(published in the April 2007 issue of Specialty Coffee Retailer magazine)
“May I have a cup of fair trade coffee, please?”
You may be hearing this request more often from your customers, as the organized human rights and economic movement known as Fair Trade gains awareness in the U.S.
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Many customers are beginning to realize that their morning latte or cappuccino is ultimately coming from small coffee farmers in developing countries who receive prices for their harvest that are less than the costs of production. Usually located in remote areas, these farmers are often forced to sell to local middlemen – known as “coyotes” in Latin America – who pay them a fraction of the market price. Although the world price for coffee usually hovers around $1.00 per pound, most of these small coffee farmers earn less than 50¢ per pound, forcing them into a cycle of debt and poverty.
The Fair Trade coffee movement, begun in the mid-1980s when world coffee prices first began a sharp descent, is designed to create an equitable and fair partnership between buyers and producers in major coffee-growing regions such as Africa, Asia, Mexico, Central America and South America.
“You have to remember what the founders of Fair Trade were responding to 20 years ago,” said Rodney North, spokesperson for Equal Exchange, the oldest and largest for-profit Fair Trade company in the U. S. “They saw that the large profits some people were enjoying in the coffee business were not filtering down to the people who actually produce the world’s coffee; that these small farmers remained as poor as they were 100 years ago.”
“The purpose of the Fair Trade movement is not charity,” agreed Tex Dworkin, spokesperson for Global Exchange, an international rights organization which promotes social, economic and environmental justice around the world. “It’s about ensuring that people are compensated fairly for their work and treated with the respect they deserve.”
The Fair Trade movement actually encompasses much more than just coffee. Fair Trade certification is currently available in the U. S. for coffee, tea, herbs, cocoa, chocolate, fresh fruit (bananas, mango, pineapple and grapes), sugar, rice and spices such as vanilla. But because coffee is one of the three most traded commodities in the world and is vital to many countries’ economies, Fair Trade Certified™ (FTC) coffee is now the fastest- growing segment of the $11 billion U. S. specialty coffee market, according to TransFair USA, a member of the international Fairtrade Labeling Organizations and the only independent third-party certifier of Fair Trade products in the U. S.
Fair Trade basics
The basic principle of Fair Trade is fair pricing – a guaranteed minimum floor price paid to farmers regardless of market fluctuations in the price of the commodity, plus an additional premium for certified organic products. (More than 60% of all Fair Trade coffee is organically grown.)
According to TransFair USA, the minimum Fair Trade price set for most products, including coffee, is intended to cover the cost of sustainable production. For “washed arabica” (the highest quality coffee), the Fair Trade minimum price is currently set at $1.26 per pound, plus 15¢ per pound if the coffee is certified organic. If the world market price rises above this minimum price, the Fair Trade minimum price rises accordingly and becomes the world market price. Importers must also pay an additional 5¢ per pound as a “social premium,” to be spent by cooperatives on community and business development projects.
“Many cooperatives are able to negotiate higher rates for themselves,” said Nicole Chettero, spokesperson for TransFair USA. “For example, although the minimum price for Fair Trade certified organic coffee is $1.41 per pound, the average price paid in 2006 was $1.48 per pound.”
Besides fair pricing, the other Fair Trade principles as established by the Fairtrade Labeling Organizations (FLO) are:
• Fair labor conditions – this includes safe working conditions, adequate living wages, and strict prohibition of forced child labor.
• Direct trade – Fair Trade importers purchase directly from Fair Trade producers as much as possible, eliminating superfluous middlemen and enabling the farmers to develop the business skills necessary to compete in the global marketplace.
• Democratic organizations – Fair Trade farmers are freely allowed to form cooperatives, unions or other groups that decide democratically how to invest their premiums.
• Community development – Fair Trade farmers invest their premiums in social and business development projects such as scholarship programs, healthcare services, and quality improvement training.
• Environmental sustainability – the use of harmful chemicals and genetically modified products are strictly prohibited in favor of environmentally sustainable farming methods that protect farmers’ health and preserve valuable ecosystems for future generations.
“When you buy coffee with the Fair Trade certification label on it,” said Chettero, “it is a guarantee that the coffee was produced according to these criteria.”
Producer groups who wish to become Fair Trade certified must first apply to FLO, a consortium of Fair Trade groups in Japan, Canada, Mexico, Australia, New Zealand, the U. S. and 15 European countries. Once a producer group’s written application is approved, a regionally based FLO inspector visits the group to determine whether it meets Fair Trade criteria. FLO also re-certifies producer groups every year, and reviews financial documents and transactions to cross-check the chain of custody and ensure that premiums are being paid directly to the farmer.
U. S. companies that wish to offer FTC products must purchase from FLO-certified Fair Trade producer groups; pay TransFair USA a per-pound fee for certification; regularly report purchases and sales of Fair Trade certified products; and sign a licensing agreement and letter of intent with TransFair USA. TransFair also encourages U. S. companies to commit converting at least 5% of their total purchase volume to FTC products within the first two years of launching labeled products.
Fair Trade benefits
Since 1999, when it began certifying products, TransFair USA estimates that 1.5 million farmers and workers in Latin America, Asia, and Africa have gained social and environmental benefits from Fair Trade practices. The number of people helped by Fair Trade increases to about 5 million, said Chettero, when the family members of all of those workers are considered.
“When farmers receive a fair price for their product, they can afford to feed their families and put their children through school instead of putting them to work in the fields,” she said.
Examples of the social benefits that have resulted from the economic stability provided by Fair Trade practices include:
• the successful prevention of the cultivation of more than 1,600 acres of coca and poppy used to produce illicit drugs in Colombia
• the establishment of a women’s reproductive health program in Nicaragua
• the formation of a fund that sends local kids in the highlands of Guatemala to college for the first time.
Environmental benefits resulting from participation in Fair Trade practices include:
• soil and water conservation through composting, terracing, and reforestation
• the preservation of crucial habitats for wildlife by growing coffee under the shade of natural forest canopy
• the elimination of pesticides and other harmful chemicals through the use of organic growing methods.
“The benefits derived from Fair Trade go above and beyond a fair price,” said Chettero. “We’ve even found that domestic violence goes down because of better communication and improved financial security. Some cooperatives even specifically prohibit spousal abuse. In the end, it’s all about personal empowerment and overall community well-being.”
Fair Trade and the coffee retail industry
Has increased consumer awareness of the Fair Trade movement led to an increase in coffee retailers who are offering FTC brews?
“Absolutely,” said Chettero. “Fair Trade coffee sales have more than doubled in the past two years, with retail sales growing from less than $50 million in 2000 to nearly $500 million in 2005. As consumers become more aware of the origins of their food, they also become more concerned about the working conditions of the people who produce it and its environmental impact. They demand change with their dollars.”
According to TransFair USA, this increased demand has led to more than 250 companies offering FTC coffee in over 20,000 retail outlets across the country, including Safeway, Trader Joe’s, Wild Oats, Whole Foods, Albertson’s, Publix, Harris Teeter, and numerous national café chains such as Dunkin Donuts and Starbucks.
Although some organizations accuse the Starbucks chain of making only a token effort toward Fair Trade, Chettero said that Starbucks is actually the single largest importer of FTC coffee in terms of volume (11.5 million pounds in 2005). According to TransFair USA, more than 3.7% of all Starbucks coffee is Fair Trade certified (this includes Costco’s Kirkland Signature brand, which is roasted by Starbucks, as well as Starbucks’ own Café Estima™ blend). That percentage is up from less than 1% when the chain introduced it in 2000.
Other large-volume retailers are also getting into the act. In 2005, fast-food giant McDonald’s Corp. began selling organic Fair Trade coffee in 658 outlets throughout New England and the Albany, NY area.
Most coffee retailers consider offering Fair Trade brews a good business decision. Besides tapping into increased customer demand, they also find Fair Trade coffee to be of high quality and taste. More than 80% of Fair Trade coffee in the U. S. is shade-grown, which allows the coffee bean to develop more natural sugar, less caffeine, and better flavor by slowing down the maturation process. This leads to Fair Trade coffee being consistently ranked high for taste by Coffee Review, the leading coffee buying guide.
These benefits do not necessarily come at a higher price for either retailers or consumers. Because Fair Trade shortens the distance between producer and buyer, and eliminates the large percentage taken by middlemen, most experts say that the price of Fair Trade coffee is comparable to other specialty coffees.
“A 12-ounce bag of certified organic Free Trade coffee priced at $7.99 is comparable to a bag of gourmet coffee that you can find at any local supermarket,” said Dworkin. “And as any economics professor can tell you, if the demand increases the price will go down.”
Retailers can help increase demand for their Fair Trade coffee by marketing it prominently with educational posters, brochures, and point-of-purchase items, and by displaying it along with main-stream products instead of relegating it to a “specialty” section, experts say.
The future of Fair Trade
Most organizations involved in the Fair Trade coffee movement devote much of their efforts to increasing consumer awareness. Consumer education runs the gamut from grass-roots efforts to organization-sponsored experiences such as farmer visits to large-scale events such as Fair Trade Month, sponsored by TransFair USA every October. In 2006, more than 9,700 U. S. retail locations participated in Fair Trade Month promotions.
Oxfam America, a non-profit affiliate of Oxfam International that works to end global poverty, has an extensive outreach program for Fair Trade, according to Shayna Harris, Coffee Program Organizer. One of its newest campaigns involves having student groups or community organizations adopt a local grocery store, develop a relationship with the store manager, and encourage them to carry Free Trade products. Oxfam America is also promoting the recently-released documentary film Black Gold, which follows the efforts of an Ethiopian coffee cooperative manager to find a better price for his farmers’ coffee.
Lutheran World Relief, a Christian organization that works with partners in 35 countries to combat the causes of poverty, has been promoting Fair Trade coffee since 1986 through Equal Exchange, according to Kattie Somerfeld, Fair Trade Project Coordinator. In 2003, Lutheran World Relief partnered with the Women of Evangelical Lutheran Churches in America and challenged them to double the amount of Fair Trade coffee their individual parishes purchased, from 45 to 90 tons. The group exceeded the challenge by ultimately buying 99 tons. Purchases have continued to increase every year, to 140 tons in 2005.
Many of these organizations find that increased awareness of the Fair Trade coffee movement leads to consumer discovery of other Fair Trade products made by small-scale artisans such as crafts, clothing, textiles, furniture, jewelry, and ceramics.
“We find that many people first discover Fair Trade through their coffee cup, but then realize that it can manifest itself through many other consumer choices,” said Carmen Iezzi, executive director of the Fair Trade Federation. “We would like to educate as many consumers as possible and let them know there is a Fair Trade alternative to almost everything they buy.”
