In March, Corporate Integrity Project Director Paul Chesser presented a “Communist China Audit” proposal at Starbucks Corporation‘s annual shareholder meeting, which asked the company to produce a report that addresses its vulnerabilities related to its business and ambitious expansion plans in the communist country.
The proposal stated:
Starbucks has 5,400 stores in over 200 cities across China, and relies on raw materials, finished products, labor and/or services from entities in the communist nation. China is an established serial violator of human and political rights. China is also a hostile adversary of the U.S. for many reasons, including:
- China intends to displace the U.S. as the lone global superpower by 2049;
- The U.S. has committed to defend Taiwan, which China has militaristically asserted is part of its country and may attempt to seize by force;
- U.S.-China relations are tense over a number of issues including China’s military expansion; egregious human rights violations; actions related to the COVID pandemic; intellectual property theft; relentless espionage; elimination of freedom in Hong Kong; and environmental pollution.
China has also indicated that it would use its industrial capabilities for strategic purposes against adversaries…
China – and by extension the companies it controls – is also identified in the U.S. State Department’s 2022 Trafficking in Persons Report as a state sponsor of human trafficking. It is now subject to the Uyghur Forced Labor Prevention Act, which imposes strict verification of parts and products imported from China, that they are not generated from slave labor.
Rather than proceed with caution, however, Starbucks has doubled down on its Chinese revenue dependence, according to its latest reported earnings. According to CNN:
In the three months ending on July 2, sales at Chinese locations open at least 13 months spiked 46% year-over-year, the company said Tuesday.
Meanwhile, the firm’s North American sales growth has slowed. Per the Associated Press:
North American same-store sales growth slowed to 7% after three quarters of double-digit gains. Customers paid more for their drinks and food, and revenue rose 11% to a record $6.7 billion for the region. But customer traffic was up just 1%.
Starbucks has put its financial performance and brand value at risk by engaging in business with the Chinese Communist Party. National Legal and Policy Center filed with the Securities and Exchange Commission a Notice of Exempt Solicitation (NES) in support of the proposal it presented in March. As outlined in the NES:
Russia’s invasion of Ukraine in early 2022 provides recent evidence of how damaging a regional conflict can be. The loss of human life and the need for humanitarian assistance are, of course, the foremost concerns. However, these events also provide recent evidence of how quickly a regional conflict can shut off revenue in the affected region. Boeing lost 90 jet orders. McDonald’s shut down 850 locations in Russia, where it derived 9 percent of its annual revenue. BP took a $24-billion write-down from exiting Russia.
Compared to the companies mentioned above, Starbucks’s reliance on China, Japan, and the rest of Asia Pacific is substantially larger as a percentage of overall revenue. Starbucks’s vulnerability to disruption from China’s stated goal of “reunification” with Taiwan requires immediate and transparent analysis.
Instead, Starbucks opposed our proposal, as explained on pages 79 of the company’s proxy statement. The firm’s continued reliance on Communist China leaves shareholders exposed to a laundry list of potential market value destroying events.
