Storm in a Coffee Cup

The Starbucks International chain of coffee shops has been waging a months-long war against an e-mail campaign calling on consumers to boycott the company because it bowed to pressure and closed its Israeli branches, rather than face a possible Arab boycott.

According to Starbucks founder and chairman, Howard Schultz, the effect of the rumor took even him by surprise. "At the time, we underestimated the reaction we would get," said Schultz, who is both Jewish and a vocal supporter of Israel.

The e-mail message - entitled "Starbucks vs. Israel" - was distributed among members of the U.S. Jewish community and claimed that Starbucks is "stopping business relations with Israel, because like so many companies, people and leaders in the world, they do not have the moral values or courage needed to do otherwise. Add this to the fact that Starbucks does tons of business in Lebanon, Saudi Arabia, Qatar, as well as other radical Arab countries who are working to destroy America. Starbucks has chosen. NOW is the time for us to choose to boycott. Let's call on everyone we can to boycott Starbucks."

But Starbucks insists that the only reason it closed its Israeli operation was economic, stemming from the recession here and the failure to capture a significant proportion of the local market.

Starbucks was established in 1971, with the first branch opening in a Seattle market. In 1992, the company was floated on Wall Street and now has 6,294 branches worldwide.

In April 2001, Starbucks Coffee International, a wholly owned subsidiary of Starbucks Coffee Company, signed a deal with Delek Group to establish the Shalom Coffee Co., which would set up and run some 70 branches of the coffee house in Israel. Starbucks held 19.5 percent of the joint venture and Delek held 80.5 percent.

In practice, the company only managed to open six branches, in Tel Aviv, Kfar Sava and Herzliya. The joint management of the company was reshuffled several times during the time it was operational, changing its corporate strategy on each occasion.

Shutting up shop

In April 2003, Delek announced that it would be closing the six branches almost immediately, firing some 120 employees and writing off its $7 million investment in the project.

In a statement, Starbucks said its decision to dissolve the joint venture was driven by "market challenges."

"It was a very difficult decision," said Mark McKeon, president of Starbucks Coffee International for Europe, Middle East and Africa. "Our commitment in the [Israeli] market continues to be strong and long-term and we will return at an appropriate time."

This did little to help the company combat the effect of the e-mail campaign, which claimed unequivocally that the real reason was political.

ADL gets involved

When the rumor first surfaced, Starbucks opted not to respond, in the mistaken belief that the rumor would simply disappear. Several weeks later, the Anti-Defamation League (ADL) contacted the company's Seattle headquarters, to see if there was any truth in the rumor.

After being convinced that the claim was false, the ADL contacted Jewish organizations to pass on the message: the anti-Starbucks campaign was unfounded, aimed at damaging the chain's reputation.

Boycott campaigns disseminated via the Internet, which have become increasingly common in recent years, are doubly effective. The recipient is more likely to accept the contents of the message as true and authentic, since it is usually sent by a friend. In addition, the ease with which these messages are distributed makes it possible to reach hundreds of thousands of people within a few hours.

Israel has also seen its share of Internet rumors, including rumors of the events in the Jenin refugee camp during last year's Operation Defensive Shield, the return of missing airman Ron Arad, and a reported extramarital affair between two local celebrities.

Starbucks is just one of the dozens of companies hit by false Internet rumors. In 1997, there were rumors that baby-food manufacturer Gerber had lost a lawsuit, since it was unable to prove that its products were made from all-natural ingredients. An e-mail distributed worldwide called on consumers to contact the company and to demand $500 compensation, as part of an out-of-court settlement.

Even the largest manufacturer of household cleaning and hygiene products, Proctor and Gamble, is not immune. In the 1970s, there were persistent rumors that the company was connected to a devil-worshiping sect.

Claims of anti-Israel bias have also been levied against McDonald's, which was rumored some two years ago to be contributing 30 percent of its income to Palestinian groups.