McDonald’s

Corporate coffee / McDonald's

McDonald’s sustainability update

mcdonalds-logoI have reported previously on McDonald’s efforts to improve coffee supply chain sustainability, part of a larger effort in overall sustainability. In my post “McDonald’s makes a substantial commitment to coffee sustainability”  I provided an overview of 2013 levels of certified coffee and farmer capacity-building partnerships. I also compared the efforts of this company which derives a relatively small portion of income from coffee to that of JM Smucker (owner of Folgers, among other brands) which makes most of its profit from coffee. I gave a brief recap and update later that year.

In their 2014 Good Business corporate responsibility report, McDonald’s declared an “aspirational” goal (versus a commitment, I suppose) of sourcing 100% of their coffee from third-party verified sustainable sources. As of 2014,

  • 32% of their global coffee (22% in the US) is from sustainable sources, including Rainforest Alliance, UTZ, or Fairtrade certified farms. This is through their network of suppliers, as they do not purchase coffee directly. That is an increase from 2012, when those figures were 25% global, 15% US.
  • 100% of caffeinated coffee is Europe is Rainforest Alliance, UTZ, or Fairtrade certified.
  • 100% of coffee in McDonald’s restaurants in Brazil, Australia, and New Zealand is Rainforest Alliance certified.
  • 100% of espresso in the US and Canada is Rainforest Alliance certified.
  • Their grocery store Espresso Roast McCafe at Home brand is 100% Rainforest Alliance certified. The bagged McCafe coffees in grocery stores are roasted by KraftHeinz.  Kraft went through a series of spin-offs and mergers, and retained some coffee operations and brands, including Maxwell House, Gevalia, and Tassimo.

These are significant efforts for a fast food chain and, as noted in my previous posts, more impressive than some coffee companies. Because McDonald’s buys through suppliers that also serve other companies, pushing the suppliers to source more certified coffees should also have positive spillover effects in the larger market.

 

Corporate coffee / Dunkin Donuts / Jacobs Douwe Egberts/KraftHeinz / McDonald's / Nestlé/Nespresso

Slave labor in your cup

danwatch-logoThe British newspaper The Guardian published an article this week, “Nestlé admits slave labour risk on Brazil coffee plantations.”The subtitle sums it up: “Nestlé and Jacobs Douwe Egberts say beans from Brazilian plantations using slave labour may have ended up in their coffee.” The article is based on an extensive investigation by the Danish independent media and research center Danwatch.  Nestlé admitted it had obtained coffee from farms found to have poor labor conditions resembling slavery. Jacobs Douwe Egberts (JDE) conceded “it was possible” they did, too.

Labor practices are outside the wheelhouse of C&C coverage; you can read the entire Danwatch report here.  But I want to point out here that this is not the first time these companies have been caught buying coffee grown under illegal or unethical conditions. It’s why I advocate for not buying supermarket coffee from large corporations and why I am so skeptical of their “sustainability” claims.

The companies

Most people are familiar with the mega-giant transnational food and beverage company Nestlé. They own the coffee brands Nescafé, Nespresso, and Taster’s Choice, as well as other international brands.

The name Jacobs Douwe Egberts (JDE) is probably unfamiliar to most people outside of Europe, and the company has a rather convoluted pedigree. It was created in 2015 after a merger between Mondelez International (which had previously taken over most of the coffee brands of Kraft Foods) and European coffee giant D.E Master Blenders 1753 (which itself was spun off from the coffee business of Sara Lee Corp.). Coffee brands include Maxwell House, Gevalia, Kenco, Tassimo, and Senseo, plus many international brands.

The privately held JAB Holding Company owns the majority share in JDE.  It also has majority stakes in Peet’s Coffee and Tea, Caribou Coffee, Keurig Green Mountain, Einstein Noah, and (via Peet’s) Intelligentsia and Stumptown.

Nestlé and JDE together control approximately 18% of global coffee production, and over 40% of global retail market share.

Caught before

In 2007, a World Wildlife Fund report revealed that coffee illegally grown in Sumatra was being purchased by Nestlé and Kraft (most of Kraft’s coffee business is now controlled by Jacobs Douwe Egberts, see above) and other large coffee buyers. Land was being cleared in a national park to grow coffee, threatening habitat for endangered elephants, rhinos, and other wildlife.

At the time, Nestlé admitted the difficulty of determining the precise origin of their coffee. Nearly a year later, in an ABC News follow-up story, Nestlé made the cavalier comment “It might come – we have no way of  knowing – from illegal sources. Law enforcement is not our task.”

Indeed, the enormous amount of coffee purchased by Nestlé, JDE/Kraft, and Smucker’s (Folgers) follows a complex supply chain that would require effort and investment to ensure it does not originate under dubious conditions. It isn’t as if these companies can’t afford it. They make hundreds of millions (in Nestlé’s case, tens of billions) in profits annually.

You can read more about Nestlé’s various sustainability claims, and my take on them, from this page. As for JDE, the fact that the majority owner (JAB) is privately held will only reduce transparency regarding their supply chain, including that of many of their acquisitions. JAB is engaged in a quest to dominate the global coffee scene. I can’t see how this race, a competition with its main rival Nestlé, can advance the cause of coffee grown in a manner that is sustainable to farmers or the environment.

Epilogue regarding other buyers

Starbucks was also implicated in receiving illegally-grown Sumatran coffee in 2007. Prior to 2007, only about half of Starbucks’ coffee was sourced under their CAFÉ Practices guidelines, which identifies their suppliers and requires various criteria and transparency, verified by a third party. Now greater than 96% is sourced through this program. In the current Brazilian case, Starbucks told Danwatch that while they had done business with cooperatives and/or middlemen connected with the guilty farms, they knew each of their farm sources and did not obtain coffee from the farms in question.

McDonald’s and Dunkin Donuts were also mentioned in the Danwatch report because they use the Canadian distributor Mother Parkers, which in turn purchased coffee from a Brazilian firm that may have gotten coffee from one of the implicated farms. McDonald’s responded that their communication with suppliers indicated conditions described by Danwatch were not present in their supply chain. I’ll add that McDonald’s has been making considerable efforts in cleaning up their coffee supply chain. They have a goal of sourcing 100% of their coffee from verified sustainable sources by 2020, and are about a third of the way there. I’ll be writing a post about their progress in these efforts.

Dunkin Donuts response was more vague: “Dunkin Brands will continue to communicate and enforce our code of conduct standards throughout our coffee supply chain. Any material breach of this Code that does not have an immediate corrective action plan would result in termination of the supplier’s approval status.” They gave this same answer to multiple questions from Danwatch.

UPDATE: For in-depth perspective on slave labor in coffee, please see Michael Sheridan’s always deeply insightful posts:

Corporate coffee / McDonald's

McDonald’s promotes coffee sustainability efforts

McD-RA-promoMcDonald’s is launching a campaign aimed to educate the public about their efforts in sourcing coffee sustainably, which I wrote about in March. To recap, the corporation’s North American operations is investing over $6 million to provide education and training to more than 13,000 Guatemalan coffee farmers to increase their capacity for sustainable coffee production.

As I noted in the previous post, the investment in technical assistance to farmers builds on the commitment to purchase increasing amounts of certified coffee, primarily from farms certified by Rainforest Alliance. Currently, all coffee at McDonald’s locations in the U.K., Australia, and New Zealand, and all coffee for espresso-based drinks in the U.S. and Canada, is sourced from Rainforest Alliance-certified farms. All coffee, except for decaf, in Europe is also Rainforest Alliance, Fair Trade, or UTZ certified. In 2011, certified purchases amounted to about 10,400 metric tons. In 2012, 25% of their global coffee purchases were certified; in the U.S. the figure was 14.8% (actual volume figures are not available).

While $6 million is not much money for a multi-billion corporation, keep in mind that coffee is not McDonald’s primary business, and that they only really entered the premium coffee market segment in 2006. They do not source coffee directly, but rely on a suite of suppliers. And, as previously pointed out, even the small amount of certified coffee McDonald’s purchased for North American (around 3800 tons) was more than coffee giants JM Smuckers (1500 tons) and Nestlé’s (2000 tons) total certified global purchases combined! And McDonald’s 14.8% certified U.S. purchases also dwarf Smucker’s 0.5% (and Smucker’s goal is only 10% by 2016). Whereas Smuckers has been dragged reluctantly into modest sustainability efforts, and Nestlé has rejected third-party certifications, McDonald’s has chosen to go with Rainforest Alliance, Fair Trade, and  UTZ Certified because they felt the certification criteria of those organizations were best aligned with the company’s vision.

mcd-coffee-sustainability-shot

Although millions of Americans guzzle coffee every day, not very many are aware of where the daily fix comes from, how it is grown, and the issues that impact coffee farmers and the environment (hence this blog!). McDonald’s wants to familiarize with the public with these issues and how specifically the company is approaching enhancing sustainability in their coffee supply chain. Their connection with Rainforest Alliance will be featured in their ads, in stores, and other promotional assets. Many people that are “into” coffee and drink specialty coffee know about coffee certifications and Rainforest Alliance. I’d venture an educated guess that most people who usually get their coffee away from home at fast-food restaurants have no notion about certifications or coffee sustainability. The ubiquity, popularity, and marketing power of McDonald’s can go a very long way in introducing these issues to the general public.

The next step is increasing the amount of certified coffee they purchase for drip coffee in North America; I hope the majority will be Rainforest Alliance.  McDonald’s has brought their suppliers (S&D Coffee & Tea, Gavina Gourmet Coffee, Farmer Brothers, and Mother Parkers) to the table to address this goal and provide the company with a sequenced plan. These are four of the largest coffee suppliers in North America — providing well over 100,000 tons of coffee annually for foodservice, private label, convenience stores, and their own brands. Currently S&D, the largest of the four, has the best sustainable-coffee commitment, offering a number of certified coffees, including their own line of Bird-Friendly certified coffee [NOTE: S&D was purchased by another company in 2020]. Farmer Brothers has just released its first, baseline sustainability report, where it states it now buys 9% “sustainable” coffee (which amounts to about 3500 tons). Gavina and Mother Parkers don’t provide much detail on similar offerings. This presents a golden opportunity for the Golden Arches. The ability of McDonald’s to influence the purchasing of their suppliers means this initiative has great potential to increase demand for certified, sustainably-grown coffees. Perhaps most importantly, I think that a significant increase in the volume of coffee destined for drip in North America, combined with the visibility and marketing power of McDonald’s, has the potential to really propel coffee sustainability issues into the mainstream.

You can see more at the coffee sustainability section of their website. More detail is promised in McDonald’s next corporate sustainability report, due out next spring. I’ll be reporting on it.

Corporate coffee / McDonald's / Rainforest Alliance

McDonald’s makes substantial commitment to coffee sustainability

mccafeMcDonald’s Corp. recently announced that their North American operations is investing $6.5 million over 4.5 years to provide technical assistance to Guatemalan coffee farmers to increase their capacity for sustainable coffee production. McDonald’s is partnering with the non-profit TechnoServe (which coordinates many coffee-related projects) and SCAN (Sustainable Commodity Assistance Network), a global consortium of 20 organizations that provide an array of support for sustainable agriculture practices. This is another component in the sustainability efforts of the Golden Arches, a number of which are directly related to coffee. These include:

  • All coffee in the U.K. is from Rainforest Alliance-certified farms (since 2007).
  • All coffee in the rest of their 39 European markets is from Rainforest Alliance-certified or UTZ Certified farms (since 2007).
  • All coffee in Australia and New Zealand is from Rainforest Alliance-certified farms (since 2008-2009).
  • All coffee for espresso-based drinks in the U.S. is sourced from Rainforest Alliance-certified farms (as of March 2013).
  • All coffee for espresso-based drinks in Canada must be certified by a third party, and is currently 100% Rainforest Alliance.

To get an idea of why I find this so significant, we need put all of this in perspective by comparing it to the largest coffee buyer in the U.S., J.M. Smucker Company.

McDonald’s is a fast food restaurant. They do not directly source or roast coffee (it comes through suppliers). Coffee is not their core business, but makes up just 6% of U.S. sales for the company1. Smucker’s is a food manufacturer that owns the coffee brands Folgers, Millstone, Dunkin Donuts bagged coffee, Café Pilon, and Café Bustelo. Coffee makes up 44% of their U.S. sales.

McDonald’s certified coffee purchases in 2011 — Rainforest Alliance, UTZ, and Fair Trade — were about 10,400 metric tons, with three-quarters of it being Rainforest Alliance-certified. Although the McDonald’s restaurants in the U.S. lag behind European markets in offering certified coffee, the company expects to buy around 3800 tons for the domestic market.  Not a lot, but more than Smuckers (1500 tons) and Nestlé (2000 tons) total certified global purchases combined!

The most recent McDonald’s pledge amounts to $1.4 million a year to provide sustainability support to coffee farmers. That’s 0.06% of its annual coffee sales of about $2.1 billion on U.S. systemwide sales of just over $35 billion. That doesn’t sound like much until you realize that Smucker has opted to support TechnoServe at $150,000 annually2, or 0.006% of its annual U.S. retail coffee sales of $2.3 billion.  And, as I like to remind everyone, JM Smucker has a dismal environmental sustainability record, and less than 0.5% of the coffee it buys each year carries any type of certification whatsoever.

mcd-love-1

You can let McDonald’s know (on Facebook, for example) that you appreciate their efforts and would like to see more eco-certified coffee in the U.S.

1Figures provided to me by McDonald’s and are the most recent available; total global coffee purchase information not available at this time. The Nestle and Smucker figures are based on the most recently available data — both of those companies are very guarded about releasing any information to the public. In contrast, McDonald’s was helpful and forthcoming about giving me this data, and also has extensive information at their web site.

2This figure is based on statements made by Smucker’s regarding a continuation of support provided to TechnoServe by Proctor & Gamble, which sold its coffee brands to Smucker. The last time donors were listed in TechnoServe’s annual reports was 2009, and Smucker was listed as a donor in the $100,000 to $499,999 level. I wrote to TechnoServe to verify the amount of support they received from Smucker, but did not receive a reply. I’m sure if Smucker had upped the ante, they’d brag about it, because their 2013 Corporate Responsibility Report touted this relationship…by highlighting the work TechnoServe had done with 170,000 coffee farmers, making it sound as if Smucker should receive lots of credit. TechnoServe receives $3.1 million in corporate and foundation support alone.

Corporate coffee / McDonald's

McDonald’s coffee in the U.S.

Background
When McDonald’s introduced its Premium Roast coffee in 2006, it was selling 500 million cups of coffee a day in the U.S. alone, or one out of every ten cups sold outside the home. On the heels of that success and that of the growing high-end coffee market, McDonald’s in May 2009 launched its McCafe line of espresso drinks nationwide. These drinks are based on beans from Latin America and Indonesia, and are currently available in over 11,000 U.S. locations.*

Across products, the company has a diverse and complicated supply chain, as you might imagine. They favor multiple suppliers which often vary geographically. This is true with their coffee: McDonald’s does not roast its own coffee, so it obtains its beans from other roasters.

Fast food coffee: how does McDonald’s coffee compare?
Personally, I rarely drink coffee outside my home. Quality and taste issues aside, if I don’t know where it comes from, I don’t want to drink it. But when I think about other ubiquitous fast food outlets and their brewed coffee, I think about Folger’s being served at Wendy’s, about Dunkin Donuts being owned by three creepy private equity firms (providing little or no information on where their coffee comes from), and another of the “big four” corporate roasters, Sara Lee‘s Douwe Egberts division, supplying Burger King’s coffee. These are horrible choices, driven by profit. Quality and environmental sustainability not top priorities. Or if they are, none of those companies are making any effort to disclose to the public where they source their green beans and what environmental protection (or producer compensation) measures they undertake.

McDonald’s coffee suppliers
In comparison, the identity of McDonald’s major coffee suppliers are known, albeit with a little digging. Information on the the sourcing policies of those suppliers varies (discussed below). I’m most impressed with Green Mountain and Distant Lands. Those of S&D and Gaviña are more opaque.

The roasters below supply beans to the McDonald’s McCafe drink line. The first two also did/do supply beans for drip coffee. That is generally done on a regional basis, so I presume that the espresso line is supplied regionally as well.

S&D Coffee
This Concord, NC-based company is one of the leading roasters to the food service industry, supplying tens of thousands of commercial customers with coffee and allied products. S&D has supplied McDonald’s with coffee for over 30 years, and in 2008 was named McDonald’s supplier of the year. It was founded in 1927 and is still privately held by the Davis family. It is much more difficult to find out how privately-held companies source their coffees. A look at their line up reveals that they have several dozen wholesale coffee selections, including a few that are certified by Rainforest Alliance (at the 30% level. e.g., the products contain only 30% certified beans). While some coffees are single origin, little to no detail is provided, at least on the web site.

Gaviña Gourmet Coffee
Gaviña is based in southern California. Founded in 1967 by Cuban immigrants, it is still privately held by the Gaviña family, and currently roasts 32 million pounds of coffee annually. Gaviña has supplied McDonald’s since 1983, first with drip coffee and now with beans used in the espresso-based drinks. McDonald’s represents 15% of Gaviña’s sales. Other big commercial customers include 7-Eleven and CostCo. Gaviña sources coffee from about 40 different countries. Gaviña doesn’t divulge the three or four Latin American nations used in McDonald’s McCafe drinks; they say that’s proprietary information (but see below). Guess that means we can’t narrow it down to the cooperative or farm level! Gaviña’s web site indicates they have a limited selection of organic coffees, and a search for other certified coffees comes up blank.

Distant Lands Coffee
Distant Lands Coffee is one of the newer McDonald’s suppliers. The original roasting plant is in Texas, and recently they added another near Seattle. Among other places, Distant Lands supplies coffee to Safeway supermarkets and Panera Bread. In my post about Panera’s coffee, I went into some detail about Distant Lands and had good things to say about their commitment to quality and sustainability, which you can read about there. The fact that Distant Lands also owns or manages the farms they source from (such as chairman Bill McAlpin’s well-known La Minita in Costa Rica) was appealing to McDonald’s.

According to a Chicago Tribune article, at least one McDonald’s rep traveled to Distant Lands’ managed farms in Costa Rica, Brazil and Guatemala (as well as Indonesia), thus revealing the origins of at least three of the Latin American countries McCafe drink beans come from.

One other McDonald’s coffee supplier is worth noting. Vermont’s Green Mountain Coffee Roaster has been supplying Newman’s Own organic and Fair Trade certified coffee to around 650 locations in New England since 2005. Unlike the other suppliers, GMCR is publicly-traded. They have a great corporate responsibility record, source a lot of sustainably-grown coffee , and have many initiatives in coffee-growing communities. GMCR only supplies coffee to McDonald’s for drip, but it’s probably one of the most responsibly-sourced cups you’ll get at any fast food establishment, if you are fortunate enough to live in the region supplied by GMCR.

McDonald’s and Rainforest Alliance outside the U.S.
In smaller (and some would say more eco-conscious) markets, McDonald’s has gone a step further. All McDonald’s coffee in Australia is Rainforest Alliance certified. The web site specifically says, “Every bean we grind at McDonald’s Australia is made using 100% Arabica coffee beans sourced only from Rainforest Alliance Certified farms in Brazil, Colombia and Costa Rica that meet strict environment and social standards.”

In the UK, where as of early 2007 McDonald’s was selling 143,000 cups of coffee daily, the company also uses Rainforest Alliance certified coffee exclusively. There, they source through Kraft under their Kenco brand. According to McDonald’s, they are expanding certified coffees throughout Europe, where all their coffee will either be Rainforest Alliance or Utz-certified.

As a reminder, neither of these certifications is specifically geared towards shade or biodiversity. More on Rainforest Alliance shade standards here and Utz environmental standards here.

Where does this leave us?
Getting coffee at a fast food chain is not the usual or best path to uplifting farmers, preserving the environment, or even appreciating great coffee. That being said, if I had to do it, my conclusion is that I’d feel least guilty getting a cup of coffee at McDonald’s than at other big fast food chains.

Perhaps, we can make it better. One thing on the McDonald’s corporate responsibility web page caught my eye:

“Other McDonald’s markets such as McDonald’s USA are working with suppliers to learn more about sustainable sourcing options for coffee. They will continue to monitor customer preferences and develop their coffee sourcing accordingly.”

McDonald’s has responded to consumer pressure in the past (albeit prolonged and crushing). Let them know that you want to see all of their U.S. coffee come from sustainable sources. Here’s how you can contact them:

Phone: 1-800-244-6227
Snail mail: McDonald’s Corporation, 2111 McDonald’s Dr., Oak Brook, IL 60523.

—–

*About half of McDonald’s 30,000+ locations are located outside of the U.S., and while I’ll discuss their sustainability efforts in other parts of the world — notably the U.K. and Australia — this post focuses on the coffee in their U.S. stores.

First two coffee cup photos by Majiscup, last by Avlxyz under Creative Commons License.