Fair Trade: Fair for Farmers, Best for Business

Coffee farmers in Uganda, who benefit from Fairtrade sales.

Coffee farmers in Uganda, who benefit from Fairtrade sales. Credit: Magnus Manske

Interest is rising in premium, ethical coffee: it’s time to invest in ‘Generation Fairtrade.’ While the recession was seen to have been detrimental to many consumer markets, the coffee industry has remained resilient, with competitors increasing expansion across the UK.


A GROWTH INDUSTRY

Not only is coffee in general performing well, there has been an increase in the demand for premium products, despite the added costs they entail: consumers are now seeking out ethical, sustainable, higher quality coffee beans.

As people look beyond established brands and seek out coffee with a bit more substance, the potential for Fairtrade products to take advantage has presented itself.

Fairtrade – basically the idea that farmers in the developing world are given a fair wage for their work – is not a new one, introduced in the ‘90s to aid coffee bean farmers. However, despite our economic woes, the Fairtrade market is peaking. According to Mintel’s Handle with Care the suffering economy is actually the cause of this success: it has reminded the consumer that our actions, just like our economies, are interlinked, and that by spending a little more we can positively affect the lives of others.

On the face of it there doesn’t seem to be a lot of scope for Fairtrade products to take hold in a market dominated by big-name brands. The fact that many grocers’ standard own-brand and some economy ranges are now Fairtrade- or Rainforest Alliance-certified (Tea and Other Hot Drinks – UK, June 2013) could hypothetically make consumers complacent about ethically sourced coffee, potentially creating an industry-wide low standard for it.

THE FIGURES
Through studies undertaken by Keynote, 64.3% of all respondents were found to worry about the effects that the dominance of the major brands has on the smaller, independent shops, with 48.2% saying that the use of Fairtrade and/or Rainforest Alliance-certified coffee in an outlet was important to them.

Although slightly less than half showed concern about Fairtrade the balance seems to be tipping: this study shows the younger generation is much more in tune with the ethical concerns of coffee production, with over 60% of 16-24 year olds concerned about Fairtrade. Fairtrade themselves rate this stat even higher, as their own survey revealed that 82% of surveyed teens thought companies need to act more responsibly.

YOUTH POWER : 22-year-old Joseph has faith in Fairtrade

YOUTH POWER : 22-year-old Joseph has faith in Fairtrade. Credit: Coffee Trade

Joseph Craig, a 22-year-old student from Salford [pictured above], is a frequent buyer of Fairtrade products. He said: “Although I’m a firm believer in Fairtrade, in an ideal world we wouldn’t need it at all. I don’t think it’s much to ask that everyone involved in the farming of products like coffee gets a fair deal, and it’s in the hands of governments to make sure that’s what happens. But they can’t be trusted; the Fairtrade ideology needs to be embraced by a lot more companies if I’m going to continue to buy their coffee.”

Businesses should be proactive in response to this trend: investing now may see you reap rewards in the future as an ethically conscious generation begins to spend big on coffee.
Coffee company Cafedirect has already spotted this gap in the market: they have recently acquired Kopi, a subscription service which delivers a new kind of coffee every month to the subscriber’s door.

Tapping into a new “coffee connoisseur” market, it seems that Cafedirect is ahead of the curve –in a statement CEO John Steel said that his company’s recent acquisition will close the gap between grower and drinker, with the focus being on premium, bespoke coffees not suitable for supermarkets.

That’s a sentiment that this new market can relate to.

Cafedirect has also pioneered a new range of 100% Fairtrade Nespresso machine-compatible pods, the profits of which are split 50-50 with the farmers. In doing so the Fairtrade company has shown that balancing ethical concerns with innovation is a viable strategy in today’s market, and one that doesn’t have to sacrifice success for ethical practice.

This new type of consumer that cares about eco-friendly farming, fair wages, and low-income community development is willing to pay more for their coffee. But the quality has to be there to warrant the extra spend.

Kaizen Venture Partners took this concept and ran with it. Deciding to help three ailing Rwandan coffee producers into the international market, the company managed to build them up until they became suppliers to sizeable coffee outlets Starbucks, among others.

The Rwandan coffee producers, known collectively as KZ Noir Ltd., prioritised quality over quantity, and the results have shown in the turnover: KZ Noir’s sales almost hit the $3m mark in 2014. An impressive feat given the economic climate.

This attention to detail is becoming increasingly important as ‘Generation Fairtrade’ seeks out coffee that is both ethically sourced and high-quality. And, surprisngly, this is not always the case with Fairtrade.

FAIRLY TRADED?

A Brazilian farmer, whose way of life has benefitted from schemes like Cup of Excellence and Fairtrade

A Brazilian farmer, whose way of life has benefitted from schemes like Cup of Excellence and Fairtrade. Credit: usaid

Western companies often get a fairer deal on Fairtrade products than those for whom it is intended, with supermarkets making vastly larger profit than the farmers do. For instance, a farmer makes an average of 10p extra on a Fairtrade bag of coffee. But a supermarket can raise the price so that they make ten times that much profit, with guilty customers unknowingly lining the pockets Hardly an incentive to put the effort into growing high-quality beans.

Fairtrade themselves are not infallible: several years ago the company spent a considerable amount of money on advertising, rebranding, and promotion. Admittedly this is a necessity for most businesses, but it seems counterituitive to spend such an amount of money promoting the Fairtrade brand when the money could have been given directly to farmers.

There are alternatives to Fairtrade that offer innovative solutions to the questions posed by ethics and coffee quality.

THE ALTERNATIVES
The Cup of Excellence competition offers a unique “win-win” proposition: it encourages farmers to grow superior quality coffee in exchange for a better price, thus providing the consumer with a better drink. The demand for quality is so high that participants in the competition are often paid over 10 times the market standard per pound for their coffee: a strategy where everyone benefits.

“Relationship” coffees are another option: importers deal directly with farmers or co-operatives, cutting out the middle man resulting in speciality coffee prices. These coffees have to meet very strict quality guidelines (for which they are given training and help by the organisers of the relationship).

Whichever method of coffee production appeals to you, the importance of the direct connection between price and quality is now paramount to consumers.

Supply chains are under immense pressure to keep costs low, and with supermarkets constantly lowering prices to undercut competitors the need for fairly traded goods is high, to ensure that low prices do not affect the quality of the product nor the farmers who produce it.

As coffee drinkers become more aware of products other than that of the garden-variety, innovators are set to benefit – good news for the world’s farmers, a shot in the arm for the industry, and reassurance for the world’s independent coffee pioneers.



Further Reading

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