Changing the World Cup by Cup

The journey, progress and future of fair-trade coffee

By Karen Meyer

“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 United States.

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 per pound, most of these small coffee farmers earn less than 50 cents 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.

Coffee is seen here growing within a diverse forest ecosystem under the shade canopy. Photo courtesy of CECOCAFEN

“You have to remember what the founders of fair trade were responding to 20 years ago,” explains Rodney North, spokesperson for Equal Exchange, the oldest and largest for-profit, fair-trade company in the United States. “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,” agrees Tex Dworkin, spokesman 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 United States for coffee, tea, herbs, cocoa, chocolate, fresh fruit (bananas, mangos, pineapples and grapes), sugar, rice and spices. Because coffee is one of the three most-traded commodities in the world and is vital to many countries’ economies, Fair Trade Certified™ coffee (FTC) 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 (FLO) and the only independent third-party certifier of fair-trade products in the United States.

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 percent of all fair-trade coffee is organically grown.)

Dona Yoli dries coffee on her patio in Veracruz for the Coyutla Cooperative. Photo courtesy of Tommy Bassett

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 cents 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 five cents 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,” says Nicole Chettero, spokeswoman 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 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 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,” says 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 United States 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.

Godnice Lema, a coffee farmer from Tanzania, is picking her shade-grown, fair-trade coffee. Photo courtesy of Lutheran World Relief

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 to converting at least 5 percent of their total purchase volume to FTC products within the first two years of launching labeled products.

Although some critics accuse the fair-trade model of encouraging over-production, North says this is actually a misapplication of the economics adage that higher prices lead to higher supply. “This is only true if there are higher prices across the board,” he continues. “The typical coffee producer group currently only sells a fraction of its total harvest on fair-trade terms, simply because there are a limited number of fair-trade operators. The rest of their harvest is sold on the conventional market. Since there is no guaranteed high price for their total production, there is no incentive for them to over-produce.”

North says the same misunderstanding is true of the common criticism that the fair-trade model does not guarantee quality. “There is nothing about French roast coffee or Mexican coffee or organic coffee that guarantees quality, either,” he says. “Yet we all know there are high-quality French roast and Mexican and organic coffees. Fair-trade coffee cooperatives and roasters have to meet the same quality standards as all of their competitors. And which coffee farmer is better equipped to provide quality coffee beans—the one receiving the higher fair-trade price, or the one receiving 20 to 30 percent less on the conventional market?”

Jesus Choqueheranca de Quevero is a member of the CEPICAFE farmer co-op, Peru, and a supplier of organic coffee to Equal Exchange, a fair-trade worker co-op. Photo courtesy of Equal Exchange

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, explains 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 says.

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 a 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,” says 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 retail coffee industry
Has increased consumer awareness of the fair-trade movement led to an increase in coffee retailers who are offering FTC brews?

Photos courtesy of Oxfam America

“Absolutely,” says 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 fair-trade coffee in more than 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 says that Starbucks is actually the single largest importer of fair-trade coffee in terms of volume (11.5 million pounds in 2005). According to TransFair USA, more than 3.7 percent 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 percent 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, N.Y., area.

Many 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 percent of fair-trade coffee in the United States 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.

El Aguila coffee pergamino waits for the retrilla in Salvador Urbina prior to export to the USA. Photo courtesy of Tommy Bassett

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-oz. bag of certified organic, fair-trade coffee priced at $7.99 is comparable to a bag of gourmet coffee that you can find at any local supermarket,” says 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 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, works to end global poverty and 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 fair-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,” says 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.”