Fair Trade News

October 20th, 2006 | Seattle Times
by Melissa Allison
Seattle Times business reporter


Fair-trade coffee begins to heat up mainstream market

For all the buzz about the importance of buying fair-trade coffee, it represents only 2.2 percent of beans sold in the United States.

It has been a phenomenon of the specialty-coffee market, where better quality brew tends to sell at higher prices. That category includes Starbucks, which says it's the largest purchaser of fair-trade coffee in North America.

The fair-trade concept aims to lift farmers out of poverty, and it appeals to young and higher-income coffee drinkers, said Marcia Mogelonsky, a senior analyst at the market-research firm Mintel International Group in Chicago.

The logo has begun appearing in mainstream outlets as well, including grocery stores, some McDonald's and Dunkin' Donuts.

"It's one thing when Starbucks has it, but when you see Dunkin' have that sticker on their door, it means it's made the mainstream," said Carol Cone, chairwoman of Cone, a Boston-based strategy and marketing firm that specializes in branding for causes.

If she's right, it could mean a better life for people like Marcial Garcia, who owns a 16-acre coffee farm in northern Nicaragua. The certifying group TransFair USA brought Garcia to Seattle last week to spread the word about fair trade.

Only about half of Garcia's crop is sold at fair-trade prices because of low demand.

At fair-trade prices, coffee brings in 5 cents more per pound than at conventional prices, with a minimum of $1.26 a pound for nonorganic beans and $1.41 a pound for organic beans.

For Garcia, the better prices mean he can afford shoes and high-school educations for his three daughters, a concrete floor over the old dirt one in his home and better nutrition for his family.

"Now we have more clothes, shoes and socks, and we can buy a little bit of cheese," he said through a translator at PCC Natural Markets in Fremont. Garcia's other stops included Caffee Ladro, the University of Washington and Starbucks headquarters.

Coffee peddlers say fair-trade coffee is gaining momentum.

Tony's Coffee, a Seattle-based roasting company that sells nationwide, saw its sales of fair-trade coffee double six times in the past five years, said sales manager Darryl Miller.

"We were attracted to the fair-trade model because we believe it's what's right," he said. "We market ourselves that way, and people are drawn to it."

Customers of PCC Natural Markets responded well when the company began carrying only fair-trade coffee beans a couple of years ago, even though it meant a 10 to 15 percent price increase.

Stephanie Steiner, PCC's headquarters grocery buyer, thinks customers probably assumed they were getting only fair-trade beans all along.

"It's quite possible they associated the fair-trade message with all the coffee," she said. "People don't have a natural internal conversation about 'If I buy this coffee, I'm supporting poverty, and if I buy this, I'm supporting the end of poverty.' "

By stocking only organic, fair-trade and shade-grown beans, PCC takes some of the complexity out of shopping, she said.

Starbucks believes it is doing the same thing with a program called C.A.F.E. Practices, which requires that farmers meet certain standards for quality and that any middlemen pass the higher prices on to growers.

After that, the price varies, with more money going to those who meet stricter standards for social and environmental sustainability.

About half of the roughly 300 million pounds of coffee Starbucks bought in fiscal 2006 came from C.A.F.E. Practices, a program Garcia's co-op has applied to join.

In addition, Starbucks beat its goal of buying 12 million pounds of fair-trade coffee over the past year, although it has not yet disclosed the number of pounds it bought. Last year, the company bought 21 percent of the fair-trade coffee imported to the U.S.

Starbucks will not disclose the range of prices it pays farmers, but in 2005, the Seattle company said it paid 23 percent more on average than the conventional market for arabica coffee beans. The conventional market was priced around 84 cents to $1.36 a pound in 2005, based on New York Board of Trade futures.

TransFair does not oppose Starbucks' C.A.F.E. Practices and other sustainable sourcing programs, because it views them as evidence of growing awareness in the market.

But its officials say a major strength of their model is they are third-party certifiers who guarantee that international standards are met.

"We don't doubt that Starbucks' sourcing standards are rigorous, but companies can and do make many claims about their products and their companies, and the customer has no way of knowing if those are true," said Jean Walsh, a TransFair spokeswoman.

What it means: Fair-trade certification allows farmers to receive higher prices than they would in the conventional market. The program also prohibits forced child labor, ensures safe working conditions and encourages environmentally sustainable farming methods as well as other measures to improve farmers' lives.

A bit of history: Fair trade is part of a larger movement that began in the 1940s with churches selling crafts made by World War II refugees. Certification began in the Netherlands in 1988 because of plummeting prices in the world coffee market. Today, 20 countries have labeling programs using shared criteria under the umbrella of Fairtrade Labelling Organizations International in Germany. In the United States, certification includes coffee, tea, cocoa, rice, sugar, vanilla and fresh tropical fruits.

Amount paid for fair trade versus conventional coffee: At least 5 cents more per pound

Amount earned by fair-trade versus conventional farmers: 3 to 5 times more

Source: TransFair USA, Oxfam America