May 21, 2024


Business – Your Game

Fair Trade Coffee

Coffee used to be well, just plain coffee. You could order it with cream and/or sugar and that was pretty much the extent of the considerations. Now, the variation of terms bandied about is endless: organic coffee, gourmet coffee roasters who use only gourmet coffee beans, dark roast coffee, French roast and Arabica beans. There is also the place of origin: Ethiopia, Kona, Mocha, Sumatra and Uganda. Given the current rate of global warming, Tundra can’t be far behind.

Then, there is Fair Trade coffee. Fair Trade certification originated in the Netherlands in 1988 after a significant drop in wholesale coffee prices around the world. During that period, there was an excess supply of coffee beans over demand. The price on world markets had plummeted so low that coffee farmers around the world were unable to earn anything close to a livable wage. By 1997, several other labeling certifications had evolved: Fair Trade Foundation, TransFair USA and Rattvisemarkt. They merged to become The Fair Trade Labeling Organization or FLO, which has been extended to include many types of agricultural products.

In order to attain Fair Trade Certification for coffee, wholesale importers must adhere to certain standards. They must provide credit to farmers as well as offer transitional assistance to those who choose to produce an organic coffee bean crop. They must provide safe working conditions for all workers, pay a fair wage, allow no child labor and invest the Fair-Trade premiums they receive into development projects such as medical care, environmental projects, training and scholarships. In return, they are guaranteed approximately $1.30 per pound for raw coffee beans as opposed to selling on the world market. When the world market price is higher (as it is now), they receive a premium above the market rate. Those growers who convert to organic farming methods receive an additional $.20 per pound. Since Fair Trade eliminates intermediary steps between the producer and consumer, often the retail price is quite similar.

Fair Trade has its critics. The elimination of the middleman has removed many jobs from the market. Many believe that the Fair-Trade label allows the retailer to mark up prices significantly, without a corresponding additional benefit to the growers. Also, the $1.30 per pound price was established in 1990 without regard for inflation. Now that global corporations such as McDonald’s, Starbuck’s and Proctor and Gamble have begun to promote the Fair-Trade brand, smaller businesses oriented around labels such as “Fair Trade”, “Organic” and “Locally-Grown” are losing marketing ground. Clearly, there is little opportunity for price competition between a local coffee shop and Wal-Mart selling organic, Fair-Trade coffee beans. However, taking these elements into consideration, few can effectively argue that Fair-Trade has not been beneficial to small farms in remote parts of the world.

Ultimately, Fair Trade coffee has leveled the field at least to some degree. In the regions where coffee is grown, there is more access to education and health care. Many of these services were previously non-existent. Children of farmers are now in school instead of working on the farms. As the demand for organic fair-trade coffee has increased, the economic motivation has also raised the number of growers of organic coffee beans, helping to preserve fragile ecosystems. Fair-Trade is not perfect, but is certainly a small price to pay for such overwhelming benefit to some of the world’s poorest nations. The next time you are drawn by that smell of roasting coffee beans, consider choosing Fair Trade coffee.