hi all fellow coffee lovers

the recent discussions on Fairtrade coffee, certification, etc. on this list was brought to my attention by some of you. my name is cameron. i work for Fairtrade Labelling here in ANZ. i was the guy interviewed on ABC Lateline Business for those who followed that link / post.

anyway, i've read a lot of the posts and stuff and there are a lot of issues raised about Fairtrade that will take a while to answer fully. it's wonderful to see so many people passionate about ensuring coffee growers get a fair deal and having a robust debate on the merits or otherwise of Fairtrade as part of the solution to the problem.

so i'd like to open up this thread for all of your specific questions on Fairtrade, fair trade, coffee, etc. and i'll do my best to answer them.

i realise you are all spread around the country, but i did wonder about the value of a 'face to face' Q&A somewhere like sydney or melbourne that could be recorded and podcast?

cameron

Cameron,

Thanks for coming on to CS to engage in the debate. Luca's Questions would be my starting point - but I'd also love to hear what developmental work is being done to progress FT. My argument with FT has always been that it is a 'good start' but there hasn't been any (apparent) effort to review the system and implement improvements.

Quality of coffee is a very big issue and some of the FT beans I have tried have been of poor quality which was a bit sad when you look at the impact FT could have if combined with a Cup-of-Excellence style quality development program.

Look forward to hearing more!

Michael 'Grendel'

Andy (or other mods) I reckon this conversation could be a good one - any chance of slapping a 'sticky' on it for the duration?

mod edit- thread is now sticky

Hi Cameron,

You're doing well!

Luca

luca wrote on May 20^th, 2007, 1:03pm:


Fairtrade certification is not a quality certification system. Fairtrade certifies the manner in which the product has been produced and traded. Quality is an issue certainly - but differentiating quality in the market place comes down to the brand owners.

As coffee consumers - especially as those with a more refined pallette - i'm sure you've come to associate coffees from particular origins, farmers, regions, roasters with varying degrees of quality. Indeed, I would expect a bit of varied opinion on these matters depending on each persons tastes and preferences.

There has been debates within the Fairtrade system about quality differentiation and introducing incentives for quality enhancement. At this stage, the decision has been not to add another level of complexity to the system - and to see quality rewarded by higher demand and higher prices within the Fairtrade system.

So then, isn’t the best way to ensure higher prices to focus on quality?

Quality certainly has its place in bringing higher prices for particular coffees. However, quality alone doesn’t guarantee the producers are benefiting. Additionally, there needs to be a perceived future in the business of coffee growing for producers to invest in quality. Availability of resources for investment, training, etc. – and being able to meet basic needs for themselves and their family – also enhance the process of investing in and enhancing quality.

Fairtrade standards and certification provides a valuable framework for quality enhancement, for a number of reasons:

• the Fairtrade certification process ensures that any additional value gained in the market for Fairtrade coffee goes to the producer organisation, i.e. monitoring the price transactions

• Fairtrade provides market access, long term trading relationships, stable minimum prices, etc. that  provides certainty for investment in quality enhancement

• the Fairtrade premium provides producer organisations with resources to fund investment in new farming techniques, extension training, etc. to enhance quality

Over the last 5 years or so, Fairtrade coffees have done quite well at the Cup of Excellence competitions. I think it was in 2003 or 2004 that 6 of the top 10 CoE coffees were from Fairtrade certified producer groups.

Cameron, the point that Andy's just raised is the one that bugs me the most as a consumer.

As the certifying body I should hope Fairtrade would be concerned at retailers and or roasters profiteering by using the Fairtrade name.

Thundergod wrote on May 29^th, 2007, 8:56pm:


Thanks Andy and TG. The price paid by consumers, etc has been an ongoing source of debate and discussion for a long time, as you'd imagine.

Here are some of the issues / responses / comments on this topic:


1. At the level of the roaster, brand owner, and final retailer (shops, cafes, etc.), the price charged to consumers is not regulated at all. As a Labelling Initiative, we encourage our licensees not to make more money from their Fairtrade products compared to their regular products. We do acknowledge there may be additional costs of doing Fairtrade – such as higher costs for beans, promotional material, product packaging, and of course the license fees they need to pay and the internal control systems they need to have in place. As such, we also expect our licensees not to lose money from Fairtrade – it is business, not charity.

Variation in the costs associated with a particular business, possible use of price discrimination to position their brand, differences in quality, target markets, etc. all are variables in the final price paid by consumers.

The key thing is that, at the level of the producer, they are being paid a stable price that covers cost of sustainable production as well as a premium to invest in local sustainable development initiatives, and also benefiting from the other impact areas of Fairtrade.


2. Does it concern FLO and yourselves that retailers can mark up the coffee and sell it at a premium and that that premium does not get passed onto the growers? Do you accept that it is open to exploitation by retailers who can target price-insensitive customers with a higher priced coffee?

ANSWER: Many Fairtrade products are now sold at very competitive prices to their conventional counterparts, and in the case of 100% switches (such as in the UK with M&S tea and coffee, AMT Coffee, Co-op own label coffee and chocolate, and all Sainsbury's bananas), there is no difference at all. Given that you can also buy Fairtrade products more cheaply than some conventional ones, it's clear that Fairtrade prices to farmers are nothing to do with shop prices to consumers. Instead, Fairtrade ensures that, whatever the price paid by the shopper for a product carrying the FAIRTRADE label, you know the producers have received at least the Fairtrade minimum price and social premium for investment in the future.

Find out more about retail pricing on the Fairtrade Foundation UK website:
http://www.fairtrade.org.uk/downloads/pdf/Retail_pricingmp.pdf


3. The issue of retailers 'gouging' is always going to be there. For example, it has been raised in ANZ with respect to the wide variation in wholesale and retail prices for 1kg of roasted Fairtrade coffee. The criticisms often miss some key points:

• It is ILLEGAL to limit the profits companies can make from products. No Fairtrade Labelling Initiative has the ability to control what mark up companies put on Fairtrade products. We can encourage operators (licensees, retailers) not to make any more profit from Fairtrade than their other product lines. We can encourage consumers to search around for the best deal for them, i.e. market competition. But we can't mandate what people can do with Fairtrade Labelled products. Essentially people will pay what they will pay in the market place depending on how much they value the Label.

• Different companies have different cost and pricing models depending on their location, business structure, supply chains, staff, etc. For example, you can't compare the price of Fairtrade coffee from a small operator in the heart of Sydney to volunteer run social enterprise. The former has very high costs associated with where their business is located. The latter benefits from low labour costs. The only 'fair' comparison is to compare the price of the Fairtrade products to the non-Fairtrade products sold by the same operator.

• Products vary in their quality. You go to a supermarket and you can choose to buy a top end coffee for $17 for 250g or a low end coffee for $5 for 250g. The products are at different price points and have different markets.

• Related to price differentiation on 'quality' (real or perceived) is the fact that operators often choose a price point that they believe the market will pay and that is what they work to - based on market research, other products in the market, etc. this can mean lower profit margins in the interests of selling product.

The best thing to do is to compare the price under Fairtrade to non-Fairtrade rather than comparing end of chain sales to how much they are paid. Such arguments also ignore the principle in Fairtrade of seeking to build the capacity of the producers to do as much of the transformation of the product as possible for themselves and the elimination of 'middle men'.

Andy Freeman wrote on May 29^th, 2007, 6:48pm:


Hi Andy

Some other things to think about in the metrics here - and in defence of many of our licensed operators who I know are working their butts off to support and promote Fairtrade, do the right thing, and are not lining their pockets with swindled gold:

FACTOR ONE - BEAN PRICES

- the current 'minimum price' to buy a conventional (non-organic) Fairtrade green bean is US$1.21 / pound + the US$0.10 / pound premium = US$1.31

- In Australia and New Zealand, the overwhelming majority of Fairtrade coffees available are purchased at prices far in excess of the Fairtrade minimum price due to their quality and high demand for coffee from these origins, i.e. in excess of US$1.21 /  pound

- pretty much all the Fairtrade coffee in Australia and New Zealand is also organic certified, so that is an additional US$0.20 differential / pound on top of the Fairtrade minimum price and Fairtrade premium

FACTOR TWO - COSTS OF DOING FAIRTRADE

- in addition to (perhaps) paying more for beans (obviously, again, some beans Fairtrade may be cheaper than some other non-FT quality beans), there are other Fairtrade cost factors

- these factors include development of separate promotional material (brochures, cups, etc), differentiated product packaging, and of course the license fees they need to pay, the internal control systems they need to have in place, and the compliance efforts (reporting, etc.)

FACTOR THREE - MARKET POSITIONING

- as i mentioned elsewhere, there is also the thinking that goes in to market positioning, including price differentiation, which may lead roasters (and perhaps cafes, but they are not really my business) to put their coffees at particular price points, sometimes with lower profit margins, sometimes higher, depending on different factors


Overall, we expect our licensees not to lose money from Fairtrade – it is business, not charity.

Over the last 3.5 years, I've known roasters to charge less, the same and more for Fairtrade compared to other products in their range. Many of them sell Fairtrade at a similar price point to their organic certified - or indeed move all their organic to be dual Fairtrade and organic.

C Neil wrote on May 30^th, 2007, 8:34am:


(continued)

Community solidarity - The Fairtrade system has been criticised for singling out producer groups that enjoy fair trading conditions while their neighbours or colleagues need to continue working under poor conditions. But research has shown that benefits of the Fairtrade system often spill over and solidarity with other disadvantaged but non-Fairtrade producers can increase. For example, in Indonesia, Fairtrade revenues made it possible for members of the Gayo Organic Coffee Farmers Association (PPKGO), in Aceh to provide humanitarian aid for victims of the devastating earthquake and tsunami that hit the region in December 2004. PPKGO supplied eight truckloads of food for disaster victims, and cooperative members led teams of volunteers in the relief effort.

Ensuring labour rights - Thanks to Fairtrade, workers take on a more active role on the farm, plantation or factory where they are working. They are more involved in the business practices and more aware of their rights. It is often also the first time that they become part of a trade union in order to defend their rights. They also gain experience in dealing with the premiums, such as handling banks, making decisions on how to best spend the money and how to organise themselves. Teresa Wanjiru Muki Ri, a grader in the pack house of Flower Panda, a Fairtrade flower farm in Kenya explains “I have been paid my pro-rata leave dues and I am benefiting from a provision of free basic medical cover. I have also learnt about freedom of association which I was not really aware of before”.

A stronger business approach - Last but not least, Fairtrade enables stronger organisations to develop, which are more experienced in accountancy, business planning, literacy etc. It also improves the quality of the product and provides better access to international markets (also to non-Fairtrade markets for high quality products) through the establishment of long-term trading relationships.



There is a growing body of work on impact that you can find on the FLO website too. See http://www.fairtrade.net/impact.html.

We have some producer profiles on our website too, accessible here: http://www.fairtrade.com.au/Producersandimpacts.



Cameron

That is alot of typeing!!  Thanks for taking the time to explain it, i'm sure you will probably get a few more questions.

Andrew

Hi Cameron,

Without wanting to beat you about the head, I'll just say this: I view FT as a fantastic mechanism for lifting the floor price for coffee growers.  In line with Thundergod and Andy's comments, I'm kind of disappointed that FT marketing isn't always in line with reality and that some people think that FT has something to do with quality.  For example, it was quite disappointing to me to see a recent article in the Age where Jaspers claimed that farmers received 300 to 400% more under the Fair Trade scheme.  Regarding quality, I'm a big fan of CoE; just take a look at the recent "Best Of Panama" auction prices ... although I believe that we need programs like CoE and FT to lift prices at both the floor and the ceiling of the quality spectrum.

*end rant*

I do have a few more questions for you, though:

(a) How transparent is the FLO system?  For example, are reports from an independent auditor available online?

(b) CoffeeSnobs has recently started its own social responsibility program, Fair Crack.  Other than donating the proceeds to FT, can you suggest any worthy recipients?  I think that what we would all like to do is to make a direct contribution to a project.

Cheers,

Luca

Personally I'd like Fairtrade to say that FT certified coffee should cost no more than other coffee.

looking at Andy's numbers I'd be willing to cough up an extra 5 cents a cup but no more.

I know how much I can get green beans for and I know how much I'd have to pay a roaster if I had a cafe.
I've worked in my fathers' food retail businesses and also for a multi-national take away food retailer.
I'm also a qualified auditor and all this knowledge and experience leads me to my opinion that a lot of retailers are overpricing their FT.

To change it, we as consumers and you as the certifier need to keep pointing out that a few cents a pound CANNOT justify the prices the gougers are setting to take advantage of the gullible public.

Trouble is, we are in the minority.

tempestv8 wrote on Jun 20^th, 2007, 12:37pm:


tempestv8,

Whilst not a believer in the way FT is implemented (too many are using it as an excuse to gouge extra profits from the customers..... and the FT organisers seem powerless or unwilling to control this.....) the basis of the arrangement I believe is good.

The other products mentioned in your post are produced in Australia, by Australians..... and we won't work unless we get a fair day's pay..... we'll just go on the "dole"...

Coffee is mainly produced in third world countries by the equivalent of "slave labour" where the workers get paid very little.... and they have no bargaining power - except what you are offered or you and your family can starve.... (and no dole either!!!!).

So the FT arrangement is supposed to ensure these people get a fairer income.... only a little better than they get now.... but important in their lives. What we pay is only a fraction of what someone in the western world would be paid for similar work.... they probably get the equivalent of what we pay for a cup of our coffee as a day's salary!!!!

So the idea is great.... I'm just not sure of the implementation.

Quote:


Ummm...

Cup of Excellence is a competition that promotes the highest quality coffee in different (and expanding) regions. Those coffees are auctioned to the highest bidder and has nothing at all to do with this debate as far as I can tell.

Rainforest Alliance  (RFA) coffee is a scheme that educates and promotes sustainable faming practice and carries no where near the same fees or promises.  A farm needs to meet management criteria to be RFA certified, not just pay a licence fee.  Their Annual reports are freely downloadable and show 2% management expenses, 6% spent on fundraising/advertising and 92% spent on the program of education and training.  Reasonable figures I would have thought.

Quote:


"show me the money"  was my point too when I wrote...

Quote:


Surely you don't tell your customers that AU$0.003c of their latte was all the farmer would see and when they have 15 coffees on their loyalty card the producer at origin would have got 5 cents.  

Quote:


Bravo Pat, I applaud your passion and encourage your fairness in not using FT to gouge customers on price.  It’s admirable but also fairly rare.

askthecoffeeguy wrote on Jun 21^st, 2007, 8:18pm:


askthecoffeeguy wrote on Jun 21^st, 2007, 8:18pm:


You said yourself you've seen the evidence.

askthecoffeeguy wrote on Jun 21^st, 2007, 8:18pm:

Andy Freeman wrote on Jun 21^st, 2007, 10:38pm:


Not to mention that Kraft Foods, Dowe Egberts, & Lavazza are the biggest sponsors of Rainforest Allaince.

Isn't it these companies who helped engineer the over-supply and under-valuaing of the coffee comodity in the first place?

luca wrote on Jun 21^st, 2007, 11:16pm:


Umm... quality control and commitment to social justice don't readilly spring to mind when considering the outlet in question.

yes i guess that's true of any coffee environment

Wushoes - David S wrote on Jul 15^th, 2007, 8:20pm:

I think this is a bit of a distorted and niaive report Wushoes.  Any of Hudsons coffee probably costs more than the one you can buy at the op shop and has nothing to do with whether it's fair trade or not.  For example, I bet Hudsons rent is higher, and premises more expensively fitted out.  I'm not suggesting that their pricing is justified, just suggesting you need to consider other factors do influence price.  And if the punters will pay $4.50 then guess what...their pricing is right!

Cafe in Phillip Island sells a Sara Lee coffee brand for $3.20 and fairtrade coffee for $4.50. I found that really funny. Sara Lee is one of the reasons fair trade is need, but to look trendy they got fair trade in at a unfair price.

Every opportunity, be it trendy or not, is assessed as a chance to increase profits.  It's why they are in business!

We don't need to look overseas for examples of this either...milk goes up 50c per litre and the farmer receives just 7c of this; check out some of our charities and see how much of every $ donated ends up in the hands of that hollow-faced child in the TV ad.  I'm not suggesting it's right and would love to see every cent go to the source, but know in many cases it simply cannot happen.

Maybe a little bit of good is better than no good at all?

your prices sound fair and reasonable for specialty coffee. Im surprised that you try to match low priced coffee. surely any business that cares so little about the coffee they use probably wouldn't be doing your coffee justice when they prepare it.

benipk wrote on Jul 17^th, 2007, 12:43pm:


I have purchased coffee from Ben and can attest to the quality of the coffee and Ben's roasting skills. The Feminino was very tasty! No affiliation, just a happy customer.