Preliminary conclusions & Plans

• There seems to be an increase in prices of trademarked coffees relative to non-trademarkedcoffees starting during the period that led to the “Starbucks Day of Action.”

• It is not (yet) clear whether this effect was temporary or long term.

• There may also be spill-over effects from the Trademarking Initiative & Starbucks case onnon-TM coffees, as they created publicity for “Ethiopian Fine Coffee” in general.

• Will be working on Bayesian methods to identify the effect on the evolution of prices (withChristopher Reicher at IfW).

•Your suggestions are very welcome!!

-.06-

.04-

.02

0.0

2.0

4D

.Har

ar_o

ver_

nonT

M

2005m1 2006m1 2007m1 2008m1 2009m1Year-month

D.Harar_over_nonTM

-5-4

-3-2

brea

kpoi

nt t-

stat

istic

2005m1 2006m1 2007m1 2008m1 2009m1Year-month

Breakpoint t-statistic: min at 2007m2

in series: Harar_over_nonTMClemente-Montañés-Reyes single IO test for unit root

-.05

0.0

5.1

D.Y

irgac

heffe

_ove

r_no

nTM

2005m1 2006m1 2007m1 2008m1 2009m1Year-month

D.Yirgacheffe_over_nonTM

-5-4

.5-4

-3.5

-3br

eakp

oint

t-st

atis

tic

2005m1 2006m1 2007m1 2008m1 2009m1Year-month

Breakpoint t-statistic: min at 2006m3

in series: Yirgacheffe_over_nonTMClemente-Montañés-Reyes single IO test for unit root

-.04

-.02

0.0

2.0

4D

.Sid

ama_

over

_non

TM

2005m1 2006m1 2007m1 2008m1 2009m1Year-month

D.Sidama_over_nonTM

-5.5

-5-4

.5-4

-3.5

-3br

eakp

oint

t-st

atis

tic

2005m1 2006m1 2007m1 2008m1 2009m1Year-month

Breakpoint t-statistic: min at 2006m4

in series: Sidama_over_nonTMClemente-Montañés-Reyes single IO test for unit root

Unit root & Structural break tests

• Fail to reject unit root for all estimated origin premiums.

• For the log relative prices:

Table 2: Unit root tests (dfgls in Stata)Log of... Pre 12/06 Whole periodSidama/nonTM unit root no unit rootYirgacheffe/nonTM unit root no unit rootHarar/nonTM unit root unit root

Preliminary analysis

Based on Carter and Smith (2007): Relative Price of a Substitute (RPS) Method.

1. Test for cointegration in pre-event relative prices.

2. Test for structural break in relative prices.

3. Estimate price impact.

Estimating monthly price premiums

log (Pi) = α1Sidama + α2Yirgacheffe + α3Harar + βO + ... + γG + ui,

estimated separately for each month. O is a vector of dummies for other coffee origins that arenot trademarked (incl. unknown origin), G is a vector of grade dummies from G1 to G5 and iindicates each transaction in the data set. (I exclude organic and fair trade certified coffees – lessthan 1%– to prevent convoluting the price effect of these standards with that of the TM.)

2.6

2.8

33.

23.

43.

6

03/05 12/06 06/07 10/07

2005m1 2006m1 2007m1 2008m1 2009m1

sidamaD yirgaDhararD jimmaDunknown

03/05: Application to USPTA for TM12/06: Starbucks Day of Action06/07: Starbucks Signs the TM Agreemt.10/07: USPTO approves Sidamo TM

Estimated monthly origin premiums

Figure 1: Estimated origin premiums for each month and the landmarks of the publicity of the Trademark Initiative

Data

• Data from Ethiopian Customs on all coffee exports since 2004.

• Include information on price, origin, destination, grade and certification status (around 24,000data points).

• ICO data on global production, trade and prices of arabica and robusta coffees.

Table 1: ICO Brazilian Naturals and Ethiopian Customs Prices, US cents/lb.

Year ICO Non-TM Sidama Yirgacheffe Harar2004 87.85 96.55 89.26 131.482005 106.61 109.05 111.95 137.27 132.932006 102.75 103.36 121.11 159.70 118.592007 108.47 106.82 129.10 177.64 137.152008 131.15 128.27 162.29 218.15 164.642009 108.28 104.73 156.98 205.88 149.92

Source: ICO Data and author’s calculations from Customs data.

Trademarking and Licensing Initiative & Starbucks

• There is a big disconnect between the retail prices of Ethiopian coffee and farmers’ share (6%of final retail price, LYIP).

• In 2004 Sidamo sold for up to 26$ per lb, whereas average farm-gate price was 50 cents per lb.

• 2004: Ethiopian government initiated the Trademarking and Licensing Initiative (growers,small traders, exporters, cooperatives) to create a mechanism to get more control over theircoffee in the world.

• 2005/03: Application to USPTA to trademark “Sidamo,” “Yirgacheffe,” and “Harar” names.

• 2005/10: USPTO suspended “Sidamo” application because Starbucks had already a trademarkapplication for “Shirkina Sun-Dried Sidamo.”

• 2006/06: Ethiopian government filed a case against Starbucks at the Trademark Trial andAppeal Board.

• 2006/07: Starbucks dropped its claim but refused to sign the initiative.

• 2006/12: Oxfam organized “Starbucks Day of Action” (Dec, 16) to urge Starbucks to sign(100,000 people contacted Starbucks).

• 2007/06: Starbucks signed the TM agreement.

• 2007/10: USPTA approved the registration of “Sidamo” as TM.

Why study Ethiopian coffee?

• Coffee is one of the most valuable agricultural commodities in international trade.

• Ethiopia produces high quality arabica coffee that is valued highly in specialty markets: re-ceives consistently >90 points in international tastings by professional cuppers.

• Ethiopia produces 5% of World output and 30% of SSA.

• 95% of coffee is produced by over a million smallholders and 10 million people depend on theindustry.

• Coffee provides 35% of total export earnings.

Abstract

The Ethiopian government has initiated the Ethiopian Coffee Trademarking and Licensing Ini-tiative in 2004 to register trademarks for three of the world’s finest coffee varieties, i.e., Sidamo,Yirgacheffe and Harar, in coffee importing countries. Thirty countries signed the trademark andlicensing agreement so far and more agreements are under negotiation. This initiative created alot of publicity and worldwide campaigns to support Ethiopian coffee farmers mainly due to thecourt case between Starbucks and the Ethiopian government over the right to register the name“Sidamo” as a trademark in the US.

This paper evaluates the effects of this initiative and the publicity created by the Starbucks caseon export prices of Ethiopian coffee. I analyze the evolution of prices for the trademarked coffeesover time and compare it with that of non-trademarked Ethiopian and other Arabica coffees. Thisstudy identifies whether and how government policies and international publicity affected prices,and assesses the feasibility of government’s main goal of “de-linking” the prices of its fine coffeesfrom the world prices in order to increase the share coffee farmers receive from the retail price ofthese coffees.

Kiel Institute for the World EconomyPoverty Equity and Growth Network (PEGNet) – funding for the field work.

Aslıhan Arslan, Post Doctoral Scholaraslihan.arslan@ifw-kiel.de

The Effects of the Coffee Trademarking Initiativeand Starbucks Publicity on Export Prices of Ethiopian Coffee

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