonprofit organization Light Years LP, estimates that the trademarking agreement will generate an extra $88 million a year in gourmet coffee revenues for Ethiopia. Assefa agreed.

"Starbucks began this trend, but now they're being given a run for their money," he said. "Discovering new sources of fine coffee is really a big job, so Starbucks itself had a deep interest in ensuring the survival of Ethiopian coffee. Ethics aside, interests dictate that they concern themselves with increasing the income of our farmers."

At least, the agreement offers a glimmer of hope for the poor but proud African country that gave the world coffee in the first place.

"All arabica coffees we know in the world are derivatives of this one strand that came from Ethiopia. We possess a very rich diversity of varieties, and the survival of Ethiopian coffee depends on our genetic pool," said Assefa. "Before, there was no incentive. But now, the possibilities are enormous. We're just beginning." - END -

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