Bean Facts

Good Coffee, Better World: The Ethics and Economics of Fair Trade Coffee

    Coffee beans, raw and roasted

    Helen Haynes, a Providence, Rhode Island, resident with a long-time interest in environmental issues, was disturbed. She had read that small coffee farmers in poor countries were suffering massive starvation because world prices for raw beans had crashed, but that the corporations dominating coffee sales in the U.S. continued to charge high prices and gather huge profits.

    Then she noticed signs about “fair trade coffee” at the Coffee Exchange, a popular local coffeehouse, and encountered a booth featuring fair trade coffee at her religious denomination’s annual assembly. Haynes had also heard members of her congregation, the First Unitarian Church of Providence, complain about the quality of the coffee served at coffee hour every Sunday. She recognized an opportunity to act on her beliefs and got to work.

    Some congregants had been interested in starting a fair trade coffee program, but not everyone was clear about what fair trade coffee was, where to get it, and how much extra it would cost. They decided to try it out. Haynes made the first purchase from New Harvest Coffee Roasters of Rumford, RI; she believed it was important to support a local business. Church administrator Posey Kooris handled the logistics and calculated that donations of 25 cents per cup would cover the extra cost.

    After the new program was launched, many coffee-hour attendees were pleased that the church was supporting fair trade, says Kooris. There was no negative feedback, and donations were covering the cost. Fair trade coffee had caught on, and First Unitarian had joined the growing number of organizations and individuals that scrutinize what they consume and make choices they believe will support a healthy environment, a sustainable economy, and a fair living for the people of the world.

    What’s so important about coffee?
    Can one person’s choices can make a difference in the world? If so, which choices will have the most impact? Coffee activists say a good place to start is the coffee you and the people you know consume every day.

    Sheer size of the market
    Coffee is the second-largest U.S. import after oil. The U.S. is the largest coffee consumer in the world, accounting for one-fifth of world consumption.

    Lopsided and exploitative trade relations
    Coffee is produced by some of the poorest countries in the world and sold to some of the richest. The economies of some countries, such as Ethiopia, areFreshly roasted beans at Coffee Exchange dependent on coffee revenues; a crisis in coffee sales can unleash massive starvation and political unrest.

    There is also an imbalance of power between raw coffee bean producers and major purchasers. Coffee is produced in a highly labor-intensive process, much of it by small farmers and cooperatives. Most of the raw beans are purchased by a few large multinational importers, and the processed-coffee wholesale trade is dominated by the “Big Four”: Nestle, Philip Morris, Sara Lee, and Proctor & Gamble (manufacturer of Folgers).

    Dire economic crisis among coffee producers
    Coffee has long suffered from the boom-bust cycles typical of exports by Third-World countries. Farmers have little control over the prices of commodities. When bad weather ruins crops or demand grows quickly, coffee prices soar and farmers around the world plant more coffee as a cash crop. Eventually a glut on the market develops, prices crash, and many farmers go out of business.

    During the world coffee shortage of the early 1950s, farmers were eager to plant coffee as a cash crop. Up to that time, most coffee had been of the superior-quality arabica variety. But arabica trees take four years to mature and need high altitudes to grow; the inferior robusta trees mature in only two years and can grow on flat lands. More and more countries began to plant robusta, causing a glut. The quality of mass-produced coffee such as Maxwell House also began to decline as more robusta was used.

    Currently, large amounts of cheap robusta coffee have flooded the market; the world price of coffee has plummeted to its lowest level in decades. Small coffee farmers around the world have been plunged into poverty or forced to abandon their farms. Some immigrate to already crowded cities or to the United States. In Colombia, some coffee farmers are turning to coca production.

    Who are all those organizations?
    A movement to promote a fairer world economy has been gathering force, composed of many types of organizations.

    Fair trade certification
    Fair trade certification is a voluntary system that monitors the production and international sale of goods offered by small producers in poor countries to promote fair, sustainable, and environmentally sound trade practices. The coffee certification process requires that participating farmers’ cooperatives meet certain criteria regarding service to their communities, environmental responsibility, and democratic functioning. It also requires that the purchaser pay at least the minimum price (currently $1.26 per pound for non-organic coffee), extend credit, commit to a long-term relationship with the producers, and provide technical assistance.

    The fair trade certification movement grew out of efforts by North America and European churches in the late 1940s to establish handicraft cooperatives in poor communities around the world to export their products at fair prices. Alternative Trade Organizations (ATOs) formed that followed this model, such as Ten Thousand Villages. The Haavelar Foundation in the Netherlands and Transfair International in Germany developed systems to standardize fair trade guidelines and offer certification to the coffee industry. The two organizations combined to form the Fairtrade Labelling Organization International (FLO).

    TransFair USA, a member of FLO, certifies all fair trade coffee in the U.S. It was established in 1998 and began to certify fair trade coffee in 1999. Certified products feature their logo.

    Fair trade advocacy groups
    These groups increase the public’s awareness and organize actions on behalf of social justice causes. Some of them cover a broad range of issues, including coffee. Other groups are solely organized around coffee.

    Oxfam addresses poverty and social injustice around the world. In one campaign, Oxfam has urged Nestle to drop its demand that Ethiopia pay $6 million to compensate for a company, not owned by Nestle at the time, that was nationalized 27 years ago by a corrupt dictatorship.

    Global Exchange is an international human rights organization that promotes environmental, political, and social justice. In one program, it works with student and other groups to introduce fair trade coffee in their communities and offers action materials; a current campaign calls on Folgers to offer fair trade coffee.

    Coffee Kids was founded by Bill Fishbein, co-owner with his brother Charlie Fishbein of the Coffee Exchange in Providence, RI, after traveling to Guatemala and seeing the association between coffee production and poverty. Coffee Kids works with local organizations in Mexican and Central American coffee communities in education, health-care, and microenterprise programs.


    Businesses that sell fair trade certified coffee
    These for-profit businesses are subject to all the competitive pressures any business faces. But they have chosen unconventional approaches to staying commercially viable that include principles as well as profit.

    Some, like Equal Exchange, sell only fair trade coffee; others sell other coffees as well but actively promote and sell a significant amount of fair trade coffee. Some also sell organic coffee – not necessarily fair trade coffee but also good for the environment and for farmers (see sidebar for clarification of terms).

    This is not an exhaustive list of places to buy fair trade coffee. Many other businesses offer varying quantities of fair trade coffee. Even large chains like Starbucks and Dunkin Donuts have begun to offer fair trade coffee, often after considerable efforts on the part of advocacy groups, but it is a tiny portion of their product lines and they generally do not significantly promote it.

    Equal Exchange is a pioneer of fair trade coffee in the U.S. It was the first U.S. company to officially adopt European fair trade standards, years before the establishment of Transfair USA. Equal Exchange is now the largest seller of certified fair trade coffee in the U.S. Unlike many of the other companies that offer fair trade coffee, EE sells only fair trade coffee.

    According to Rodney North, Equal Exchange’s “Answer Man,” when the company first started, the market for fair trade and organic coffee was mainly through health-food outlets, but a wider public awareness of fair trade coffee has been growing rapidly. TransFair and advocacy groups have done a lot to publicize ftfair trade coffee, he says. Equal Exchange also educates consumers through store demonstrations. They brought a coffee farmer to the U.S. for people to meet rather than see made-up images such as “Juan Valdez.” We don’t often hear the stories behind the products we buy, says North. For instance, “We we don’t know where meat comes from – that kind of opacity is a problem. We are fed misleading images of bucolic scenes where milk and eggs come from. Where they really come from, and the consequences, are your decision to think about.”

    North says the fastest-growing part of their business has been the interfaith program; faith communities have done a good job of educating their members about fair trade coffee. Some of the participants are the Lutheran World Relief; American Friends Service Committee; Presbyterian Coffee Project; and the Unitarian-Universalist Service Committee.

    Equal Exchange also models the kind of democratic functioning that fair trade coffee certification requires of fair trade coffee farmers; it is organized as one of the largest democratic worker cooperatives in the country. Top-to-bottom pay ratios, for instance, are kept at 3-to-1, compared to the average 475:1 ratio of corporate CEO pay to that of average workers recently reported by Business Week (Source: Equal Exchange Web site).

    Coffee Exchange is a Providence coffee roaster and coffeehouse. Co-owner Charlie Fishbein describes the origins and evolution of Coffee Exchange as serendipitous. In the early 1980s the family had a cookware business that failed. They decided to try again in a small place on the same street, this time just selling coffee beans because they “had a feeling” they would sell. As the business grew, they added brewed coffee, an espresso machine, interior tables and chairs, and outdoor tables and chairs. The key to their success, says Fishbein, was that their coffee was fresh. Charlie Fishbein loads raw beans into roaster

    In 1988, Fishbein’s brother Bill visited Guatemala and observed both the poverty and the sense of community spirit. He was moved to found Coffee Kids (see above), adding a new dimension of community service to Coffee Exchange. Charlie Fishbein was surprised to find that this awareness – thinking about the process by which coffee is made – also made him more conscious of the quality of the coffee. “Somehow the coffee was better – I don’t understand why – we were a better organization, the product was better, because of the component that Coffee Kids brought.”

    Loading Raw Beans into the Roaster

    The next step was a move across the street to their current location and the purchase of a coffee roaster, which enabled them to take freshness to a new level. Most of the beans used to brew coffee or sold by the pound have been roasted in the last four days, and none is more than a week old.

    Coffee Exchange started with three varieties of fair trade coffee. Now, 20 out of the 44 total varieties are fair trade coffee, and 95% is organic. Fair trade coffee is an expensive proposition for a retailer like him, says Fishbein. He feels that he would have the same product and customer loyalty without fair trade coffee – but he considers it as part of his social responsibility. checking the color of a French roast“That’s where Coffee Kids came in. Instead of recognizing the responsibility as a burden, all of a sudden I’m searching for ways to participate, to assume responsibility for the process – coffee, customers, farmers, community – it became the way to do things.”

    Checking the color of a French roast

    New Harvest is a small coffee roaster based in Rumford, RI. Owner Rik Kleinfeldt relates that he learned how to roast coffee while working at the Coffee Exchange and later established New Harvest so he could concentrate on coffee roasting; a retail business, he says, needs to provide other products such as food and drink. By roasting the coffee on-site, says Kleinfeldt, he can offer a much fresher-than-average product, since the quality of coffee declines quickly after roasting. He likes to keep the focus local so he can provide customized wholesale programs. New Harvest also sells mail order coffee, mostly through the Internet. Kleinfeldt has seen an increase in interest recently from professional associations and religious organizations.

    The company focuses on organic and fair trade coffee but also offers some non-certified coffee. Some customers, Kleinfeldt says, simply aren’t interested, and to stay viable he needs to accommodate them, too. His business model is to offer prices that are “25%–35% less than you would pay for conventional coffee from a big gourmet roaster” by keeping costs low and keeping expectations for profit “humble.” New Harvest also donates a portion of its sales to community service projects in Guatemala and Nicaragua.

    Kleinfeldt says his basic motivation for selling fair trade coffee is a sense of fairness. “When a commodity like coffee is traded, people lose sight of what it takes to produce it. Just because supply and demand create a price doesn’t mean that workers are getting what they need.” There is also another, possibly more selfish reason, he says, for people who care about coffee. “The current patterns of coffee trade can go on only so long before the specialty coffee trade collapses. Farmers are not making enough money and will dig up their trees if the current price structure continues.” The result would be a discouraging scenario for coffee lovers – no more specialty coffee, only huge plantations producing Maxwell House and Folgers.

    Is fair trade certified coffee the only “good” coffee?
    Certified fair trade coffee is not the only way to support small coffee farmers. Some coffee sellers have direct relationships of their own – that don’t go through the fair trade certification process – with coffee growers or coffee-producing communities.

    Steve McCloy is a physician and clinical assistant professor at Brown University Medical School who has been going during the summer for 15 years to Guatemala to provide medical care at the San Lucas Toliman Mission’s clinic. The San Lucas Mission also has a coffee cooperative that sells coffee in the U.S. While not certified, it also supports community development and a decent living for coffee farmers and their families.

    McCloy has some doubts about the economics of fair trade coffee. He feels that even the fair trade price of $1.26 per pound is too low to support coffee farmers in poor countries; the Mission pays farmers $5.00 per pound. McCloy also feels fair trade coffee is too expensive at retail – it appears to be aimed more at upscale consumers, and there is still a large market for more affordable, mass-produced coffee.

    The San Lucas system has its own drawbacks, according to McCloy. Unlike the businesses that distribute fair trade coffee, the San Lucas Mission relies heavily on volunteer labor in all aspects of the supply chain – from volunteers that help harvest the coffee beans to the distribution by the Mission in the U.S. to sales by volunteers like him. Rodney North of Equal Exchange acknowledges that the fair trade price of $1.26 is “too low to really lift people out of poverty.” But, he says, “because it’s more than twice the going price, it’s all we can pay without pricing ourselves out of the market.” Also, McCloy says, although the San Lucas Mission works hard at being inclusive, their character as a Catholic organization can sometimes color their work.

    McCloy promotes San Lucas coffee because he feels a deep personal connection and a sense of responsibility to the San Lucas community and to the work of the Mission. McCloy would like Americans to realize how fragile the rest of the world’s economy is. In an economic downturn, “we worry about our stocks not performing – these people can’t put food on the table.”

    Richard Savignano, an adult educator who frequently visits Guatemala, also points out that there are “many routes to fairness.” Only cooperatives of small farmers are eligible for fair trade certification, but there are larger estates, such as Oriflama, owned by Betty Hannstein Adams (aunt of his wife Virginia Adams) that make every effort to treat their workers fairly. Another such estate, says Rik Kleinfeldt of New Harvest, is La Minita in Costa Rica.

    Coffee Exchange’s Charlie Fishbein notes that he is usually glad to pay 10 cents a pound to TransFair for the fair trade logo license, because he knows they raise public awareness of fair trade coffee. The fee adds up, however – when he writes a check for $10,000, he can’t help thinking about what that money could accomplish if donated to Coffee Kids, where it would go directly to a service project in a coffee-producing community. “There are a lot of ways of dealing with social problems through consumer activism. Fair trade is only one – a valid one, but not the only one.”

    What can you do?
    There are many ways to do the right thing. Some of them ar listed below.

    Educate yourself.
    Global trade raises complex issues with few easy solutions. The Bibliography contains some resources to start learning more.

    Be mindful of the consumer choices you make.
    Find out where the products you consume come from and how they are produced and use that knowledge to make choices.

    Put pressure on retailers.
    Rik Kleinfeldt says it’s a challenge sometimes convincing retailers to carry fair trade coffee. The more they hear from their customers, he says, the more willing they will be. If a chain such as Stop & Shop or Starbucks carries a limited amount of fair trade coffee, ask for more prominent displays and more variety.

    Rodney North describes the impact of customer requests on Albertson’s, who conducted a marketing campaign to ask customers what products they wanted. Enough people said they wanted fair trade coffee to convince the supermarket chain to carry it in some of their stores.

    If a company says they sell fair trade coffee, North says, ask what percent of their products are fair trade. “Ask for fair trade – and don’t settle for ‘oh, it is fairly traded,’ ask for the label.”

    Organize actions in your community.
    The actions of a group have even more impact than those of individuals. Ask professional organizations, faith community, schools, and other organizations in your community or that you are a member of to use fair trade coffee.

    Increase your level of citizen participation.
    Ask yourself and your elected representatives questions about the economic and social models we are using. Don’t assume they are inevitable – they are all products of choices that have beneficiaries and losers.

    Ask yourself why fair trade is important.
    Does fair trade really make a difference? Is being socially responsible an expensive luxury? La Minita owner Bill McAlpin “scorns fair trade coffee,” in which he believes that “well-intentioned folks” sell to the “affluent but guilt-ridden.” He believes that price should only be determined by the quality of the coffee, not by its political correctness. (Pendergrast 1999, p. 394)

    But most of those interviewed for this article would disagree. American consumers need to stop looking only at what the product is; it does matter, they say, how a product is produced. They feel, like Coffee Exchange’s Charlie Fishbein, that fairness and quality are intimately connected.

    Why is coffee activism important? According to Rodney North, “Because commerce (and life) do not have to be reduced to a matter of dog-eat-dog, whoever-has-the-gold-rules. Because there’s a better, more humane way to get these jobs (like growing, processing, distributing, and marketing coffee) done than what we normally settle for. Because if you were the coffee farmer this is what you’d want, what you would think is only fair.”

    References and Annotated Bibliography
    Margaret Balch-Gonzalez – Good Coffee, Better World: The Ethics and Economics of Fair Trade Coffee

    • Certified fair trade: Coffee certified by a member organization of the FLO – in the United States, TransFair USA – to have been produced by small farmers under certain conditions and traded according to certain rules of fairness. Recognizable by the “Fair Trade Certified” logo. Most fair trade coffee is organically produced.
    • Organic: Certified by a member of the umbrella organization International Federation of Organic Agriculture Movements (IFOAM) to be produced in an environmentally safe way. Healthier for the consumer, but even more so for farmers and their families. Not necessarily fair trade certified.
    • Shade-grown: Certified by one of two organizations to have been grown under shade trees along with other food crops in a way that prevents soil erosion, provides a habitat for songbirds and other wildlife, and supports a more sustainable living to the farmer.
    • Estate: A large coffee farm, often family-owned, in which coffee is harvested by employees rather than small farmer-owners. Not eligible for fair trade certification, but sometimes voluntarily committed to fair labor practices and community service.
    • Plantation: Large coffee farm geared toward supplying the mass markets and big coffee brands. Sometimes accused of unfair labor practices. Critics of fair trade certification have sometimes pointed out that it doesn’t address conditions for plantation workers.
    • Arabica: The original, superior-quality variety of coffee that is grown at high altitudes. Virtually all specialty coffees except espresso use only arabica coffee.
    • Robusta: An inferior-quality, high-yield variety of coffee. Grown at low altitudes, often on deforested land, and used in mass-produced coffees.
    • Specialty coffees: Higher-quality, higher-priced coffees, often produced by small companies, although larger companies such as Starbucks are participating more and more in this fast-growing sector of the coffee market.