Fair Trade Roadmap

Our commitment to Fair Trade is an important part of how we do business. In this section we'll walk you through a quick Fair Trade Roadmap. First, we'll look at the nuts and bolts of Fair Trade, how it works and how it compares with "business as usual". Next we'll introduce you to the "Great Pretenders" - companies that use Fair Trade to capture a market niche without making any serious ethical commitment to the farmers. Finally, we'll show you how we're raising the bar on Fair Trade and corporate integrity.

Sounds exciting, doesn't it? Let's go!

• How Fair Trade Works
• How Can I Be Sure it's Really Fair Trade?
• Enter the Marketers
• Complain, Complain, So What are You Gonna Do About It, Mister Coffee?
• See Our Fair Trade Audit

How Fair Trade Works

Coffee prices paid to the farmer are based on the international commodity price for coffee (the "C" price) and the quality premium each farmer negotiates. Fair Trade provides an internationally determined minimum floor price when the C plus premium sinks below $1.26 per pound for conventional and $1.41 for organics (that's us!). Three years ago, two major factors coalesced to clobber the boringly stable C price - the flooding of the market with cheap Vietnamese coffee and the discovery by financial speculators of a newly "free market" liberalized coffee market. As a result, the C price fluctuated wildly for a year, then dropped from an all time high of over two dollars for a pound of green coffee to a low of thirty cents. Consequently, the majority of the world's farmers have been unable to recover the cost of production, driving millions off the land and unable to adequately feed their kids. So while other roasters and importers have paid as low as .30/lb., we won't go below $1.41.

As important as price, Fair Trade works with small farmers to create democratic cooperatives that insure fair dealing, accountability and transparency in trade transactions. In an industry where the farmer is traditionally ripped off by a host of middlemen, this is tremendously important. Cooperatives are examined by the Fairtrade Labeling Organization (FLO), or the International Fair Trade Association (IFAT), European NGOs, for democratic process and transparency. Those that pass are listed on the FLO Registry or become IFAT members. Cooperatives provide important resources and organization to small farmers in the form of technical assistance for crop and harvest improvement, efficiencies in processing and shipping, strength in negotiation and an array of needed social services, such as health care and credit. The down side of this is that many decent, well-run small farms that are not members of coops are left out of the formal Fair Trade system. But like I always say at the conferences, if you like the farm and you care about the issues, just pay the price anyway!

Fair Trade also requires prefinancing of up to sixty percent of the value of the contract, if the farmers ask for it. Several groups, such as Ecologic and Green Development Fund have created funds for prefinance lending. We have been able to prefinance about half of our contracts (with Cooperative Coffees and Royal Coffee) working with these excellent groups. Unfortunately, it is rare that a contract in the mainstream gets prefinanced, as most importers don't want to put the money up front and take the risk of loss, and some farmers are afraid to ask for fear of losing the sale. Also, let's be frank; who likes to pay for something before receiving it anyway? So the conceptual resistance to prefinancing is understandable, if you're only thinking about your own pocket.

How Can I Be Sure it's Really Fair Trade?

With all the corporate hype, it can be challenging to know what's really behind the claims on the packages or in the ads. There are only two ways to know that the particular coffee you are drinking is Fair Trade. First, if the package contains a Fair Trade Certified logo from Transfair USA. This organization certifies coffee transactions, not companies. So if you see the Transfair logo on a coffee, you can be sure that the company paid a Fair Trade price for that batch. It doesn't mean that the company is committed to Fair Trade, has prefinanced anything, has a long term relationship with that farm group or any of the other, deeper commitments of Fair Trade, regardless of the generalized language several Transfair licensees use to describe Fair Trade, and (by association) their own practices. But at least the farmers got a Fair Trade price for that coffee. The second way to be assured that Fair Trade and even broader trade justice practices are undertaken is if the company is a member of the Fair Trade Federation (FTF). FTF coffee members are committed to being 100% Fair Trade, as well as incorporating a host of social and economic justice principles and practices into their businesses.

Enter the Marketers

"Yes, I'm the Great Pretender" (apologies to Elvis)

There are less than a dozen of us 100% Fair Trade coffee companies in the USA. The other two hundred plus companies that participate at all range from a measly half-percent (Seattle's Best), one percent (Starbucks), twelve to twenty-four percent (Green Mountain - we can't get accurate figures from the company) and so on. Many smaller companies are about fifty percent and thinking about larger commitments. Most of the Big Boys, however, have turned Fair Trade over to their marketing departments. So, instead of seeing the need to pay all farmers a living wage because it is ethical and good for business in the long run, these companies are limiting Fair Trade to just another offering ("Today we have Colombian, Hazelnut and Fair Trade"). At the same time, many of these companies are doing the marketing blitz, placing glitzy ads in magazines expounding their friendliness to farmers with their Fair Trade coffees - but conveniently neglecting to tell consumers that they are only one or ten percent Fair Trade. These companies never tell you about the other ninety percent of the farmers that they are pushing deeper into poverty every day while raking in the highest profits they've ever seen. Recently, Time Magazine did a big piece on Fair Trade, highlighting one of those companies that speaks so profoundly about the importance of Fair Trade (guess they forgot to tell the reporter that they only pay Fair Trade prices to twelve out of every hundred farmers they buy from).

Please don't get me wrong. I am a believer in making money, just not at the expense of children's health and a community's viability. Is there a correlation between the abysmally low price paid to farmers and the astronomical profits of the Big Boys since the crisis began? Hello? Could it be because they are only paying the farmers about half of what they used to pay but haven't lowered their prices to consumers? Does the word GREED have any application here? You be the judge, I'll just keep being 100% and sleep well at night.

Another hidden irony of Fair Trade is that the current Fair Trade price is still about forty cents per pound lower than the market price we all paid for coffee three years ago - and even then we were all profitable. So why are companies so resistant to paying farmers enough to stay afloat when its so much less than they willingly paid three years ago? Five letters, starts with a "G".

It's important to remember that Fair Trade is an economic agreement, it's not a type of coffee. Often, the Big Boys say there's not enough Fair Trade coffee out there. To quote Ronald Reagan, "There you go again!" There's literally tons of available Fair Trade registered coffee out there. Last year less than twenty percent of the Fair Trade eligible coffee was sold that way - if nobody buys it at Fair Trade prices it gets sold as conventional. The Big Boys simply choose not to pay the price for it - then they claim it isn't available. In addition, brokers often bring in containers at conventional prices and then sell them at Fair Trade prices if they can, returning the difference to the farmers. This is called retro-certifying. Until it actually gets sold Fair Trade, it is reported as conventional, so the Big Boys can claim there ain't none out there.

I have also called for two years for Transfair USA, one of the certifiers of Fair Trade transactions, to reveal the percentage of Fair Trade beans each licensee buys. That way, customers can have real information about what they are buying and can make their own choice as to whether to support a company or not. Absolutely not, cries Transfair, that's a corporate secret! What's so secret about what percentage a company is? Unless, of course, the company doesn't want you to know the truth, and would rather leave you with a marketing perception that they are all fair trade and socially responsible. And whatever happened to transparency and accountability, the hallmarks of Fair Trade? I guess it's O.K. to mandate that the farmers open their books to us on demand, just don't ask us to do the same. I once sat in an audience listening to an august panel of "fair trade" companies talking about how important Fair Trade was and their sincere commitment to it. I politely asked each panelist to tell us what percentage of their purchases were Fair Trade. You would have thought I had put habaneros in their hot tubs! They each sputtered and mumbled something about sort of ten, err fifteen percent, err, "I don't have those figures with me". I don't get invited to those forums very much anymore. If I hadn't asked that question, we all would have gone away with the impression that those companies were all about Fair Trade, instead of having made a marketing platform out of it.

Complain, Complain, So What are You Gonna Do About It, Mister Coffee?

See our Fair Trade Audit

I know, I know. Anybody can take potshots at easy targets like those greedy Big Boys. So let's model some appropriate behavior here. In response to the corporate marketing hype that is already capturing part of Fair Trade here in the USA, we decided to raise the bar on how Fair Trade was done. As of January 1, 2004 we committed ourselves to the following program:

• All purchases from certified organic FLO cooperatives.
• All purchases at or above international Fair Trade price.
• Prefinancing whenever financially possible.
• Additional six cent/lb Social Equity Premium paid to farmers for distribution, development, internal expenses, or however they choose to use funds.
• An independent, public audit by Quality Assurance International of our Fair Trade practices, to be posted right here for all to see!

This is a simple, accountable program that allows any consumer or farmer to check out our claims. So jump right in and use the above links to follow the Fair Trade Roadmap. We hope that other companies will follow our lead, step up to the bar, and give out meaningful, real-world information backing up their claims to social responsibility and equitable trade relationships. We believe that the farmer deserves the money and the consumer deserves the truth - at that point, the choice is yours.