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Starbucks' business empire is among the most recognizable multinational food companies on Earth. This investigative report explores the brand's appeal and the secrets of its success, while revealing the coffee giant's dark underside.

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00:00one company has achieved an amazing tour de force turning coffee the most mundane of soft drinks
00:13into a magical potion a beverage sold for a fortune that changes you into a sophisticated
00:20human being that gives you the illusion that you make a difference and lets you believe that you
00:28are for a moment at least above others this company is Starbucks I have fallen over the
00:39brand and it's not just the coffee embodies a lot of thing in just one cup the Starbucks logo on the
00:45cup is saying hey yeah I can afford this I live a little bit better than you do one American
00:52entrepreneur understood just how high a price we were ready to pay for this promise a leader who
00:59claims to be progressive Howard Schultz great companies I believe have to understand what
01:06it means to achieve the fragile balance between profitability and a social conscience by addicting
01:13millions of customers to his beverages he has built an empire an inescapable landmark of globalization this
01:22Starbucks brand is a very human brand it's a brand is not just a product it's like a religion what
01:28does the world according to Starbucks look like the coffee giant has poked itself into our lives it's
01:3528,000 stores are set in the top locations worldwide they came in and took our store it was scary big
01:44corporation came and took over took over our shop a bold success that covers a far more bitter truth
01:51that the firm would like to hide just like its permanent race for profits and the high pressure on its
01:59employees it's the hardest job I've ever worked at Starbucks you're doing 15 things at one time all day
02:06it's like a juggling act and you have to be a good juggler and if you're not a good juggler you won't
02:12survive it's cynicism disguised as authenticity the various promise has he went off pensamintos
02:20también pero ya yo ya no sentía nada de eso nada it is fast food products sold as premium ones the
02:29product that contained the highest amount of sugar was from Starbucks that contained 99 grams of sugar
02:35that's staggering and its very own understanding of tax laws Starbucks or how wicked illusionists built
02:46an empire on a promise that would be nothing more than a smokescreen
02:51born in Seattle USA Starbucks is established now in 75 countries how does the brand managed to win
03:16over that many customers despite high prices yes it is a form of luxury in many many ways you have
03:28an idea how much you spend at Starbucks every month I guess I'm thankful that I've made a career of being
03:37a lawyer and maybe I can have a little bit of an affordable luxury it's a social statement that I can go to
03:43Starbucks I just went to Starbucks and here's my drink and yes I paid five dollars for this drink
03:47yes I paid seven dollars for this drink and it's a source of pride you're sitting in a Starbucks and
03:52got your Apple laptop and you've got your Starbucks drink you've achieved success in America I'm gonna
03:58confess to you there was a time in my life where I was employed as a dental assistant I recall that I
04:04could not afford to go as often as I do now to Starbucks that's the honest truth with their coffee
04:12customers also by a form of social recognition a calculated strategy designed at the beginning of
04:20the brand's expansion American academic Bryant Simon has spent a long time studying the coffee giant
04:30visiting hundreds of Starbucks Starbucks deliberately followed a strategy of trying
04:39to get upper-middle-class largely white largely affluent people on board with the brand people who drove
04:47BMW's who wore you know fancy clothes once those people were on board then emulators followed pretty
04:57quickly its most loyal customers were not the wealthiest people there were people who wanted to use
05:04the cup and use their association with the brand to look like they were affluent
05:09malgré tout c'est de la restauration rapide en fait en anglais on dirait du fast drink vous avez
05:16besoin que votre boisson soit préparé rapidement et vous se donner rapidement donc oui on est dans la rapidité
05:20de service en revanche la volonté de Starbucks c'est d'avoir des connexions avec les clients on essaie d'amener
05:26cette connexion cette chaleur humaine qui va faire que oui ce sera rapide mais au moins vous a
05:30eu l'impression d'avoir un vrai contact avec quelqu'un a personalised connection that focuses on the
05:38customer and makes him or her feel good Starbucks has designed its marketing strategy on this promise
05:46they don't want to say number 26 your drink is is ready they don't want you to feel dehumanized in
06:11that way they want you to be recognized they want to say Luke your drink is ready come get it
06:19when Starbucks come to the UK and they're asking people's name the reaction wasn't good the typical
06:27British reaction why do you want to know my name yeah yeah what's it got to do with you so the British
06:33public have got a little bit used to it but it's still an embarrassing thing for for a Brit to walk up
06:39to a bar and want to drink a cup of coffee and then have to give is nine Starbucks coffee company uses a
06:47phrase called the Starbucks experience as customers come in frequently they're greeted before they get
06:54to the coffee counter if they're a regular customer they'll identify the person by name it's a major
07:02corporation recognizing each person as an individual it is such a smart thing to do the customers must
07:11also familiarize themselves with Starbucks language to give its beverages a touch of sophistication and
07:17and since its beginning the brand has been using a whole lingo inspired by Italian
07:23Starbucks understood the importance of this language as a way of creating belonging and identification with
07:38the brand the more intricate language about the drinks created an insider group and therefore you
07:44identified with the brand and you got something back you could be part of the insider club and
07:49that's what the language did Starbucks offered a little bit of connection Starbucks barely advertises a
08:00bold communication strategy for a leading brand the company prefers to rely on its marketing concepts
08:07since its creation the best messenger of the brand remains the customer holding a paper cup stamped with its iconic mermaid
08:19we've never been in the coffee business serving people we've always been in the people business serving coffee we've
08:28enhanced the lives of many people who perhaps would not have anywhere to go if Starbucks did not exist
08:36Starbucks prides itself for the creation of a new environment the company presents its coffee shops as shelters open to
08:51all ideal for encounters and exchanges a safe haven in an increasingly individualistic society defining each of its stores the third place
09:03third place it's like okay you have your home you have your office what's in between those where you would come in feel welcome feel warm feel safe
09:18third place is that place where people go and they're recognized and they feel comfortable and relaxed there is a little bit of an internal reward I'm coming here because my spirits are being lifted a little bit you know the series friends and they always end up in this bar
09:30that's kind of like what it is it's kind of like what it is it's kind of like a hub that you like to come back to at all times
09:37yet Starbucks has expertly recycled a quite different concept the third place concept was described in the 1980s by American sociologist Ray Oldenburg
09:49according to him it's an arena for political encounters and exchange convening people from all walks of life
09:56in the 1990s the marketing experts of the coffee giant twisted the concept crossing out its political aspect
10:08a former advertising guru at Nike Scott Bedbury was one of those experts
10:15we realized we were sitting on very powerful territory it's really not about the coffee it's about the moment it's about the place it's about the break that you get could be just a single person alone getting ten minutes of sanity
10:23out of a really messed up day but it's like it's like there ten minutes you know everything matters it isn't just the coffee it's not just the place it's how clean the restroom is it's are you verbally or visually acknowledging what you're doing
10:44everything matters it isn't just a coffee it's not just the place it's how
10:49clean the restroom is it's are you verbally or visually acknowledged when
10:54you walk in the store within a minute or two it was a real holistic approach to
10:58say everything matters you can't don't cut any corners all Starbucks coffee
11:04shops follow the same design an appearance of pomp and warmth deliberately
11:10and as if space was not an issue customers are never cheek-by-jowl
11:19if we design stores wherever we always make sure that we end up delivering on
11:25the promise that if your coffee is a little bit more expensive you should
11:28also have the full experience Starbucks was one of the first companies in the
11:33world to introduce a the big chair that the couch you know the softness and that
11:38people will actually stay in
11:42Starbucks early on had this policy that they would never kick anybody out you
11:47could stay for as long as you wanted now most of Starbucks businesses take out
11:52early on they figured this out they were gonna be doing a lot of takeout business
11:56the other thing is it seemed like a gift right oh I can stay there for as long as
12:03I want this company's great Starbucks was more than happy to have a kind of
12:09clean-cut middle-class looking business person sit on their phone or their
12:14computer for hours right because that person was a prop is Starbucks third
12:21place really a space of encounters and exchanges open to all high prices top
12:27locations all over the world are a major hurdle for many this is a period where
12:36Americans are retreating into their own houses they're moving into gated
12:41communities there was a deep fear in the United States of public space but people
12:47weren't totally happy with their kind of retreat into the private and I think
12:51Starbucks understood that Starbucks actually used the language of third place
12:55used Americans desire of third place but created something less than a third
13:00place the cafe as the place where people are alone in public
13:19today Starbucks is the number one coffee shop chain in the world from its
13:25headquarters in Seattle the American giant rules over an empire as coca-cola
13:30or McDonald's the brand has become iconic of our consumerist society
13:36yet this was not the intention of the Starbucks founders the brand was born in reaction to
13:55excessive consumerism all began in the early 1970s in Seattle on the west coast of the
14:07United States the counterculture was at its peak and challenge the American way of life and its
14:14supermarkets overflowing with standardized and tasteless food products
14:21three young friends embarking a fight against this standardization
14:26the 1970s you know when Starbucks was a local company is sometimes referred to as the romantic period of the company Jerry Baldwin and Gordon Bowker and I would get together and have lunch and we would talk about our futures we weren't entirely satisfied with our jobs and at the end of the lunch the waiter offered us coffee and when he brought it to the table it was three cups of espresso
14:55this is coffee so we each took a sip of this coffee it was so terrible just was like drinking paint remover
15:05the worst the coffee at that time was unbelievably poor during that conversation it occurred to us that
15:16that we might be capable of starting a coffee company in Seattle that was the beginning of Starbucks
15:31the three friends decide to sell high-end coffee beans they opened their first coffee shop in a trendy part of Seattle
15:38Starbucks soon gains customers within a few years the brand opened six more stores in the city
15:51it was only in 1982 that the small company was revamped when its founders hired a new marketing director Howard Schultz a former salesman for Xerox
16:07an ambitious and strong-minded young New Yorker
16:12Schultz wasn't the founder of the company but he understood its value he brought with him a business mentality he came from business
16:21Schultz's ability to see forward was more than the original founders
16:26One year later during a trip to Italy Howard Schultz has an epiphany Starbucks must sell more than coffee beans the stores must be converted into restaurants and sell beverages but the founders are against it
16:45They didn't want to do what Schultz wanted to do they didn't want to conquer the world they were products of the counterculture they were products of the 1960s and that was by nature something that kind of venerated the small
17:01Schultz didn't have that faith I mean Schultz wasn't part of the counterculture
17:06He saw opportunity he understood the appeal of authenticity he understood the appeal of the individual store he understood the rebellion against the kind of corporate branding the McDonaldization of America
17:23In 1986 Howard Schultz takes over Starbucks he creates his own chain but keeps the name
17:32He also sticks to the small companies elitist approach by offering high-priced beverages to a wealthy clientele it's an instant success
17:43The original logo is brushed up to avoid shocking anyone the naked mermaid becomes more conventional
18:00Howard Schultz has achieved a tour de force he has turned the original authentic store into a multinational a slap in the face of counterculture
18:13The coffee sold by the American giant is a standardized product in all Starbucks all over the world it tastes the same an intentional full-bodied taste
18:30In the US, coffee is consumed. The coffee is admitted to the latte
18:37The latte is coffee and light. If you want the taste of the coffeeundy looks transparent with the honey
18:43So the coffee tastes a little bit strong
18:45So the coffee tastes as a little sharp
18:47So the whole coffee tastes comes from a kind of intense torrefaction
18:50It's also the same taste everywhere
18:52In every country
18:53You will have the same drinks in France, England or China or Japan
18:57To meet the increasing demand,
19:00Starbucks has given up the traditional espresso machines.
19:04The giant now uses unique automatic machines
19:07that allow things to be speeded up.
19:16To make a coffee on a traditional machine,
19:19which is a barista machine,
19:21the barista would unlock the portafilter, the filter holder,
19:25knock out the coffee, go into the grinder,
19:27put the coffee in, tamp, brush, lock, press, café, yeah?
19:32We call it the ten steps.
19:33We used to call it the Brasilia tango, yeah?
19:35It was like a dance with the machine.
19:37That's what a barista does.
19:39What Starbucks do, they press a button.
19:42And what the machine does is what the barista does.
19:44But it does sort of raise questions about, you know,
19:47why we're calling them baristas
19:49and why Starbucks claims
19:51of being one of the leading coffee companies in the world.
19:54I mean, they're button pressers.
19:56That's what Starbucks did.
19:58They de-skilled the job.
20:04To expand its customer base
20:06and attract those who don't like coffee,
20:08the brand has come up with beverages
20:10served with a lot of milk,
20:12flavoured with syrup,
20:13or covered in whipped cream.
20:15Starbucks has had a great impact on consumption habits.
20:19They had to convert the Americans, yeah?
20:27And they had to convert the soft drink,
20:29the Coca-Cola, the Pepsi Coca.
20:31How do you convert them?
20:33Well, a better way to convert them is to give them caffeine,
20:35which they get from the drink,
20:37and to add a syrup to give it the sweetness.
20:39So now the younger generation had a chance to do something trendy,
20:45do something with a caffeine kick,
20:47and do something with the sweetness.
20:49Everything they would get from a soft drink,
20:51but moving on and being different.
20:53Customization is a key to the relevancy of what we do.
21:02Believe it or not,
21:03there are 89,000 different variations of beverages that we make.
21:11Traditionally, coffee is a short day, right?
21:14It's morning to mid-afternoon.
21:16But Starbucks was paying prime money for its real estate.
21:20It needed drinks that people could drink throughout more of the day.
21:24The iced drinks, the cold drinks,
21:27they expanded the coffee day to them
21:29and expanded the coffee year to them.
21:36The more important thing for Starbucks is really the Frappuccino.
21:40That delivers them to a whole other audience
21:42and a whole other kind of realm of consumer culture.
21:45Well, the real story in the Frappuccino goes to a couple of Starbucks baristas
21:50in Los Angeles who were mimicking a drink from a competitor,
21:55which is actually made with ice cream and real chocolate syrup,
21:59and I think it was about 1,200 calories for a drink.
22:02We figured out how to do it,
22:04and we figured out how to create the real coffee extract out of our roasting plants.
22:08You know, it could actually be the base of that drink.
22:11It just took off, went crazy.
22:21Today, Starbucks leads the world market
22:23thanks to its sweet, full of cream and high-fat drinks.
22:26Beverages copied all over the world.
22:29Super sizes have become the norm.
22:32Along with them, baristas offer pastries, high on sugar also.
22:38In the United Kingdom, one in four adults is obese.
22:53Action on Sugar, a public health organisation,
22:58fights against excess of sugar in food products.
23:01In 2016, they published a staggering study.
23:08We looked at these hot flavoured drinks because I think people don't necessarily think that they tend to be quite high in sugar.
23:16We found that 35% of them would have the same amount or more compared to a can of cola.
23:26I think people won't expect that.
23:28They are drinking a coffee drink every morning, not realising that the levels of sugar are comparable to a can of cola.
23:35The product that contained the highest amount of sugar was from Starbucks.
23:40It was a venti, so yes, it was a very large size.
23:43Starbucks' venti hot, mulled fruit drink.
23:48And that contained the equivalent of 25 teaspoons of sugar.
23:5299 grams of sugar.
23:54That's staggering.
23:55That's three times the maximum intake of sugar per day for an adult.
24:00Those companies create that demand for type of products like this.
24:08Initially in the beginning, that product didn't exist and Starbucks as a result created demand for it.
24:15And so people prefer it.
24:17They are influencing our preferences.
24:20They manipulate people through advertising, for example, to create that demand for such a product.
24:26Today, about 350,000 people work for Starbucks worldwide.
24:43Unlike other fast food chains, the company intentionally put the spotlight on its low-level employees, the baristas.
24:51Great companies, I believe, have to understand what it means to achieve the fragile balance between profitability and a social conscience.
25:04There is a narrative behind the respect displayed by Howard Schultz.
25:10The big boss has made his tough childhood, spent in a housing project in a New York low-income district, the foundation of his brand's values.
25:23I grew up in Brooklyn, New York, when I was seven years old.
25:27I came home from school in 1960.
25:30And I walked in and my father was spread on a couch with a cast from his waist to his ankle.
25:37He was a diaper delivery man before the invention of Pampers.
25:43You can imagine.
25:45And he fell on a sheet of ice and broke his hip and an ankle.
25:50And in 1960, if you were a blue-collar worker and you got hurt on a job, you were basically dismissed.
25:57There was no workman's compensation.
25:59There was no health insurance.
26:01I was witnessing, at the age of seven, literally the fracturing of the American dream.
26:06I wanted to try and build the kind of company that my father never got a chance to work for.
26:13In Starbucks lingo, baristas are not employees, but partners.
26:22It's more than a mere communication tool.
26:25Since its creation, the company offers social benefits, notably health insurance to its American employees, including those working part-time.
26:36Unprecedented for a company of this scale.
26:43It was Howard's idea to call them partners.
26:45And I think he just wanted to give people that make the lowest amount of money dignity and respect.
26:51He invested in the employees so that they would feel respected, and they would feel honored, and they would stay.
26:59The company offers to finance the education of its baristas through a partnership with the University of Arizona.
27:14Distance learning classes are provided online.
27:17It is my firm belief that success in business and in life is best when it's shared.
27:21Tangible benefits.
27:22But is Starbucks as generous as it seems with its employees?
27:24The company offers to finance the education of its baristas through a partnership with the University of Arizona.
27:28Distance learning classes are provided online.
27:30It is my firm belief that success in business and in life is best when it's shared.
27:42It's been my firm belief that success in business.
27:43It's a great term for marketing.
27:44It really is.
27:45It's a great term for marketing, it really is.
27:46It's a great term for marketing.
27:47It really is.
27:48as it seems with its employees.
27:55The idea of partner sounds really good.
27:58It's really good, it's a great term for marketing,
28:00it really is.
28:01Do I feel like I'm a partner in this company?
28:03No.
28:04Saying I'm a partner makes it sound like it's equal,
28:08and it's not.
28:11Jamie Prater has worked for Starbucks
28:13for the past 11 years.
28:15He's a shift manager,
28:16the middle rank between barrister and store manager.
28:20He's one of the rare employees
28:22to publicly shame the company's working conditions.
28:33The typical morning we open at 4 a.m.,
28:35so we get there by 3.30 a.m.,
28:38so we're out of bed by 3, sometimes earlier.
28:42Some people live 40 minutes away,
28:44so they're out of bed by like 2.30 in the morning.
28:48And we get there, and we have a half an hour
28:50to open the store.
28:51We have to clean, we have to get presentable.
28:53Of course the mornings are the busiest time for Starbucks,
28:55so that's when we get the most customers.
28:57So then you are focusing on customer service, number one.
29:01And then as that lessens,
29:02you have to kind of go into cleaning.
29:05Cleaning, cleaning, cleaning.
29:06So when you're not helping customers,
29:07you're putting food in the oven.
29:09If you're not doing that,
29:10you're sweeping, you're mopping,
29:11you're doing dishes, you're getting ice,
29:13you're cleaning, you're cleaning cabinets,
29:14you're, um, it's that rotation
29:18for six, seven, eight hours,
29:20however long you're working.
29:21It's over and over and over.
29:22So it's like you're, it's like a juggling act.
29:25And you have to be a good juggler.
29:27And if you're not a good juggler, you won't survive.
29:33It's the hardest job I've ever worked at.
29:35It's just this idea of you're working in emergency
29:37and emergency and emergency.
29:39You're doing the job of five different people
29:42at any given time.
29:43And you're expected to perform and give
29:46extraordinary, legendary customer service
29:48and create that third place and make eye contact
29:51and say, how are you, Bob?
29:52How are you doing today?
29:53How's your kid?
29:55So it's like, it's like you're a conductor
29:57or someone's conducting you and you're like this.
29:59Okay, now here, now here, now here.
30:01It's intense.
30:02Every day it's like that, every day.
30:04Running like chickens with your head cut off.
30:05Absolutely.
30:17On the strength of its successful beverages
30:20sold at high prices
30:22and a strict staff management,
30:24Starbucks generated a profit of 2 billion US dollars in 2017.
30:32The coffee giant has been a listed company since 1995.
30:37To meet its shareholders' expectations,
30:39it has developed an aggressive store openings strategy.
30:50In New York, Starbucks' ubiquity is noteworthy.
30:56Grand Central Terminal is one of the most important crossing points of the city.
31:00750,000 commuters per day around the station within a 400-metre perimeter is the highest number of Starbucks.
31:13I remember New York, where we started opening up, you know, like a store almost every other week in New York City.
31:30If I could get out of a cab anywhere, if I just looked around long enough, I could see somebody walking with a Starbucks cup.
31:36And if you walked the opposite direction, you'd ultimately find the store.
31:40Because you could see people walking out, you know, it's kind of like going upstream. It's crazy.
31:50I think Starbucks has pretty smart real estate people, right?
31:53They're often located where you'd expect them to be, on the right side of the road, going into town for the morning commute,
32:00you know, right next to a train station.
32:05Starbucks can do this because they're not competing with each other.
32:08Because they don't franchise.
32:10What Starbucks does is own its stores to control the kind of space itself,
32:15but also means that a store next to it isn't competing with the other store.
32:21It's about aggregate demand.
32:23We couldn't open the stores fast enough.
32:26We were opening one store roughly a week when I got there, and a year later, it was one a day.
32:33And then 24 months after that, I think it was three a day.
32:38Within this 400-meter perimeter, a total of 17 Starbucks.
32:43Today, New York City counts 300 Starbucks, and the brand is developing further.
32:57Forget about business districts.
32:59The brand now targets more trendy areas, such as East Village.
33:04Starbucks spreads discreetly, showing no mercy to its competitors.
33:09This mural is a mural of our original shop.
33:18This is where we started, and we operated for years.
33:21It was a small shop, but it had a lot of frontage and a lot of window,
33:25and it was a charming little shop.
33:29Ike Escobar's small independent coffee shop was located at a crowded junction, a highly prized location.
33:35We're in the store doing business as normal, and somebody walked in and started measuring.
33:44And we walked over to the guy and said, can we help you?
33:47What are you measuring?
33:47He said, I'm here to measure for the renovation.
33:50I said, what renovation?
33:51He said, the Starbucks renovation.
33:53And as it turns out, Starbucks had already taken that store for the period that would start after my lease was over.
34:00They had already signed the lease.
34:02They never came to talk to you?
34:03Never.
34:04They came in and took our store.
34:06It was scary.
34:08The big corporation came and took over our shop.
34:14This is what my original shop looks like now.
34:18Starbucks came into the area very late.
34:22They were not in this area at all.
34:24And when they did come in the area, they came in with many stores opening about the same time.
34:35Since his eviction, the independent restaurant owner has opened five new stores in New York.
34:48Starbucks expands internationally at a high speed, too.
34:52In 2003, the brand owned about 7,000 stores around the world.
35:00Ten years later, in 2013, it went up to almost 20,000.
35:05In 2018, 28,000 Starbucks operate in 75 countries.
35:12One country in particular concentrates this unbridled growth.
35:20The largest Starbucks in the world is in Shanghai.
35:24A huge store, proportional to the scale of the Chinese market, 2,700 meters square.
35:31Ten times bigger than a typical Starbucks.
35:34Despite its high prices, the store is busy all day long.
35:40Despite the fact that there are already more than 600 Starbucks in Shanghai and 3,000 nationwide.
35:47On average, a new store opens every 15 hours.
35:52The brand has established a name for itself as a model.
35:58On every continent, the strategy of affordable luxury developed by its marketing experts attracts those who belong to the emerging middle class.
36:06Over the years, Starbucks invades the cityscape at the best locations, standardizes tastes and dictates its codes.
36:21To polish up its image, the multinational converts to fair trade coffee.
36:28To do so, it calls upon a unique partner.
36:32On its packs of coffee, Starbucks now displays the logo of an American NGO, Conservation International.
36:41For 15 years, Conservation International has been on an amazing journey with Starbucks to ethically source their coffee around the world.
36:50Conservation International is proud to recognize Starbucks for ethically sourcing 99% of their coffee, making them the largest coffee retailer to reach this milestone.
37:0299% of Starbucks coffee is ethically sourced. Impressive.
37:08How can the brand reach such a milestone?
37:11To a world that's changed for the better.
37:14Conservation International is an environmental organization based in Washington, D.C.
37:23In exchange for generous donations, it closely works with multinationals such as Walmart supermarket chain, Disney or Apple.
37:32Companies that often seek to improve their image.
37:35Since the end of the 1980s, Conservation International is established in the Chiapas region of Mexico.
37:54The NGO helps small coffee farmers to become fair traders by connecting them to large coffee buyers.
38:13We approached Starbucks and said, this is a great project, wouldn't you be interested in supporting it, buying the coffee from it?
38:20They were very interested in the environmental story around the coffee and so it became a product that had, you know, additional assurance of good environmental and social practices as well.
38:32For the co-operatives of small coffee farmers, the giant is a godsend.
38:38In theory, fair trade is the promise of higher prices.
38:42It's also the opportunity to get rid of all the middlemen who buy their coffee at low cost on behalf of multinationals.
38:49In 2000, Komonyai Noptik, a co-operative that gathers 200 small farmers, accepts to partner with Conservation International and change its production methods.
39:08It was through the international conservation.
39:26We started to create workshops where we would improve the quality of the coffee.
39:33and that we would sell to a market in the United States with a buyer called Starbucks,
39:41but that we needed to do some practices, different from what we were doing.
39:48We would call it Cafe Practices.
39:52Cafe Practices, the ethical label custom-built for Starbucks by the NGO Conservation International,
39:58thanks to that label, farmers can sell their production to Starbucks.
40:07To obtain that label, they commit to improve the working conditions of their employees
40:12and to opt for more environmentally friendly production methods.
40:16In theory, Cafe Practices represents considerable progress.
40:23In practice, it's a controversial label.
40:31It's not fair trade coffee, right?
40:33Fair trade is an attempt to create an ethical sourcing system.
40:36In order to do that, you have to get the stamp of approval.
40:39You have to follow a certain set of guidelines.
40:42And that's what it is.
40:44What we're left with with Cafe Practices is that Starbucks creates its own system.
40:50It inspects its own system and decides whether it fits their own criteria or not.
40:57It's not the same thing.
40:58As a customer, isn't it a bit confusing that you started a new label with Starbucks?
41:06How do customers find their way in the different labels?
41:11It's a great question.
41:12There is, you know, a plethora of different labels out there.
41:15Fair Trade International, Fair Trade America, Max Avila.
41:19Why did Starbucks and Conservation International not just go with one of those other programs?
41:24I think Starbucks wanted quality to be a prerequisite of what got verified.
41:29And they felt in order to do that, they needed to kind of probably own a little bit more of that investment.
41:36Thanks to this turnkey label provided by the NGO, Starbucks can claim its coffee is 99% ethically sourced,
41:45when it's not even certified as Fair Trade.
41:49The small Mexican farmers in Chiapas didn't stay happy for long.
42:02To purchase large quantities of coffee, Starbucks imposes an intermediary, contrary to the spirit of Fair Trade.
42:12Ecom is a world leader in coffee beans trade, whose Mexican subsidiary is called AMSA.
42:23AMSA sets the prices and dictates the terms.
42:26The intermediary buys the coffee beans at low prices, processes them and sells them to Starbucks at a higher price.
42:33The small cooperative writes to the American head office of Starbucks, asking that they deal directly with them.
42:48The multinational declines.
42:51We asked to talk directly because we believed that the negotiation was more and more with AMSA than with Starbucks.
43:05I felt that that was not so transparent.
43:08There were several promises.
43:10The small cooperative, as many others in Chiapas, decided to stop selling its coffee to Starbucks and to control its distribution network on its own.
43:31Sandwiches and pastries sold in Starbucks all over Europe are manufactured by local subcontractors.
43:59But they are labelled as built to Starbucks EMEA.
44:06EMEA is a shorthand designation meaning Europe, Middle East and Africa.
44:16When Starbucks established itself in Europe in the 2000s, they based their head office in the Netherlands, in Amsterdam.
44:24Dozens of thousands of coffee bags are shipped here to be roasted in this factory, before being delivered in every Starbucks all over Europe.
44:40The European subsidiary of the American giant soon finds itself at the heart of a tax evasion scandal.
44:49The controversy broke out in the United Kingdom, where Starbucks has been established since 1998 and still operates some 900 coffee shops.
45:07In 2012, a journalist from the news agency Reuters makes an interesting discovery.
45:21The multinational pays no corporate income tax.
45:25Officially, the company has reported no profit.
45:28When you look at the accounts of Starbucks in the UK, what one saw was in the previous 14, 15, 16 years they hadn't made any money in Britain.
45:39And this was highly unusual and a surprise given that the company seemed to have cafes on every corner that I passed.
45:46One of the other things that caught my eye was the way in which its executives seemed to be ever promoted within the Starbucks organization.
45:55Usually, if your business loses money, you lose your job.
45:59One of the things we could see was that the UK division was perceived by Starbucks centrally to be performing very well.
46:06The UK was not being depicted to investors in the same way that Starbucks was being depicted to the revenue commissioners here in the UK.
46:19A Labour MP takes hold of these revelations.
46:25Margaret Hodge heads the Parliament's Public Accounts Committee and decides to alert public opinion by summoning the finance director of Starbucks' European subsidiary.
46:36If you've made losses in the UK over 15 years, what on earth are you doing business here?
46:43We know that we must be in the UK to be a successful global company.
46:48But you're losing money here.
46:49It's a critical market.
46:50Why don't you go over to the US, focus on the US where you say you're making money, if it's true?
46:55Because we've had tremendous optimism and encouragement over time about our ability.
46:5915 years, Mr. Alstead, and yet you're carrying on, if it's true.
47:03Yes, I assure you it is true, but I assure you nothing to do with any tax avoidance.
47:10The committee hearings bring to light a system of royalties that the brand pays to itself.
47:16As franchisees, Starbucks' European subsidiaries are required to pay an annual fee to Starbucks' Mair in Amsterdam.
47:25Any Starbucks outlet here in the UK was charged for the brand and they located the brand itself in Holland, which is a low tax jurisdiction.
47:42That meant money immediately went out of the UK into Holland to pay for the brand.
47:50How they got to that 6%? They were unable to explain to us.
47:57In its defence, Starbucks claims that this fee matches real costs.
48:07The firm mainly benefits from the Netherlands tax system, lenient with multinationals.
48:12Starbucks has secretly negotiated an arrangement with the Dutch tax authorities.
48:23Is there a special low tax regime in the Netherlands on royalties?
48:26Yes, there is. We have a tax ruling that we've had since the opening.
48:29So it's less?
48:30Oh yes, it's a very low tax rate.
48:31So there is a tax advantage to you for paying the royalties in the Netherlands?
48:36What is the tax rate you pay in the Netherlands?
48:39I'm very happy to provide that to the committee.
48:42I am bound, confidentially, to the Dutch government on that.
48:45Yes, they do offer very competitive tax rulings.
48:48It's not just unique to Starbucks.
48:53The tax evasion scandal tarnishes the brand's image.
48:57In the United Kingdom, boycott campaigns multiply.
49:01I received a call from Chris Engloff, who was at that time in charge of Starbucks operations in the whole of Europe.
49:13Could he come and see me?
49:14I thought, you know, why not?
49:16So I invited him into the House of Commons.
49:19And we sat there and had this most extraordinary conversation,
49:23where he basically offered me, over a cup of coffee, 20 million pounds in tax.
49:29I'm not an official of the tax authorities here in the UK.
49:33I have absolutely no status.
49:35And the idea that a company can choose to set the amount of tax that they pay
49:42was quite mind-blowing.
49:45Are you still welcoming to Starbucks today?
49:48Yeah, I never go to a Starbucks.
49:50In October 2015, Starbucks is condemned by the European Commission for unfair competition.
50:00Brussels disapproves of the tax agreement reached between the Netherlands and the European head office of the group.
50:07We found that since 2008, Starbucks manufacturing has benefited from undue tax advantages.
50:17And this is illegal under EU State 8 rules.
50:21The European Commission condemns Starbucks to pay a penalty of almost 26 million euros to the Dutch tax administration.
50:33The multinational contests the decision and files an appeal before the European Court of Justice.
50:40In the meantime, the European head office of Starbucks has been transferred from Amsterdam to London.
50:49And today, the company pays taxes in the United Kingdom.
50:54Controversies do not weaken the image nor the growth of the coffee giant.
51:09Today, Starbucks is stronger than ever.
51:14While its employees may denounce the harsh working conditions and the very low wages,
51:19the company aims at becoming a social model.
51:23It's CEO, Howard Schultz, sees himself as the epitome of the big-hearted and progressive leader.
51:36In the United States, Howard Schultz is very popular.
51:41Had Hillary Clinton been elected, he could have become Secretary of Labour.
51:46Today, some claim he has greater ambitions.
51:50Are you going to run for president in 2020, Howard?
51:53No, I'm not.
51:54I said that I'm doing everything I possibly can as a private citizen to advance the cause of the country.
52:00It sounds like you're running for president, Howard.
52:02No, I didn't say that.
52:03Come on, Maria.
52:04I think a guy like Howard would make for a great leader anywhere.
52:12There's a collapse of trust in institutions.
52:16There's trust in the United States. We don't even trust each other anymore.
52:19Hopefully, big companies will step up and realize they, especially in free countries like ours, they represent democracy.
52:27And they need to stand up for it. And they need to protect it.
52:31So I think more than ever, we have to, we meaning big companies, multinational companies, we have to demonstrate how we're making the world better, somehow.
52:44Starbucks is not only involved in the health and education of its employees.
52:48The brand multiplies symbolic gestures.
52:51The company supports gay marriage and urges its customers to vote.
52:56The coffee giant employs people with disabilities, war veterans, and made a promise to hire 10,000 refugees.
53:05Always well-publicized announcements.
53:15Yet, in April 2018, the brand got entangled in a racist incident.
53:22In one of the Philadelphia's Starbucks, two Afro-American customers declined to order before their third friend has joined them.
53:31One of them asks to use the washroom.
53:34The manager calls the police.
53:41The humiliating arrest is filmed by other customers.
53:45Black guys sitting here meeting me?
53:47Yes.
53:48What did they do?
53:49What did they do?
53:51The two men are quickly released, but the incident has already caused a scandal.
53:59To prove Starbucks is not prejudiced, the company makes a spectacular move.
54:03Its 8,000 American stores are shut down for an entire afternoon.
54:08On that day, 175,000 employees attend a mandatory training to prevent all acts of discrimination.
54:22Whatever Starbucks' hubris, whatever its desire to solve certain problems, it can't, right?
54:30Starbucks trades in the idea that politics is about gestures, about performance.
54:36But politics is about organising constituencies, passing legislation and changing the conversation in this country.
54:45Starbucks.
54:46The third place, the space of exchange open to all, is a myth.
54:56Officially, the brand is committed to its customers, its employees and its coffee suppliers.
55:03But in the meantime, its eyes riveted on its market prices, the multinational continues to grow relentlessly.
55:12And remains the master of illusion.
55:17SFX
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