An Ethos of Greed?

If you’ve been to Starbucks lately, you may have noticed that they’re selling a new kind of bottled water called Ethos. Ethos, which is wholly owned by Starbucks, is based on the clever idea that consumers will buy more products if they think their purchase helps bring clean water to the developing world.

They promise to give five cents for every bottle they sell to clean water projects in places like Ethiopia and Honduras, with a goal of at least $1 million by the end of 2006 and $10 million over the next five years.

But underneath the façade of generosity is a huge cash cow. Bottled water is one of the most profitable retail beverages, and Starbucks is clearly aiming to increase its sales of water with Ethos’ marketing campaign, which includes brochures and signs in its stores. Considering that Starbucks has 4,666 stores in the U.S. (as of April) and charges $1.80 per bottle—for an approximate $1 profit (Starbucks wouldn’t confirm this amount)—the corporation is set to make far more in profit from Ethos than what it has promised to donate.

This would seem at odds with the purpose of Ethos, which is to “inspire customers and employees” and “provide clean drinking water around the world,” according to Jennifer Guebert, Starbucks’ Marketing Manager for the Great Northeastern Region. In fact, she says that making more profits “isn’t the goal behind the initiative.”

If Starbucks really wants to make a difference, it could donate all of the profits it makes on Ethos to clean water projects—20 times more than the mere nickel it’s donating now. This is the policy of Keeper Springs, a water brand that Harvard sells all over campus. The company, founded by Robert F. Kennedy Jr., Chris Bartle, and John Hoving, donates all of its after-tax profits to the Waterkeeper Alliance, a nonprofit that works to preserve America’s waterways. But its reach is much more limited than Starbucks’ Ethos. Since Keeper Springs is only a wholesaler—not a distributor or retailer—the profits that it donates are close to the five-cents-per-bottle amount that Ethos donates.

Bartle said he is very supportive of the Ethos concept, though he confirmed that five cents is nowhere near the profit Starbucks makes on each bottle. “The basic rule,” he said, “is that the more money that goes to good causes, the better.” When I raised the point that Starbucks and Ethos have probably spent millions on their marketing campaign, which includes a two-month R.V. tour, he said, “that’s the fundamental dilemma Keeper Springs faces. We don’t spend any money on marketing because we’re afraid of the criticism we might face.”

Bartle is skeptical of the huge profits Starbucks is reaping from Ethos. As he pointed out, “if you don’t give all of your profits away, or at least a high percentage, how much more are you making because of what you’re telling people?” If Ethos helps Starbucks sell more bottled water than ever before, is the company unfairly profiting off the consciences of their customers?

As a public company—unlike Keeper Springs or Newman’s Own—Starbucks has shareholders to answer to when it comes to giving away profits. But Starbucks’ shareholders might actually support bigger donations, especially given their history of approving other socially responsible policies. Starbucks has led the industry with its efforts to promote Fair Trade Coffee and organic and shade grown coffee. Starbucks also generously gives even part-time employees health care, which is a big commitment given the rising costs of insurance.

Bartle vouches for Starbucks’ President and CEO Jim Donald, saying he’s a great guy and a true believer in the mission of doing good while making money. Perhaps, then, Mr. Donald will see the problem with donating so little of the Ethos profits when charity is the central concept of the brand. Starbucks customers are smart enough to know that a nickel is nothing on a bottle of water that costs almost two dollars.

That cost itself is also worth questioning. It is rather wasteful to buy bottled water at all if you have access to clean tap water, which 1 billion people in the world lack. Not only do the bottles, refrigeration and transportation generate a great deal of waste and pollution, but the money ($9.8 billion in the U.S. annually) could be better spent on projects like those that Ethos is supporting. According to a great article by Tom Standage in the New York Times, “clean water could be provided to everyone on earth for an outlay of $1.7 billion a year beyond current spending on water projects, according to the International Water Management Institute,” a fraction of bottled water profits.

In any case, for the sake of the developing world and its own reputation, Starbucks should donate 75 percent or 100 percent of the profits from Ethos water. If not, consumers should question whether Starbucks has an ethos of charity or an ethos of greed.

Nicholas F. B. Smyth ‘06, a Crimson editorial editor, is a government concentrator in Dunster House.