The
AGRIBUSINESS EXAMINER
Monitoring Corporate Agribusiness From a Public Interest Perspective
A.V. Krebs  Editor\Publisher
 
Issue #145                                                                     March 4,, 2002
 

GLOBAL CAMPAIGN SEEKS
TO END STARBUCKS USE OF GE INGREDIENTS,
AND PROMOTE USE OF FAIR TRADE COFFEE 

Consumer, environmental, and social justice activists in 300 US cities and seven other nations (England, Scotland, Israel, Austria, Canada, Australia, & Japan) leafleted and stage protests in front of Starbucks coffee shops from February 23 to March 2. These protests were timed to coincide with Starbucks' annual meeting in Seattle on February 26.

Protesters, including shareholders in Seattle, called attention to Starbucks' use of genetic engineered ingredients in their foods and beverages, as well as Starbucks' refusal to brew Fair Trade, shade-grown coffee as its "coffee of the day" at least one day a week.

Events were scheduled for Seattle, Portland, Los Angeles, San Francisco, Minneapolis, New York, Buffalo, Philadelphia, Washington DC, Albuquerque, Dallas, Houston, San Diego, Vancouver, London (UK), and scores of other cities as part of an ongoing international campaign against Starbucks which began last year.

Starbucks, the largest coffee shop chain in the world, has recently begun to give in to at least some of the demands of this global campaign, but remains under pressure from activists and some of its shareholders, for full implementation of the campaign's demands. Orin Smith, Starbucks CEO, admitted last year that Fair Trade, shade-grown coffee represents only one tenth of one percent of Starbucks' total sales, and that most of its beverages and foods contain GE ingredients.

"Starbucks must do more than just greenwash themselves. Unless they remove rBGH and all GE ingredients from their product lines, brew Fair Trade and organic coffee as their `coffee of the day'  at least one day a week, and guarantee a living wage to coffee farmers, they run the risk of further damage to their reputation and their bottom line," stated Ronnie Cummins, National Director of the Organic Consumers Association (OCA).

The OCA is a nationwide network of 250,000 organic consumers, which works with public interest groups worldwide to oppose GE and industrial agriculture and to promote organic farming. The OCA's national office is located at 6101 Cliff Estate Road, Little Marais, Minnesota 55614
 

CORPORATE FRIENDLY
AMERICAN COUNCIL ON SCIENCE AND HEALTH
SEEKS TO DISCREDIT STARBUCKS ANTI-GE CAMPAIGN

PRNEWSWIRE/ : Caveat Emptor. Consumers and journalists beware ---- Anti-biotechnology activists engaged in a week of "direct action" at Starbucks Coffee shops this week aim to target you over the next few days with false and misleading information about food safety, nutrition and the environment.

The same people who brought you a long list of other false health and environmental scares --- including the infamous Alar in apples scare, the Dow-Corning breast implant campaign --- and dozens of other debunked fears are at it again. This time the scaremongers are targeting such safe foods as milk and other dairy products in your local Starbucks.

Like the misleading Alar in apples scare, activists often use products associated with children --- like milk and ice cream --- and falsely link these products with horrible ills such as cancer to evoke the greatest fear among parents and the consuming public. The harm and cost to consumers and farmers alike can be significant.

In 1989 environmental activists and their public relations firm Fenton Communications claimed that the use of the plant growth regulator Alar by apple growers was causing cancer in children who eat apples and drink apple juice. The claims made national headlines and were highlighted on news programs like "60 Minutes."

They turned out to be false, but they cost apple farmers (particularly those in Washington State) hundreds of millions, increased consumer food costs, and caused a significant spike in consumer purchases of organic produce. Conveniently, this public relations firm also represented the benefiting organic food industry interests, who also conveniently funded the environmental activists.

When the science and health community responded and showed that the offending "cancer-causing" chemical was, in fact, less carcinogenic than bacon, tap water or peanut butter (Bruce Ames, University of California Berkeley), it was too late. The public relations firm had celebrated achieving their goal; "the PR campaign was designed so that revenue would flow back to the (client) from the public." (Source: Fenton Communications memo published in the Wall Street Journal, 10/3/1999).

And when confronted over a decade later when the false "cancer in children" fears failed to materialize, the PR firm referred inquiries to their client, the Natural Resources Defense Council, which stated, "The message of that report might have been muddled by the media, and the public might have over-reacted, because we never said there was an immediate danger from Alar . . . " (Source: PR Central's Inside PR Monday, September 4, 2000)

Today, more than a decade later, the same public relations firm and the same activists are in Seattle and at local corner coffee shops across the country spreading false fears about the safety of milk from cows supplemented with bioengineered bovine growth hormones (rbST).

This time Fenton Communications represents ice cream manufacturer Ben & Jerry's and a variety of other "organic" and "natural" products companies whose sales benefit from these scares. Fenton is also representing the activists coalition Genetically Engineered Food Alert attacking the safety of dairy products derived from cows that are supplemented with rbST. Once again, these activists are receiving funding from the benefiting organic industry interests.

These slick public relations professionals promote false claims by evolutionary ecologist Michael Hansen, Dr. Samuel Epstein (ranked by the American Association for Cancer Research as the least credible scientist on issues of environmental cancer), or fired Fox journalists turned activists Steve Wilson and Jane Akre.

These supposed experts proclaim that such dairy products cause cancer, harm cows, and hurt small dairy farmers. But check the facts from the hundreds of real experts who have published and commented on these issues . . . . .

So, next time you look at a pint of eco-friendly Ben & Jerry's or the premium-priced organic milk option offered by Starbucks, remember, all milk contains bovine growth hormones [Ed Note: manufactured by Monsanto Corp.] --- they are naturally produced by all dairy cows. Supplementing dairy cows to help them maintain their natural peak levels of this hormone does not change the milk in any way --- but it does help protect our environment by enabling family dairy farmers to produce more milk with fewer cows.

This results in significantly less water and fuel use, less grain and land under the plow, and less animal waste. This safe product --- used by more small dairy farmers than large --- also helps family farmers remain profitable and ensure they can afford to pass along their farms to future generations.

Biotechnology helps farmers produce more safe and nutritious food, using less land and less input. This is good for consumers, good for the environment and good for farmers --- misleading fear campaigns, on the other hand, are not.

The American Council on Science and Health is a consortium of more than 350 scientists and physicians dedicated to consumer education on public health issues, such as the environment, nutrition, and pharmaceuticals. ACSH differentiates between real health risks and hypothetical or trivial health scares.
 

OCA'S RONNIE CUMMINS ATTACKS
"CORPORATE BULLIES WHO NOW BELIEVE
THEY HAVE A DIVINE RIGHT TO RULE THE WORLD"

"For over 100 years Monsanto has been poisoning the public and polluting the Earth with toxic pesticides and herbicides, carcinogenic and neurotoxic artificial sweeteners, PCBs, a genetically engineered animal drug, recombinant Bovine Growth Hormone (rBGH), as well as an expanding menu of untested and unlabeled trangenic field crops--soybeans, corn, canola, cotton, potatoes.

"Recently a court found Monsanto guilty of recklessly and deliberately polluting the environment in Anniston, Alabama for decades with PCBs. Now rather than face up to the fact that rBGH (banned in every industrialized country except for the USA) is a dangerous drug that should be pulled off the market, Monsanto and their front groups are attacking the Organic Consumers Association for pressuring Starbucks and other companies to get rBGH out of their products.

"But rather than cave into this pressure, the OCA and its allies all over the world need to step up the attack. With ever stronger campaigns and marketplace pressure, global Civil Society can drive rBGH and Frankencrops off the market and bring Monsanto to their knees --- in the process teaching a lesson to the corporate bullies who now believe they have a Divine Right to rule the world."

--- Ronnie Cummins, National Director, Organic Consumers Association
 

MONSANTO FOUND GUILTY
OF "BEHAVIOR SO OUTRAGEOUS IN CHARACTER
AND EXTREME IN DEGREE AS TO GO BEYOND
ALL POSSIBLE BOUNDS OF DECENCY"

MICHAEL GRUNWALD, WASHINGTON POST: An Alabama jury  . . . .found that Monsanto Co. engaged in "outrageous" behavior by releasing tons of PCBs into the city of Anniston and covering up its actions for decades, handing 3,500 local residents a huge victory in a landmark environmental lawsuit.

The jury in Gadsden, Alabama, a town 20 miles from Anniston, held Monsanto and its corporate successors liable on all six counts it considered: negligence, wantonness, suppression of the truth, nuisance, trespass and outrage. Under Alabama law, the rare claim of outrage typically requires conduct "so outrageous in character and extreme in degree as to go beyond all possible bounds of decency so as to be regarded as atrocious and utterly intolerable in civilized society."

After a six-week trial on liability, the case now proceeds to a damages phase. Solutia Inc., the corporation formed when Monsanto spun off its chemical division in 1997, has already spent $83 million to settle two other PCB cases in Anniston as well as $40 million on cleanup costs. Shares in Solutia, the lead defendant in the case, plunged 34% to $5.80, after yesterday's verdict.

Overall, Solutia share prices have plummeted 59% from $14.02 since a January 1 article in The Washington Post revealed Monsanto documents showing that the company routinely dumped PCBs in Anniston and covered up its behavior for more than 40 years. Meanwhile, 15,000 additional area residents have filed another lawsuit citing health problems, property damage and emotional distress caused by PCB contamination. And a Senate committee is preparing to hold hearings on the situation.

Solutia Chief Executive John C. Hunter said his company is "extremely disappointed" with yesterday's verdict. "This case is not over," said Solutia spokeswoman Beth Rusert. "But regardless of how it turns out, we're going to do our part to clean up the PCBs in this community."

PCBs, shorthand for polychlorinated biphenyls, have been banned in the United States since 1979, but they were once considered life-savers, nonflammable coolants that prevented explosions in electrical equipment. From 1935 on, Monsanto was the only U.S. company that made them, at one plant in Illinois and another in working-class west Anniston.

Today, PCBs are known as global pollutants and possible carcinogens, although debate still rages over the extent of the danger they pose to human health. The Bush administration recently ordered General Electric Co. to spend $460 million to dredge its PCBs out of the Hudson River, but scientists say the situation in Anniston is much worse. Yards and creeks there have the highest levels of PCBs ever recorded in a residential
community, and people have unprecedented PCB levels in their blood.

Anniston residents did not learn about the pollution until 1996, even though documents show that Monsanto knew about it for decades. In 1966, for example, Monsanto managers discovered that fish dunked in a local creek turned belly-up within 10 seconds, spurting blood and shedding skin as if dropped into boiling water. In 1969, they found a fish in another creek with 7,500 times the legal PCB level. But they never told their neighbors, and concluded that "there is little object in going to expensive extremes in limiting discharges."

"Those people destroyed this community," said David Baker, president of the local group Citizens Against Pollution. "They poisoned us, they profited from us, and now it's time for them to pay." At trial, attorneys representing Monsanto and its corporate kin argued that the company acted "promptly and responsibly" to limit its PCB releases once it learned that the chemicals could linger in nature for centuries. They also pointed out that the Anniston plant stopped making PCBs eight years before a national ban took effect.

Those arguments were undermined by documents --- many featuring warnings such as "CONFIDENTIAL: Read and Destroy" --- that suggested a company-wide preoccupation with maintaining its $22-million-a-year PCB monopoly regardless of health or environmental risks. "We can't afford to lose one dollar of business," one internal memo declared. A committee the company formed to address controversies about PCBs had only two formal objectives: "Permit continued sales and profits" and "protect image of . . . the corporation."

"Ultimately, Monsanto's own words did them in," said Brendan DeMelle, an analyst for the Environmental Working Group, an anti-chemical advocacy group. So far, Solutia has bought out about 120 homeowners and businesses, and has cleaned out more than a mile of drainage ditches. But Donald W. Stewart, a former Alabama senator who represented the plaintiffs, hopes the case will lead to a much more extensive cleanup.

He also hopes to recover big money for his clients, and the defendants have deep pockets. Pharmacia Corp., the company formed after a merger with Monsanto in 2000, was also held liable. The biotechnology company now known as Monsanto has claimed to have no connection to this case, but records show that it must pay any judgment Solutia is unable to cover.

"Oh, we're looking forward to the damages portion," said Stewart.
 

ORGANIZATIONAL PROFILE:
AMERICAN COUNCIL ON SCIENCE AND HEALTH

Compiled by the Center for Media & Democracy

ACSH calls itself "a science-based, public health group that is directed by a board of 300 leading physicians and scientists . . . providing mainstream, peer reviewed scientific information to American consumers." To its credit, it has taken a strong public position against the dangers of tobacco, one of the leading preventable causes of death in today's society. However, it takes a generally apologetic stance regarding virtually every other health and environmental hazard produced by modern industry.

PERSONNEL
The American Council on Science and Health has been headed by Elizabeth Whelan since its inception. Whelan makes no bones about her political leanings, describing herself as a lifelong conservative who is "more libertarian than Republican." According to media commentator Howard Kurtz, "Television producers like Whelan because she's colorful and succinct, skewering her adversaries with such phrases as `toxic terrorists' and referring to their research as `voodoo statistics.' Newspaper reporters often dial her number because she is an easily accessible spokesperson for the `other' side of many controversies."

The ACSH board of directors is also heavily stacked with conservatives, including:

Board chairman A. Alan Moghissi, a former official with the Reagan-era U.S. Environmental Protection Agency, characterizes environmentalism as a belief that "members of endangered species deserve protection and that, because there are billions of humans, humanity does not qualify for protection." As an "expert on risk assessment," Moghissi appears regularly on rosters of industry-supported "expert panels" that work to undermine environmental regulations.

He serves on the advisory board of numerous anti-environmental organizations and right-wing think tanks, including the American Policy Center's "EPA Watch," the Committee for a Constructive Tomorrow, the Advancement of Sound Science Coalition, and the National Wilderness Institute, a "wise use" anti-environmental organization that calls for abolition of the Endangered Species Act.

In 1990, Moghissi served on a panel created by the libertarian Competitive Enterprise Institute, in league with Consumer Alert and the National Consumer Coalition to challenge the EPA's policy requiring asbestos removal from schools and other public buildings. He also chairs the Science Advisory Committee of the Environmental Issues Council, which was established in 1993 by industry trade associations including the Association of American Farm Bureaus, the Association of General Contractors, the National Cattleman's Association, the American Pulpwood Association, the Natural Gas Supply Association, the United States Business and Industrial Council, the Mountain States Legal Foundation, and the Independent Petroleum Association of America.

Attorney Jerald Hill is a former long-time president of the Landmark Legal Foundation, which appears in the Heritage Foundation's list of conservative "resource organizations." A recipient of funding from right-wing gazillionaire Richard Mellon Scaife, Landmark has a $1 million annual budget and a reputation as a "conservative's American Civil Liberties Union."

It has filed lawsuits against labor unions and school desegregation and has fought for legislation that would allow parents to direct public education funding toward their children's private schools. (Former Whitewater special investigator Kenneth Starr also has ties to Landmark.)

Henry Miller, a former official of the Food and Drug Administration now at the Hoover Institution, regularly grinds an ax against what he considers the FDA's "extraordinarily burdensome regulations" regarding genetically engineered foods and new drugs.

Other advisors include familiar names from the list of "usual suspects" who appear regularly as scientific experts in a variety of anti-environmental, pro-industry forums: Dennis Avery, Michael Gough, Patrick J. Michaels, Stephen Safe, and S. Fred Singer, to name a few. Several, including Floy Lilley and J. Gordon Edwards, as well as Moghissi, have written articles for 21st Century and Technology, a publication affiliated with lunatic-fringe conspiracy theorist Lyndon LaRouche.

Albert Nickel represents the PR/advertising firm of Lyons Lavey Nickel Swift (their motto: "We change perceptions"). Lorraine Thelian is a senior partner and director of the Washington, DC office of Ketchum Communications, which handles the bulk of the firm's "environmental PR work" on behalf of clients including Dow Chemical, the Aspirin Foundation of America, Bristol Myers Squibb, the American Automobile Manufacturers Association, the Consumer Aerosol Products Council, the National Pharmaceutical Council, the North American Insulation Manufacturers Association, and the American Industrial Health Council, another industry-funded group that lobbies against what it considers "excessive" regulation of carcinogens.

Ketchum boasts that the D.C. office "has dealt with issues ranging from regulation of toxins, global climate change, electricity deregulation, nuclear energy, product and chemical contamination, and agricultural chemicals and Superfund sites, to name but a few."

HISTORY

ACSH was founded in March 1978. A revealing reference regarding its origins appears in the minutes of a meeting that month of the board of directors of the Manufacturing Chemists' Association (later renamed the Chemical Manufacturers Association, and known today as the American Chemistry Council).

The minutes record an appeal by MCA director William J. Driver, who noted that Whelan had founded "a tax-exempt organization composed of scientists whose viewpoints are more similar to those of business than dissimilar. . . . ACSH is being pinched for funds, but in the interest of independence and credibility will not accept support from any chemical company or any company which could even remotely be concerned with the aims of the council."

Notwithstanding this desire to make ACSH appear independent, Driver added that "Dr. Whelan would be happy to hear from" MCA members who "are interested in the work of the council and know of possible sources of funds." Shortly after its founding, ACSH abandoned even the appearance of independent funding. In a 1997 interview, Whelan explained that she was already being called a "paid liar for industry," so she figured she might as well go ahead and take industry money without restrictions.

"It was the great Alar scare of 1989 that boosted Whelan into the media stratosphere," notes Washington Post media reporter Howard Kurtz. ACSH and Whelan were fixtures on the anti-environmental scene long before the Alar issue emerged, downplaying risks from DDT, dioxin, asbestos, and a host of other polluting chemicals, but Whelan's prominent role in the Alar counter-publicity campaign helped make ACSH a common source for journalists seeking expert commentary on public health issues.

FUNDING

In its IRS Form 990 for its fiscal year ending June 30, 1999, ACSH reported revenues totaling $2,566,557. Salaries and benefits to its top five employees were reported as follows:

Elizabeth Whelan, President, $223,570
Jeff Steir, Associate Director, $110,185
Gilbert Ross, Medical Director, $87,325
Ruth Kava, Director of Nutrition, $71,626
Cheryl Martin, Associate Director, $55,837

During its first 15 years of operation, ACSH published the names of its institutional funders, but it has stopped doing this in recent years, making it harder to identify where all of its money comes from. In the latest years for which information is available, some 40% of ACSH's budget was supplied directly by industry, including a long list of food, drug and chemical companies that have a vested interest in supporting Whelan's message. ACSH funders have included the following:

ALCOA Foundation
Allied Signals Foundation, Inc.
American Cyanamid Company
American Meat Institute
Amoco Foundation, Inc.
Anheuser-Busch Foundation
Archer Daniels Midland Company
Ashland Oil Foundation
Boise Cascade Corporation
Bristol-Myers Fund, Inc.
Burger King Corporation
Campbell Soup Company
Carnation Company
Chevron Environmental Health Center
Ciba-Geigy Corporation
Coca-Cola Company
Consolidated Edison
Cooper Industries Foundation
Adolph Coors Foundation
Crystal Trust
Shelby Cullum Davis Foundation
Dow Chemical Canada, Inc.
Dow Corning Corporation
E.I. Du Pont de Nemours & Company
Ethyl Corporation
Exxon Corporation
FMC Foundation
Ford Motor Company Fund
Frito-Lay
General Electric Foundation
General Mills, Inc.
General Motors Foundation
Gerber Products Company
Rollin M. Gerstacker Foundation
Hershey Foods Corporation Fund
Heublein, Inc.
ICI Americas Inc.
Johnson & Johnson
Johnson's Wax Fund, Inc.
Kellogg Company
Ester A. and Joseph Klingenstein Fund, Inc.
David H. Koch Charitable Foundation
Kraft Foundation
Kraft General Foods
Licensed Beverage Information Council
Thomas J. Lipton Foundation, Inc.
M&M Mars
Merck Company Foundation
Mobil Foundation, Inc.
Monsanto Fund
National Agricultural Chemicals Association
National Dairy Council
National Soft Drink Association
National Starch and Chemical Foundation
Nestlé
Samuel Roberts Nobel Foundation, Inc.
Northwood Institute
NutraSweet Company
John M. Olin Foundation Inc.
Oscar Mayer Foods
Pepsico Foundation Inc. (Pepsi-Cola)
Pfizer Inc.
Pillsbury Company
PPG Industries Foundation
Procter & Gamble Fund
Ralston Purina
Rohm & Haas Company
Salt Institute
Sarah Scaife Foundation, Inc.
Schultz Foundation
G.D. Searle Charitable Trust
Joseph E. Seagrams & Sons, Inc.
Shell Oil Company Foundation
Stare Fund
Starr Foundation
Sterling Drug, Inc.
Stouffer Company
Stroh Brewery Company
Sugar Association, Inc.
Sun Company, Inc.
Syntex Corporation
Union Carbide Corporation
Uniroyal Chemical Co.
USX Corp.
Warner-Lambert Foundation
Wine Growers of California

According to ACSH, some of its funding from the food industry dried up after those companies were acquired by Philip Morris, which does not like the position that ACSH has taken against tobacco. . . . . .

CONTACT INFORMATION

American Council on Science and Health
1995 Broadway
New York, NY 10023-5860
phone: (212) 362-7044

RELATED RESOURCES

PR Watch, Vol. 5, No. 4 (4th Quarter 1998) Julian Simon, Whaling, and the "Good News." This essay by Wade Frazier looks primarily at the work of now-deceased conservative economist Julian Simon, but also includes commentary based on Frazier's close reading of several books authored by Elizabeth Whelan. It also provides details about Whelan's relationship with her mentor and ACSH co-founder Frederick Stare, a nutritional "expert" who specialized in the defense of sugar and fatty foods.

Republican Doctors to Gingrich: Shun Tobacco Industry. This story provides an example of Whelan's rather unusual approach to anti-tobacco activism. (She is critical of tobacco, yet opposes requiring cigarettes to carry the U.S. Surgeon General's warning label.)

Howard Kurtz, "Dr. Whelan's Media Operation," Columbia Journalism Review, Vol. 8, No. 6 (March 1990), pp. 43-47.

"The ACSH: Forefront of Science, or Just a Front?" Consumer Reports, May 1994, p. 319.
 
Center for Media & Democracy,
520 University Ave., Suite 310,
Madison, Wisconsin 53703;
phone (608) 260?9713;
email editor@prwatch.org
 

STARBUCKS STATES POSITION
ON GM MATERIALS, LABELING & rBST MILK;
FAIR TRADE COFFEE & COFFEE SOURCING GUIDELINES

Starbucks is committed to sourcing and serving high quality coffee, tea, food and merchandise and to being environmentally and socially responsible.

Our business over the last year, Starbucks has made significant progress in responding to concerns expressed to us by our customers and by some activist groups regarding genetically modified (GM) materials, rBST milk, and Fair Trade coffee. We are pleased to provide the following information as an update on these issues at this time.

GM Material Labeling Starbucks is committed to ensure the safety of the food we offer for sale to our customers. We also believe that consumers are entitled to relevant information about food safety and that appropriate government agencies should set uniform requirements for and regulate such disclosures. The Company actively monitors food safety regulations, including those governing the labeling and sale of foods that include ingredients derived from genetic modification, and believes it is in compliance with all such regulations.

With regard to GM materials, the United States has no regulations concerning definition and labeling requirements. To assess what would be our labeling requirements if such regulations were adopted, Starbucks has applied the requirements of the newly enacted Australia/New Zealand Food Association (ANZFA) food labeling regulations, which are the most stringent labeling regulations in the world today. These regulations require labeling for all GM materials except for highly refined minor ingredients derived from GM material, such as cornstarch, so long as these ingredients do not contain genetically modified protein. In the absence of this protein, such ingredients are indistinguishable from these same ingredients derived from non-GM material. Whenever highly refined minor ingredients are used in our products, we verify that they are free of the genetically modified protein.

Starbucks has reviewed all of its coffees and teas and determined none is derived from GM materials. We have also conducted a review of other beverage ingredients and all were found free of GM material except for one beverage ingredient, which has been reformulated. We are continuing to review our non-beverage products and will make modifications or substitutions as appropriate and economically feasible so that all of our products would not require labeling under ANZFA regulations. In all cases, Starbucks will continue to monitor its products against ANZFA requirements and will conform to applicable regulations and labeling requirements in all the countries in which we do business.

GM Material While we reaffirm that we will not participate in the scientific debate over the viability and safety of GM technology, Starbucks has nevertheless engaged in a comprehensive review of our products over the last 10 months. As a result, we have:

* Confirmed that none of our coffees or teas is derived from GM materials.

* Reaffirmed our position that we have no plans to purchase coffee or tea that is derived from GM materials now or in the future. (In our opinion, there is no reason to pursue this technology for coffee and we do not plan to support its development.)

* Conducted a test of pastries made with organic ingredients in select markets in Seattle and Oregon which resulted in customer acceptance of both the quality and taste of these products.

* Completed a supplier review for all beverage ingredients and products.

* Reformulated one of our beverage ingredients to eliminate GM material.

* Conducted meetings with concerned citizens and NGOs to better understand their position on the issue of GM materials.

As a result, Starbucks has decided to formulate products to conform to the ANZFA regulations where it is practical and feasible, provided that this action will neither negatively impact the quality of our products nor result in an undue cost burden for our consumers. Where it is impractical to convert to a non-GM product, we will seek to offer alternatives to our customers.

rBST Milk While we reaffirm that we will not participate in the scientific debate over the safety of rBST treatment of dairy cows, over the last 10 months we have engaged in a comprehensive review of the milk products we use, resulting in:

* The introduction of organic milk as an alternative milk ingredient in all our company-owned stores in the U.S.

* The introduction of organic yogurt in the majority of our company-owned stores in the U.S.

* The introduction of single-serve flavored organic milk in the majority of our company-owned stores in the U.S.

* The decision to continue to offer organic soy milk as an alternative to cows' milk.

While consumer demand for organic milk in our stores continues to be very minimal, we are committed to provide this alternative milk source to our customers who desire it for the foreseeable future.

Today, based on information from our suppliers, we estimate that about 20 % of all the milk Starbucks purchases in North America is from cows not treated with rBST. While we continue to explore the availability of additional supplies of this milk, finding supplies that are verifiable as free of rBST treatment is a major challenge for us because of the bulking process used in the dairy industry. As we identify additional qualified suppliers of milk that meet these standards, we will consider converting to these sources as long as it is financially feasible for Starbucks to do so.

The best we can be Starbucks purchases the highest quality green coffee in the world. For Starbucks fiscal years 2000 and 2001, we are paying, on average $1.20 per pound, excluding freight, for the majority of our coffee. Specifically, in 2002, 74% of our green coffee will be purchased at outright prices, guaranteeing a stable price for farmers that is independent of the low prices in the coffee commodity markets; 31% of our purchases will be via long-term contracts, providing predictability for farmers for future harvests; and 59% will be supplied directly from farms and co-ops, thereby eliminating middlemen and ensuring that farmers receive more of the purchase price we pay. And while we cannot yet provide the transparency that will verify what farmers receive from the rest of the coffee we purchase, we know the vast majority is fairly compensated.

Expansion of the Fair Trade Coffee Program Since October 2000, Starbucks has led the retail specialty coffee industry by offering Fair Trade Certified coffee in all of our company-owned stores in the U.S. To become Fair Trade Certified, a coffee importer must meet certain criteria such as paying a minimum price of $1.26 per pound of coffee to cooperatives registered with Fair Trade licensing organizations. Starbucks is committed to significantly develop the Fair Trade Certified coffee program in our stores, through our relationships with college and universities in the U.S., and in the international markets where Starbucks does business.

In October 2001 Starbucks announced the expansion of the Fair Trade program by agreeing to purchase 1 million pounds of Fair Trade coffee over the next 12 -18 months and to use this additional coffee in the following ways:

* Brewing Fair Trade coffee as the "Coffee of Day" on a monthly basis in all of our stores in North America beginning May 2002.

* Expanding our offerings to colleges and universities. By the end of 2001, 59 accounts were providing Starbucks Fair Trade coffee to students. On January 1, 2002, Starbucks launched a promotion to increase the number of those accounts. To date, an additional 46 accounts have converted to Fair Trade as their core coffee, bringing the total to 105 accounts on college campuses.

* Continuing to work with the International Fair Trade Labeling Organization to become licensed to offer Fair Trade coffee in the international markets where we do business, with the intent that we will begin selling Fair Trade coffee in these markets this year.

Sourcing Fair Trade Certified coffee that meets our rigorous taste and quality standards in sufficient quantities to supply our more than 5,000 stores around the world continues to be a challenge for the Company. To address this issue, Starbucks is collaborating with a major foundation and nonprofit organization on a two-year quality improvement project with a large Fair Trade cooperative.

Improving the Standard of Living of Coffee Farmers Starbucks views Fair Trade Certified coffee as one component of our commitment to addressing the issue of the sustainability of coffee farmers. While we purchase only about one percent of the global coffee supply, we recognize the importance of helping to ensure coffee farmers have a sustainable livelihood. To address this challenge, we have moved away from "New York C" --- based formula pricing --- and focused on several other strategies,
including:

* Securing more contracts based on outright, negotiated prices.

* Negotiating more long-term contracts.

* Increasing the amount of coffee purchased directly from farms and cooperatives.

* Assisting coffee farmers in gaining access to affordable credit.

* Introducing new coffee sourcing guidelines which reward farmers for using sustainable growing practices.

* Expanding our sustainable coffee category to include Shade Grown Mexico and Fair Trade Certified coffees.

* Offering financial support for health and educational projects that directly benefit farmers and their communities.

Financial Assistance to Coffee Farmers Starbucks will continue to help coffee farmers gain access to badly needed credit by working with Ecologic Enterprise Ventures, Inc., a non-profit organization providing affordable crop financing to small-scale farmers in Latin America, and the Conservation Enterprise Fund.

In 2001, Starbucks support will result in approximately $500,000 in financing being made available to coffee farmers in Mexico. In October, Starbucks also agreed to invest $1 million for a three-year period through the Calvert Community Investment Fund to provide loans to coffee farmers in origin countries. Starbucks is working with Calvert to identify organizations in coffee-origin countries that will administer these loans for quality improvements, capital investments and micro credit at fair rates, which will, in turn, enable coffee farmers to improve their standard of living and provide better lives for their families.

Starbucks Coffee Purchasing Guidelines As a company we are very concerned with the coffee market as the current price of coffee of approximately 45 cents per pound is below the cost of production. The  effect of this is most acute for the highest quality coffees on which Starbucks depends, and there is great risk to future supplies of these
coffees.

Although Starbucks pays some of the highest prices in the industry, we continue to look for new ways to ensure that coffee production and commercialization will benefit rural communities by booting producer incomes, expanding employment and educational opportunities, and enhancing health and safety for coffee farmers.

In a first for the coffee industry, in November 2001 Starbucks Coffee Company introduced new coffee purchasing guidelines developed in partnership with The Center for Environmental Leadership in Business, a division of Conservation International (CI). The goal of the guidelines is to support Starbucks commitment to purchase coffee that has been grown and processed by suppliers who meet important environmental, social, economic and quality standards.

To launch the guidelines, Starbucks is enlisting the support of coffee suppliers who are sustainability advocates. Starbucks has instituted a flexible point system that rewards performance in sustainable categories. Points will be accrued based on a supplier's ability to meet the sustainability guidelines and suppliers who earn more points in the
program will receive higher purchasing preference when Starbucks purchases green coffee. Suppliers will also receive additional premiums of up to 10 cents per pound based upon how well their coffee samples meet the standards. Suppliers wishing to participate will be required to provide independent, third party verification of their performance against the guidelines.

Because significant changes in origin countries require flexibility and patience, the guidelines are being introduced as a pilot program for the 2002 and 2003 crop years. Feedback from participants will be used to make adjustments to the program and updates will be published at the completion of each year.

The guidelines are based on the Conservation Principles for Coffee Production, which were developed jointly by Consumers Choice Council, Conservation International, the Rainforest Alliance and the Smithsonian Migratory Bird Center.

--- Starbucks Corporation
 

CHAIRMAN HOWARD SCHULTZ:
STARBUCKS SEEKS TO CONTINUE
AGGRESSIVE WORLDWIDE GROWTH, NOT BECOME
ANOTHER FACELESS MULTINATIONAL CORPORATION

JAKE BATSELL, SEATTLE TIMES: In almost 10 years as a public company, Starbucks has catapulted from its Northwest roots to become a coffee Goliath, and its global ties were never more evident than at yesterday's (February 26) annual shareholders meeting at Seattle's Benaroya Hall.

On a tropically themed stage bedecked with fronds, ficus trees and sacks of coffee beans, company executives outlined plans to continue aggressive worldwide growth, including new stores in Mexico and Indonesia. And outside, protesters again gave exiting shareholders a reminder of the scrutiny that comes with being a global icon.

Chairman Howard Schultz told shareholders that while Starbucks has proved it can succeed in both domestic and international markets --- it has more than 5,000 stores in 25 countries --- he doesn't want it to become another faceless multinational corporation.

Starbucks, Schultz said, is striving to achieve "a very fragile balance between the fiscal responsibility for creating shareholder value and the importance of being a company that has a heart, that has a soul and is benevolent."

The company tried to stress that message for the next hour and a half during a heavily produced program that included a flag-bearing ceremony in which more than two dozen employees clad in green aprons carried flags from the countries where Starbucks does business.

Shareholders also heard about the company's efforts in countries from which Starbucks buys its beans. One video presentation showed coffee farmers in Guatemala thanking Starbucks for funding a health clinic.

In recent years, activists have urged Starbucks to do more to promote fair-trade certified coffee, deemed by a third party to have been bought at prices fair to indigenous farmers. The company recently committed to buy 1 million pounds of fair-trade-certified coffee over the next two years and yesterday said it had signed an agreement with an international organization to provide fair-trade-certified coffee in overseas markets.

Chief Executive Orin Smith told shareholders that Starbucks routinely pays prices at or above fair-trade minimums. "In short, all our coffee is fair-trade coffee," he said.

Activists say the company can do more --- for instance, by featuring fair-trade coffee as the "Coffee of the Day" in Starbucks stores once a week, rather than monthly.

"They have a great public-relations campaign that paints them as an environmentally responsible, socially responsible organization," said Lisa Ramirez of Friends of the Earth, one of the groups protesting. "We congratulate them on going part of the way there, but they're not all the way there."

Starbucks also announced it will open a store in Mexico City later this year, marking the company's first retail presence in Latin America, and will soon expand into Indonesia.

Shareholders approved several proposals, including re-election of three directors and an executive-bonus plan, but perhaps the most noteworthy proposal didn't pass. More than a third of shareholders --- 36% --- voted for a plan to have directors stand for election every year, as opposed to their current three-year terms.
 

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