They stole our coffee

There is a chain of coffee shops in Addis Ababa called “Kaldis”, named after the shepherd who, according to Ethiopian folklore, first identified coffee after watching the reaction of his goats who had been grazing on a coffee bush.  Ethiopia is the birthplace of coffee.

The Kaldis coffee shops clearly drawn more than a little inspiration from Starbucks – the logo, green aprons, and decor of the coffee shops will be familiar to anyone who has visited a branch of the Seattle-based chain (which has not yet arrived in Ethiopia).

The coffee in Kaldis is much, much better than Starbucks, however.  Ethiopians take their coffee very seriously and it is deeply embedded in Ethiopian culture; from the prolonged “coffee ceremony” in towns and villages up and down the country, to the sipping a machiato with the Sunday papers in one of Addis Ababa’s many cafes.

Tseday Asrat, the owner and founder of Kaldis, makes no secret of drawing her ideas from Starbucks.  According to the New York Times,

”I’ve always loved Starbucks, the ambiance of it,” said Tseday Asrat, the proprietor of Kaldi’s, fessing up to the obvious inspiration behind her year-old business. ”So we created our own version of it here.”

Ethiopian friends tell me that she was challenged about this on Ethiopian radio. Did she feel guilty about stealing ideas from Starbucks? “Not at all”, she apparently replied. “After all, they stole our coffee.”

It is a nice story; and there is a lesson. One of the unsolved mysteries of development economics is why inequality has grown so much in the twentieth century. Never in the whole of human history has the world been so unequal. In the past, poor societies would “catch up” with richer and more technologically advanced societies, usually by adopting their technologies. New agricultural methods, such as crop rotation and fertilizer, would spread. The spinning jenny, steam engines and factory production lines were adopted all around the world. But in the twentieth century an increasing proportion of the important technologies that make our society rich are subject to patents, copyright protection and trade secrets. Whether it is the composition of pharmaceuticals, new varieties of seeds, software we use to run our businesses and governments, or complicated fertilizers, the knowledge that underpins the wealth of our societies is more and more protected.

In the sixteenth century, double entry bookkeeping spread rapidly across Europe from Venice, enabling merchants to manage their firms much better and so contributing to rising prosperity. The idea was adopted the world over. But today’s technologies to improve the management and productivity of firms – from Microsoft Excel to enterprise management software – cannot simply be copied by firms in poor societies. The consequence is that it is much harder for firms in poor societies to compete, and catch up is much slower.

The intellectual property rights regime which aims to create incentives for innovation in industrialised societies has an unintended (and probably unnecessary) consequence of making it much harder for poor countries to catch up. I’ll be writing more about that issue here in future.  In the meantime, let’s celebrate Kaldis, which takes a good idea and makes it even better.

PS apologies to everybody who subscribes to this blog by email who got a meaningless email today. I allowed some software to create a temporary test page on my blog, stupidly forgetting that it would send out an email alert automatically.  I’ll do my best not to make that mistake that again. Clearly I’m new to computers.

16 thoughts on “They stole our coffee”

  1. interesting, and i had been discussing on various topics related to large multinational corp. penetrating throughout africa and providing their well developed services and as a result suffocating any attempts of local invention in another blog, and the discussion there although yet not settled, for me comes down to scale of economics

    any western service/product provider is tied to the factor of scalability, and the main issue africa currently is facing is just that. ethiopia as a whole although having an 80 million population runs economy which is rather small, too small, in any measure, and besides the concentration of wealth is much higher in terms of ratio resulting in a go to customer base which is very small and if you consider the factor of delivery, infrastruture etc this base shrinks even more. this added among with certain other domestic factors makes africa as the place where inventions are born and takes root as highly unlikely (too make it clear not because we are less inventive or so, to the contrary…) as often times many ideas never reach that level and die out because of the lack of enough finance to develop the idea to the next level, which ultimately normally comes from the first levels success when meeting the market. this is currently most obvious in the sector of internet based service provision or the general it sector. depressing factor as africa seem to be doomed to be relegated to the catch-up game only

    due to this IP regulations (at least in the technological grounds) would probably serve mostly foreign such capitals more than african counterparts, specially considering the cost of developing, maintaining and enforcing (where the way i see it this is the current huge blind spot, looking for instance at the entertainment sector where grounds are already broken in terms of developing the framework but the lack of enforcement is daunting) such set of tools are quite prohibitive and even hard to motivate (unless as usual some donor doesn’t step up to it)

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  3. A nice story and I’m sure that coffee Kaldis is very nice and certainly much better than Starbucks, but where is the actual evidence that Starbucks “stole” Ethiopian coffee? Because Starbucks trademarked brands in the US that are actually areas where coffee is produced in Ethiopia?

    I take and share your point about African ingenuity, creativity and innovation. There are plenty of very good examples of African entrepreneurs having successfully branded commercial entities at home and, mainly, abroad — e.g. see the vast majority of successful African musicians having to earn their bread abroad.

    Why not focus on making the IPR system work better in poor countries? Why is there no discussion here about how IPRs are one of the key determinants of encouraging technology transfer, which most people consider to be critical to supporting economic development? What about making the EIPO–and the many other tentacles of the Ethiopian government–actually accountable to Ethiopians, so that coffee growers could better understand the rights they have to exploit their culture and talent at home and abroad?

    Owen replies: Thanks Alec. Tseday’s point about “stealing” Ethiopia’s coffee is intended to be ironic. Ethiopia developed a way to roast the pods of a plant, grind the roasted beans and make a drink out of it: but they didn’t charge the rest of the world to use that technology. Contrast that with Starbucks who has developed a new way to make instant coffee, called Starbucks Via, which involves a different way to grind beans which Starbucks has protected by patent. Starbucks has over 120 patents. My point is that we use ideas and technologies from developing countries, and we don’t pay for them; but we make sure that is is hard for them to use ours. It is certainly possible that this is part of the reason that poor countries find it harder to close the gap.

    Incidentally, I’m not greatly bothered about the effects of copyright restrictions on music or films. But there are grounds for concern if intellectual property rights protection prevents people in poor countries from having access to life saving medicines, or firms in poor countries from being able to use business processes, software and other industrial technologies that would enable them compete.

    Technology is a public good (in the sense that consumption of knowledge is non rival) and the free market solution is to let it be consumed at marginal cost (namely, zero). But if knowledge were consumed at zero price, there would be no incentive to produce it. So I understand why we have a system of government intervention to encourage innovation in the face of this market failure. But our decision to do this primarily by imposing state-sanctioned and state-protected monopolies is a government interference in the market place that has broader consequences which we should take into account and perhaps find ways to mitigate or avoid.

  4. Owen, how is Starbucks’ patent on Starbucks Via, which isn’t mentioned in your post or in the NYT article that you linked to, preventing Ethiopians from commercialising their well-recognised coffee knowledge and culture? Or even from drinking instant coffee, should they ever want to. (As a coffee snob, I wonder why they would…) I genuinely don’t understand.

    What I think is more important here is that “we” are *under* exploiting knowledge, culture, talent and expertise in poor countries. The lack of protection offered to business plans, ideas, new innovations and creations, etc. that are developed in poor countries is at least part of the reason. It certainly isn’t because people in poor countries are less capable.

    If its owners want to, let’s try to help Kaldis (Kaldi’s?) build its brand (which relies on effective TM protection and a sound legal system) so that it can expand to other parts of the world (to transfer its technology and knowhow elsewhere) so that consumers can begin to develop a greater understanding of how much Ethiopian culture can contribute.

    Btw, if and when you’re in London, let’s have coffee at Monmouth Coffee Company (covent garden or borough market) — cheaper and better in every possible way than Starbucks. They even feature regular varieties of different and delicious Ethiopian beans, although I’m not sure how much of Monmouth’s revenue goes back to the growers, given governemnt restrictions on trading and insecure land rights in Ethiopia.

  5. “One of the unsolved mysteries of development economics is why inequality has grown so much in the twentieth century. Never in the whole of human history has the world been so unequal.”

    You imply that IP protection is the answer, or a major answer, to this mystery. That’s a fairly breath-taking assertion. Most developing countries have adopted IP laws only in the past two decades. Even fewer still enforce them significantly. It’s hard to lay the blame for a phenomenon that stretches across the twentieth century on such a late-arriving institution.

    Moreover, what about the usual list of reasons offered by development economists? Slavery; colonialism; legacy institutions from the colonial power; poor institutions; bad governance; corruption, and so on. I’m sure that as an economist you wouldn’t assert that IP stands out among all those reasons (not without a better worked out empirical or theoretical model), but as a blogger you seem to be doing that.

    Finally, IP rights can have two potential effects in the context of trade and tech transfer: Expanding market power or encouraging dissemination. So says the theoretical and empirical lit, and so says experience. Firms might choose to limit access to maximize profits. They also might choose to enter a market where they felt unsafe before.

    In addition, in most cases, it would seem, IP owners want to trade rather than simply withhold. That’s the benefit of having IP for the owner. Microsoft gains nothing from withholding Excel while twirling its mustache and laughing evilly. Instead, they sell it, often engaging in price discrimination. Or, if they don’t, the software may get pirated and become available anyway.

    Inventions and expressive works that partly embody certain knowledge are protected, in limited ways, by patents and copyrights. (Never the knowledge itself, which is a different matter). Is it really fair to equate limited legal protection for certain specific inventions and expressions with lack of access to knowledge generally? Are we really worse off in this regard than people in the 16th century? How long did knowledge of double book-keeping take to spread? How prone were merchants and guilds to keep innovations like that secret for as long as they could, or to seek royal monopolies (since they lacked any other way to protect it). It seems to me that cheap copies of Excel probably spread much more quickly than double-book keeping. Moreover, Microsoft (nor Lotus, nor Borland, nor Novell) never owned the idea or knowledge of the spreadsheet program. Lots of people have copied and used that idea and knowledge without infringing Microsoft’s very specific property rights.

  6. But aren’t we supposed to live in the age of information abundance? With the spread of information technology, ideas and knowledge seem to be circulating more rapidly than ever. Wouldn’t that mitigate the effects of IPR?

  7. Im sure Tseday Asart’s comment as to Starbucks “stealing” their coffee was meant to be ironic but Im also sure she has not considered Ethiopians ingesting (or earning money growing) corn, tomatoes, chili peppers, potatoes, or tobacco as stealing. I dont consider eating foods that originated in another part of the world as stealing either. Nor do I feel that the indigenous people where these items originated hundreds of years ago deserve any recompense. No more so their descendants.
    Neither do I subscribe to the idea that lesser developed countries have any intrinsic right to patent protected product without paying for the right. In technology there are free alternatives to most software. Visit Buying the sanctioned version of the dominant brand of software is easy and available everywhere in the world. This makes it easier not harder for the lesser developed to close technological gaps but one does have to make an investment. That’s life, that’s business.
    BTW I salute her initiative for making a competitive brand and wish her well in her expansion, perhaps even internationally.

  8. Chang, Rodrick, Stiglitz and others wrote about this subject and there seems to be a consensus that the establishment of the WTO created two constraints (industrial policy and trips). UN(CTAD) talks about ‘policy space’ in this framework. WIPO has also been discussing this issue. Economists talk about ‘cath-up’ growth, indicating that growth in developing countries is mainly learning (i.e. copying) from others. Might I further suggest that the only way to answer the question to what extend ip or industrial policy ‘bind’ is by an analysis of the local situation. My ‘gut-feeling’ is that in very few developing countries ip is a binding contraint, but generally speaking because of TRIPS development is more constrained.

  9. Great article and great story about Kaldis. I hope its true what she said on the radio as that’s funny. To be fair to her, Starbucks got their idea from Italy anyway. Apparently Schultz was inspired after a trip to Milan. So she’s only copying a copy.

    I think part of the problem with poorer societies is that they’re bullied by the richer ones. Great Ethiopian coffee is truly special and the farmers (and their labourers) deserve to be paid a lot more for it. Lets hope in future things change.

  10. Sorry if I repeat something that has been said, I only quickly scanned the comments. I understood that the “coffee stealing” is not only referring to the processing of coffee beans (which might have been done for the first time in Ethiopia) but the marketing of Ethiopian coffee bean names in the US by starbucks. In 2006 Ethiopia applied for the trademark of Sidamo and Harar coffee in the US but Starbucks blocked this.

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  12. There is a small chain of American coffee shops that originated in St. Louis called Kaldi’s, taking its name from that same legendary Ethiopian goat herder. I guess Ms Asrat would say that the American chain stole their name from Ethiopia.

  13. I am Ethiopian, and I don’t think it is helpful to justify her dishonesty. Starbucks did not steal “our coffee”, and as she admitted, she stole their ideas of a coffee shop.  It’s one thing to be a leba, another to be hypocritical.

    It is not “our coffee”…it is a traditional drink that originated in east africa and the middle east that became popular in the west. There are many foods and drinks from Europe and Asia that are popular in Ethiopia as well-it is all about cultural exchange.

    She even “stole” the story of “Kaldi”.. The story does not exist in Ethiopia, it is a Yemeni  fable and the goat herder’s name is not Kaldi, it is Khalid.

    I have been to Kaldi…the coffee and service and ambience was fantastic, better than Starbucks! I’m just saying’……don’t be dishonest.





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