Coffee Mourning?

We look at the impact fairtrade tea and coffee is having for producers all over the world.

When people think about tea and coffee, there's a good chance they associate it with fair trade. Clipper Fairtrade tea and Cafédirect coffee were the first Fairtrade Foundation certified products in the UK in 1994. So what's happenend since then? The Fairtrade Foundation works with 5 million producers worldwide, with over 250 products certified from over 100 companies.

The Fairtrade Foundation announced that sales of Fairtrade products in the UK in 2004 had grown by 46% in the last year to the value of £100 million. Fairtrade brands now account for 14% of the total UK roast and ground coffee market. But none of the world's top tea and coffee companies, the likes of Kraft (Maxwell House, Kenco), Nestlé, Sara Lee (Douwe Egberts), PG Tips, Typhoo and Tetley, have any brands that are Fairtrade Foundation certified.

FAIRTRADE GOOD

By buying direct from farmers at better prices, consumers are improving the lives of producers all over the world. In Ethiopia, the birthplace of coffee, at the Orimiya Coffee Farmers Co-operative Union, farmers can get more than twice the price for their fair trade coffee than those in the Jimma zone of Ethiopia's Kafa province, who sell in the open market.(1)

In a tea plantation in Sri Lanka, tea worker Sivapackiam represents her fellow workers on a 'Joint Body' which decides how to use the Fairtrade Foundation premium. "A year ago, we didn't have any electricity in our houses. All the members of the Joint Body got together and discussed how we could pay to install it. Some money came from the Fairtrade premium and we each took out a loan. With electricity, my children can study at night. In the morning I can iron their clothes and we can use a hot plate for cooking."(2)

The focus on small producers and the emphasis on sustainable production techniques has positively affected the environment too. According to Melissa Schweisguth, Fair Trade Coordinator at US human rights organisation Global Exchange, "already, over 80% of fair trade coffee is organic and most is shade grown."(3) Shade-grown coffee conserves soil and forest, protects the micro-climate, uses fewer agrochemicals and in Central America creates an important habitat for migratory birds.(1)

Fair trade has also threatened the reputation of large multinationals by highlighting their bullying tactics. As Kraft (now Altria) testified in 2002, "since the demand for 'fair traded' .... products so far is only moderate...this has created only minor business, but major image problems for the traditional coffee industry as a whole."(1)

CRISIS TALKS

In recent years, tea and coffee farmers without the Fairtrade premium have struggled to cope in a world where market prices are below the costs of production. In Southern India tea prices are around 46 rupees per kg, yet the cost of producing tea is estimated to be 75 rupees per kg.(4) In Vietnam's Dak Lak Province farmers were selling their coffee beans for 60% of what it cost to produce them.(1) Families are drowning in debt; struggling to buy food, medicine, or to send their children to school.(5)

"Tea prices have been falling for the last 20 years," says Paul Collins of ActionAid. "For every £1 we spend on tea bags the tea farmer in India is only getting 5p. But two years ago this would have been more."(6) It's the same story for coffee: "between 1997/98, a peak year for coffee prices, and 2000/01, the value of Ethiopia's coffee exports fell 58%, from US$420m to $175m."(5)

Coffee farmers now receive around 43p per pound of green coffee beans, after recovering from an all time low of 24p in 2001.(7) The amount of tea and coffee being produced also far exceeds demand, and Oxfam are calling for the 40 million bags of excess coffee that has built up over the years to be burnt.(1)

LAUGHING ALL THE WAY TO THE BANK

Despite the crisis facing many farmers in the Third World, transnational tea and coffee companies are making record profits. In 2002 Ugandan coffee farmers received just 2.5% of the retail price of their coffee sold in the UK.(5) Yet Nestlé made 26p-30p profit for every £1 of instant coffee sold.(1)

A Nestlé report confirmed that: "profits increased...and margins improved thanks to favourable commodity prices," despite chief executive Peter Brabeck's denials that the company benefited from low prices.(8) Sara Lee's beverage unit (mostly coffee) recorded a 17% profit in 2002,(1) and Procter & Gamble (which sells coffee in North America) claimed in its annual report that its coffee business, with about $1 billion in annual sales, had "a record year" in 2001.(9)

Unilever's subsidiary Hindustan Lever controls around 34% of the Indian tea market, but while producer prices have collapsed, shareholder dividends issued by the company have more than quadrupled since 1996.(4)

Some companies have been accused of deliberately exacerbating the crisis. A number of analysts interviewed by ActionAid in 2004 believed that large tea companies were contributing to pushing down the price of tea. A recent study noted regular complaints from tea producers and trade unions about cartels operating on the tea auction floors.(4) At the same time coffee multinationals are employing techologies like steaming, which means they can remove the harshness of the taste of lower quality beans - and therefore flood the market with cheap, poor quality coffee.(1)

RAINFOREST ALLIANCE

Krafty corporates are trying to improve their image though. Kraft, Lavazza and Lyons are all launching ethical offerings that are certified by New York-based conservation group Rainforest Alliance. Primarily an environmental group, Rainforest Alliance became interested in coffee when coffee farmers began clearing rainforest in South and Central America to grow 'full sun' coffee in a desperate attempt to increase harvests.

For growers to be certified they must adhere to a list of sustainable principles, including conserving local wildlife and water resources, minimising soil erosion, treating workers fairly, protecting the forest and reforesting where possible.(7) Rainforest Alliance also stipulates that at least 40% of the ground should be shaded.

Campaign groups have pointed out that the Rainforest Alliance does not guarantee a minimum price for suppliers. The minimum Fairtrade price is 65p per pound of green coffee beans.(7) "In February 2002 this was 40p above the international market price".(8) The Fairtrade Foundation also pays an extra premium for farmers to invest in community projects, even when market prices rise above 65p.

The Rainforest Alliance claims that certified farmers can receive an extra 5p to 32p above the market price.(7) The Rainforest Alliance scheme doesn't cut into corporate profit margins as heftily as the Fairtrade Foundation does. The Rainforest Alliance does not charge companies a fee for displaying its logo, and only 30% of beans need to have been sustainably produced. In contrast, there is a 2% fee based on the wholesale coffee price, to use the Fairtrade Foundation's logo.

So what are coffee campaigners in the UK saying? Ian Bretman, the deputy director of the Fairtrade Foundation, said: "There is a danger it will be perceived as Fairtrade, which we don't see as very helpful."(10) Oxfam's coffee campaigner Henk Campher notes that: "the Rainforest Alliance certification scheme does offer real environmental benefits...

However, it isn't the same as fair trade, which we believe deals with specific social and development issues in ways which aren't addressed by the Rainforest Alliance." While it can only be a good thing that huge, powerful conglomerates are being forced to take ethics into account, the Fairtrade scheme offers real security for producers, and does take the environment into account as it promotes organic farming and shade growing.

ETHICAL TEA PARTNERSHIP

In the field of tea, some corporates are getting behind the UK government-sponsored Ethical Trading Initiative (ETI) to address their ethical image. The ETI is an alliance of companies, non-governmental organisations (NGOs) and trades unions that exists to improve codes of conduct which cover supply chain working conditions.

Premier Foods and Union Coffee Roasters are members, whereas Bettys & Taylors of Harrogate, Gold Crown Foods Limited (Brooke Bond), The Tetley Group, R Twining & Company Ltd and Unilever (Europe) are part of the Ethical Tea Partnership (formerly the Tea Sourcing Partnership), which is itself a member the ETI. Ethical Tea Partnership and ETI members all receive a small circle in the Code of Conduct column if they have no code of their own.

SOLUTION

Consumers can help by buying and promoting the cause of fair trade wherever possible. The table shows which brands are Fairtrade Foundation certifed. Athough we have not covered supermarket own-brands in this report, the Co-op is the only supermarket to use only fairly traded coffee beans across its entire own-brand range.

Fairtrade Fortnight is a great opportunity for ethical consumers to promote fair trade. The fortnight will be marked by events and tasting stands dedicated to promoting fair trade products. Education packs, guidelines on becoming a fair trade town, and cards requesting managers of cafes and restaurants to stock fair trade are all available to order.

ORGANIC RELATIONSHIP

The recent boom in the organic food market has been mirrored by the growth in the range of organic tea and coffee on sale. The scoretable indicates which coffee companies offer organic products. All the companies except Lavazza offer at least one organic variety.

Coffee is usually produced on smallholder farms, and farmers are often unable to afford expensive pesticides. Tea, on the other hand, is usually produced on large plantations, and often treated with pesticides. Heavy pesticide use can be devastating for health and ecosystems. It can lead to pesticide poisonings, loss of natural predators, pesticide resistance and groundwater contamination. Local workers often do not receive adequate safety training and protection in the use of dangerous pesticides.

Organic cultivation also outlaws the use of genetically modified materials, so buying organic tea and coffee can go some way to keeping GM coffee out of the market. In 2003, Japanese researchers announced that they had developed GM plants that could provide decaffeinated coffee, which would be harvested around 2007.(14) This could devastate smallholder farmers who might not be able to compete with the novelty of decaff.

There have also been attempts to introduce beans that ripen all at the same time when they are sprayed.(14) This type of production would require less labour to harvest it, and would jeopardize the livelihoods of coffee pickers. Consumers should buy organic, and show that there is absolutely no potential commerical market for GM.

References

1 'Mugged- poverty in your coffee cup' Oxfam 2002
2 http://www.fairtrade.org viewed on 17/1/05
3 'Fair Trade Coordinator at Global Exchange responds to our interview with Procter & Gamble', http://www.eldis.org, viewed on 17/1/05
4 'Six reasons to regulate agrifood corporatations' ActionAid 2005
5 'Europe and the Coffee Crisis' Oxfam 02/03
6 Email from a representative of ActionAid 20/1/05
7 'Who is the fairest of them all?' The Guardian 24/11/04
8 'Spilling the Beans on the Coffee Trade' Fairtrade Foundation 03/02
9 'Plunge in coffee prices is causing crises' The Wall Street Journal Europe 8/7/02
10 'Storm in a coffee cup over ethical marketing' http://www.telegraph.co.uk 1/12/04
11 Email from Paul Collins, ActionAid 20/1/05
12 Conversation with a representative of ActionAid 20/1/05
13 http://www.rainforest-alliance.org, viewed on 25/1/05
14 'GM decaff coffee plant created' http://www.bbc.co.uk 19/6/03