FAIRTRADE COFFEE: SEPARATING FACT FROM FICTION
AMY OROKO, SUSTAINABILITY MANAGER
THREE MYTHS DEBUNKED
At Matthew Algie we have a longstanding commitment to Fairtrade. Many of you will be aware that we were the first coffee roaster in the UK to launch a Fairtrade certified espresso in 1997. Almost 25 years on, approximately 84% of the coffee we buy on an annual basis is Fairtrade certified. In 2019, this equated to approximately 227 million cups of Fairtrade coffee being served by our customers.
So, why are we so passionate about it? Primarily because Fairtrade is an effective mechanism for independently verifying that coffee farmers in our supply chains have received a fair price and that they uphold sustainable production standards and practices. Our relationships with the cooperatives that we source from mean that we have the privilege of seeing and hearing first-hand, evidence of the impact that Fairtrade has on farmers and their communities.
Knowing that we currently have a significant oversupply of Fairtrade coffee to the industry (745,500 tonnes of coffee was produced by Fairtrade producer organisations in 2018, and yet only 207,600 tonnes was sold as Fairtrade ) it’s sometimes hard to hear the Fairtrade debate in the UK being based on many of the same misconceptions about the certification scheme. To try and tackle this, here’s a summary of the most common “myths” about Fairtrade that I’ve come across.
Reality: The price of green (unroasted) coffee at a basic level is determined by the balance between supply and demand for the product on the global commodity market, in common with other raw materials such as cotton or cocoa. The resulting “C” price for coffee futures contracts fluctuates regularly and bears no direct relationship to the actual cost of production for coffee farmers.
The Fairtrade minimum price for coffee introduces a price floor to the coffee futures market, meaning that even when the price of green Arabica coffee falls below the Fairtrade minimum of $1.40/lb (free on board price basis) per pound, farmers who sell their coffee on Fairtrade terms will be guaranteed at least the Fairtrade minimum price. When the “C” price is above $1.40/lb, Fairtrade producers receive the prevailing market price. Fairtrade carefully consider how they set the minimum price and their intention is that it should cover at least the cost of production for farmers. It is the only mainstream certification model that provides farmers with this kind of safety net.
As it happens, since the middle of 2017, the “C” price has been below the Fairtrade minimum price. These low prices have caused very real problems for coffee producers globally, reducing the likelihood that they will be able to make a sustainable income from coffee to support their families, with secondary impacts including reductions in their ability to plan and make investments in their farms for the future. With this context in mind, it would be completely wrong to claim that the Fairtrade minimum has not been benefiting farmers where they have been able to sell their coffee on Fairtrade terms.
To take one example from our suppliers, we work with a coffee cooperative called COOMAP in Brazil who recently undertook a survey of their members in partnership with the CLAC, the regional representative body for Fairtrade farmers in Latin America. 86% of COOMAP’s farmers stated that their family income increased after becoming Fairtrade certified.
MYTH 2 “FAIRTRADE COFFEES ARE LOWER QUALITY”
Reality: Some suggest that the Fairtrade minimum price back-stop diminishes the incentive for Fairtrade farmers to invest in improving the quality of their coffee. However, on top of the Fairtrade minimum price, we pay a differential on all coffee contracts. This is an additional sum that covers various other costs associated with the delivery of the contract (shipping, insurance, etc.) and crucially, varies according to the quality grade of the coffee purchased. Therefore, the pricing mechanism for all coffee contracts, including those for Fairtrade certified coffee, provides an incentive for growers to increase coffee quality.
Additionally, we pay a specified Fairtrade Premium of $0.20/lb on all Fairtrade contracts. Whilst cooperatives have a huge amount of freedom to use this as they see fit to improve their social, economic and environmental conditions, according to the Fairtrade standards they must use at least 25% of the Premium to enhance productivity and quality. With coffee farmers around the globe earning €76,605,500 in Fairtrade premiums in 2018, this means approximately €19,151,375 was invested in improving quality and productivity in a single year.
We have seen this many times at origin, where much of the coffee processing infrastructure - from raised drying beds to washing stations or milling facilities - have seen significant investment because of the Premium. To give one example, we visited our supplier, the Capucas cooperative in Honduras just before the COVID-19 travel restrictions came into force in 2020 and it was excellent to see the solar driers and wet processing equipment that they have installed using Premium funds.
They have also used the Premium to implement a cupping school for farmers and young people in the community to learn about the importance of achieving high quality coffee.
These factors mean that we don’t see this misconception about quality reflected in the Fairtrade coffees that are available in the UK. In fact, between 2013 and 2020, Fairtrade-certified coffee products have won 56 Great Taste Awards. Additionally, in 2020, the Fairtrade Golden Cup quality contest in Colombia showcased Fairtrade specialty coffee and the minimum score for the 21 finalists was 86.
MYTH 3. “FAIRTRADE AND DIRECT TRADE ARE INCOMPATABLE”
Reality: “Direct Trade” is a movement in the coffee industry that promotes supply chain transparency, long-term relationships with producers, and rewarding higher quality coffees with higher prices.
Often Direct Trade is portrayed as an anti-Fairtrade movement, with some Direct Trade supporters criticising the certification because it doesn’t tell the consumer anything about the kind of trading relationship that exists between the buyer and seller. So, roasteries could be reaping all the benefits of having the Fairtrade label on their products without themselves paying any attention to the people who have been involved in producing their beans.
On the other hand, Fairtrade and other certifications level fair criticism at the Direct Trade movement for the lack of consistency in how the concept is applied, which ultimately stems from the fact that there is no one set of standards and no independent verification.
Even strong advocates admit that an approach to Direct Trade which is true to what most would agree are the core principles requires a substantial commitment from the buyer and the resources required for this may be prohibitive. Smaller roasters may rely heavily on the support of their brokers and therefore they may not have the flexibility or buying power to maintain long-term relationships. Furthermore, they’re unlikely to be able to invest in their own due diligence for ensuring farms are meeting social or environmental criteria, such as the prevention of child labour or preservation of biodiversity on farms.
However, from our perspective, we recognise that both approaches have their respective strengths and weaknesses and actually, because the two are not mutually exclusive, a strategy that combines both can lead to the best overall outcome for farmers and roasteries alike. Many Direct Trade coffees are sourced from Fairtrade certified groups. Equally, Fairtrade coffees can be directly traded in the sense that roasters are also committed to long-term, direct, partnerships with suppliers and with paying suitable quality premiums. This is the approach we have chosen to adopt, and actually Fairtrade actively encourages us, and other Fairtrade roasteries, to adopt these best practices through their Fairtrade Trader Standard.
Our approach is one that has grown organically as our business has evolved, and it means that (a) we can rest assured that our Fairtrade coffees have been produced in line with the Fairtrade standards, that farmers are receiving a fair price and that our customers benefit from the consumer trust and brand recognition that the Fairtrade label brings, and (b) that we can reap the benefits of having direct, long term partnerships with these groups, including our collaborative sustainability programmes and the ability to celebrate the individuals who carefully care for the coffee beans we buy.
Shortly before the pandemic, Eduarda and Estelle travelled to Brazil in search of speciality grade microlots.
Our triple certified Smokin' Bean coffee is also sourced from Brazil.
Amy Oroko
Sustainability Manager at Matthew Algie
Amy studied Economics & International Development at the University of Bath and gained experience working in development consulting in Malawi and rural Scotland, before moving into a sustainability role at Matthew Algie in 2014.
As Sustainability Manager, Amy is responsible for coordinating the company’s approach to sustainability, including our strategy, projects and internal and external communications in relation to sustainable sourcing, reducing our environmental impact, investing in our employees, and, engaging with our community.
Over the last few years she has launched our inaugural Sustainability 5 Year Plan, implemented several supply chain collaborations with coffee cooperatives and helped us to achieve net-zero carbon emissions.
Earlier in the year Amy was accepted to the Edie “30 Under 30” Class of 2020 – a training programme to develop the knowledge and leadership skills of young sustainability, CSR and energy professionals in the UK.