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Fair Trade for who?

by Repost Friday, May. 12, 2006 at 7:39 AM

by Steve Leighton A counter view to the Fair Trade Debate

Fair Trade for who?...
cherry_1_.jpg, image/jpeg, 200x150

This article discusses and investigates what fair trade is, what I don’t like about it and the alternatives that exist. Has Bean made a bold statement in 2002, to no longer stock any Fairtrade products. This hurt us financially and meant that some of our customers went elsewhere. I make no apologies for my position on this and will use the following article to explain why, and how these decisions were made.

To start off, I’m not an evil capitalist that believes farmers should be suppressed so that coffee roasters can make all the money from coffee. The only way the speciality market can possibly grow and succeed is via sustainable methods, rewarding coffee farmers for the hard work they put in. The current market situation (which has lasted for many, many, decades) is very much stacked against the coffee farmer, and always has been. Anything that can redress this situation has to be a good thing. However, “fair trade” is not the only solution, and there are many ways this can be achieved in a just manner. “Fair trade” has been the focus of many positive articles (to the detriment of other approaches), so I hope this text will correct the balance a little, and highlight other ways that sustainability can be achieved.

The idea of a fair price for a farmer, so that he can have a degree of quality of life and a just reward for his efforts, is a very basic idea, and I struggle to think of a way any other model of supply can function and survive. For instance, in business, if a trader cannot cover costs, then it’s only a matter of time until the bank forecloses and the business is no more. This happens every day all around the world, but we need to look at why this happens. For example, the trader has a product no one will pay the wholesale price for, or, his product is not of a high enough quality to satisfy the market place. Now, comparing this to the coffee market place, for years coffee buyers were not interested in quality (and many of the big multi-national companies still aren’t) therefore buying was solely price-driven, which always leads to a drop in quality. The emergence, in the early nineteen-eighties, of the speciality market, consisting of small roasters selling a high quality product, gave growers the chance to raise their standards, consequently raising the price of their coffee within the market place. Gourmet buyers will not buy poor quality.

The coffee market has also long been a reactive market; when prices are high, every piece of available land has a coffee plant on it, but when prices are low farms disappear along with the coffee, this in turn raises prices as beans become scarce, resulting in re-planting (you get the picture). For a coffee plant to be suitable for harvesting requires around 4 years from seedling to mature plant. So it’s easy to see why the market fluctuates so much, as there is a four year gap before changes are fully appreciated. The coffee-growing countries have tried and failed to work together, holding back crops to raise prices, but when harvests eventually hit the market a downturn in price always occurs. This leads to the whole boom and bust cycle that has been such a feature of the coffee market for many years.

Fairtrade entered the market with very bold intentions in 1986. It was at a time when farmers were particularly down-trodden and suffering from very low prices. I’m sure in the early days there were people running the organisation allied to an admirable plan. But with success comes a degree of corporate characteristics, and the initial focus is often lost. Does the farmer need a full-page advertisement in the Sunday Times Magazine (which, trust me, is VERY expensive)? Does he need an army of administrative staff based in a swanky London office (or many other expensive cities around the world)? “Fairly traded” produce has the ability to sell itself on its own merit and doesn't need all these things.

The final thing that made me decide Fairtrade had lost their way was when, in 2002-2003, the Fairtrade organisation decided that, in order to sell more products, they needed to change the logo. Now this in itself doesn’t sound that bad. Not until you look at the amount of money involved, which (I’m reliably informed by someone who worked very closely with Fairtrade) was in the region of one million pounds. Now not all, but a rather large chunk, was spent on advertising in the newspapers and magazines, and the rest on administration costs (letterheads, corporate image etc.). In my opinion, the new logo could have been introduced without publicity, or better yet, if the old logo had been kept, then the one million pounds could have been given direct to the farmers, either would have been a better way of spending such an amount of money.

A recent article in the Spectator (5th November 2005) explains further. Calculating that, in general (and being generous), the fair trade farmer gets 12p extra for a Fairtrade pack of coffee, compared to a standard, commercial brand. However, the price on the pack in Sainsbury's is around 75p more than their own brand offerings Resulting in a small reward for the farmer from the supermarkets, but a large return for the supermarkets hitting the guilt strings of its customers. Consequently, it is the very people that drive prices down on many items (to a degree that makes it difficult to make a decent living) who are making the consumer feel guilty, whilst increasing their profit margins? This is a perverse situation to say the least.

The Spectator article continues, discussing Percol, one of the “fair trade” pioneers. Brian Chapman is the sole owner of FoodBrand group limited, the owner of the Percol brand, and who made a name for himself, and his company, through the Fairtrade brand. A true story of taking on the big boys and becoming one himself, and lots of this is due to his determination to introduce “fair trade.” It is reported that he has paid himself in between 1.5-2 million pounds over the last two years. Now, he is very much entitled to do this, and that is part of what running a successful business is all about. But I think its important to not become too self righteous, believing that “fair trade” is the only way the farmer can get a good deal. When in reality some people in western countriesare getting a much fairer deal from the Fairtrade brand than those for which it is intended.

Something which amazes me is that the very people who created a need for “fair trade” (the big conglomerate roasters) are those who now use the brand as a stick with which to beat the consumer. Starbucks, for example, charge 10 times the amount they pay the farmer for their “fair trade” beans. They claim to be all about sustainability and partnerships, but only 1.6% of their total sales of coffee beans are “fair trade.” The Fairtrade brand is also used to further important public relations, when the vast majority of output is the product of some of the cheapest, poorest quality, and most unfair treatment for farmers to be found. If these conglomerate roasters had not driven down the prices in the first place, then prices now would be much fairer and there would be no need for “fair trade.”

The beans offered by Fairtrade are often far from being the best available (as an importer recently told me, they are sometimes, completely by accident, actually quite good, but rarely by design). So the roaster and the consumer pay a small premium (and indeed it is a very small premium, as the farmer only gets figures of little more than 1.26 USD a lb*1) for a lower quality cup. In recent months the New York Coffee Market price (this is the price which dictates the commercial grade market) rose above that of the Fairtrade price, and many of the contracts were not honoured by farmers, but sold on the open market instead. In contrast, one of my importers told me that, during this same period, none of his contracts were broken (as they were all above the market price and because these are relationships based on a quality which is worth more than mere USD’s).

A product that has no quality checks at any point of the process, and demands a premium from the importer and consumer, is a strange concept for me, and I know of no other area where this happens. Rather than using a model based on quality which warrants a premium according to its merits. I have seen this happen with the products that we sell. If something is good, people will pay (you only have to look at Hawaiian Kona and our cup of excellence coffee's to appreciate the prices superior quality coffee can fetch).

Fairtrade places in the consumer’s mind the idea that only coffees with the Fairtrade brand have been fairly traded. As a general rule, speciality coffee fetches a premium price within the market place, and as this premium is passed on to the farmer it is a good means of trading fairly, but without the ads and the offices. Relationships are built and maintained with quality importers. Cutting out the futures market can be one of the easiest ways to make sure the farmer and the roaster (and ultimately the consumer) both get a great deal. Paying the money directly to the farmer means everyone benefits. An issue recently brought to my attention by a member of the trade, is that the commodity markets are the seller’s and buyer’s last resort. Coffees that end up on the commodity market are the surplus of over-production, beans which just aren’t good enough to sell to the speciality market (believe me if they could, they would sell to the speciality market, as this can mean as much as double the price). Also, the market prices are set by those who buy many thousands and even hundreds of thousands of kilos at a time (again, this means the big roasters who use the Fairtrade brand for PR). The micro roaster has no interest in these markets, which are home to the soulless banks and corporations whose only concern is profit.

So what are the alternatives?

“Cup Of Excellence”

Has Bean are big supporters of the Cup of Excellence Bullet7 and these coffees command a real premium for quality (as much as 20 times the commercial grade market price). It encourages the farmer to raise his standards and quality, in order to get a better price and provide the consumer with a better cup, it’s a win-win situation. Recently we paid a farmer USD16.30 a lb*1 for a “Cup of Excellence” coffee, when the market was at around USD1.15 a lb*1. So is our coffee Fairtrade? No. Is it “fairly traded” (ie. does every one involved get a good deal)? Yes! These coffees go through a very specific selection process, blind cupped by farmers, to find the best offering to present to the international jury (all transparently audited to ensure no foul play. Then the world’s best cuppers are assembled at the origin where they spend a whole week evaluating the coffees and ranking them, until only the very best are presented for auction. The other benefit of this approach is the opportunity for roaster and farmer to come together, to discuss the results and work together to find the best product for the consumer. This is unique way of finding great coffee and building long term relationships with roasters and farmers. The auction process allows truly great prices to be reached (again transparently monitored and audited to make sure no foul play goes on).

“Relationship” coffees

Importers deal direct with farmers or co-operatives in order to cut the whole ‘C’ market out of the money equation, resulting in speciality coffee prices. These coffees have to meet very strict quality guidelines (for which they are given training and are helped to obtain by the organisers of the relationship). This is important in order to guarantee that there is a direct connection between price and quality.

“Speciality” Coffee

This might seem strange, but ordinary speciality coffee already has a premium attached to it. It’s more of a gourmet item, so the farmer gets more in return; the importers and roasters are willing to pay more as the consumer is willing to pay a higher price for a gourmet product. We use importers who we trust, who have relationships with farms and farmers (I’ve been to cuppings where I have met the very farmers who were more than pleased to be involved in such a process). By working on a trust basis, I know that the whole chain is getting a fair deal.

So in conclusion!

Just because it doesn’t say “fair trade,” doesn’t mean it’s not fairly traded. It’s always worth asking your roaster their standpoint on price, their thoughts on sustainability and their relationship with the importers and farmers. Don’t be fooled into believing that the only fair deals are done under the “Fairtrade” label. If you really want to take an interest in your coffee, make sure that the price you are paying represents a fair deal for all involved and helps to create a high quality, sustainable product.

*1 FOB Prices

Disclaimer: Has Bean Coffee Limited does not warrant, guarantee, undertake, or make any representations regarding the accuracy, reliability, completeness or correctness of this article. All remarks made are that of an individual point of view and in no way represent the opinion of Has Bean Coffee Limited. All information provided is accurate to the best of the writer’s knowledge. Reproduction only with prior permission from Has Bean Coffee Limited.

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