The cost behind a cup of Fairtrade coffee

COST fairtrade coffee

BeanScene asks why coffee from a certification and development model like Fairtrade costs more and how that price is reflected in the cup.

When café owners face their own business and financial challenges, it can be difficult to see the value of serving certified coffee. However, Molly Harriss Olson, CEO at Fairtrade Australia and New Zealand and former chair of the Fairtrade International Board, says it’s important to know that Fairtrade is the only globally scaled alternative trading system that is half owned by the farmers. 

“From tree to cup, Fairtrade has a profound impact across 75 developing countries on sustainability practices, quality, and farmer livelihoods – because the Fairtrade farmers own it,” Molly says.

Farmers selling Fairtrade-certified coffee are paid a minimum of US$1.40 per pound. Will Valverde, Fairtrade ANZ Producer Support quality and productivity lead and former member of a Costa Rican Fairtrade cooperative, says this is broadly recognised as the sustainable cost of production, though this changes from country to country and farmer to farmer. On top of that, a Fairtrade Premium of US 20 cents per pound is paid to reinvest in the farm and the community.

“Coffee prices have only been above the Fairtrade sustainable cost of production for roughly three months in the last five years. That’s incredibly challenging if you’re a farmer,” Will says.

“The next generation of coffee farmers know the cards are stacked against a fair go, and without Fairtrade, will their kids think it’s a fantastic business to invest in?”

While the specialty coffee industry will often discuss how and why they pay above commodity coffee prices, Stephen Nankervis Fairtrade ANZ’s Commercial Partnerships Manager says this represents a fraction of coffee consumed in Australia.

“The specialty coffee market occupies the hearts and minds of the coffee drinking community, but it doesn’t occupy the volume,” Stephen says. “Commodity prices go up and down. In 2019, it went as low as 88 US cents. If you were a Fairtrade farmer, you were selling coffee for about double that.”

cost fairtrade coffee
Fairtrade’s global system is 50 per cent owned by producers, representing farmer and worker organisations.

However, he adds that “there is a lot of confusion in the industry about how the Fairtrade Minimum works. The base price payable for Fairtrade-certified coffee is US$1.40 per pound, it’s not a set or ceiling price. Like non-certified coffee, better quality requires higher prices.

“It’s frustrating when I see roasters say ‘we pay more than Fairtrade’ for a 90-point-plus Geisha out of Panama. If you had bought that coffee under Fairtrade terms, you’d be paying exactly the same price, plus 20 cents premium.”

At least a quarter of the Fairtrade Premium paid to farmers is required to be reinvested in farm quality and productivity. Fairtrade also invests in liaison and quality officers on the ground to train farmers and cooperatives in good farming practices.

“The last thing Fairtrade wants is for coffee to be sold at Fairtrade Minimum prices. That’s why it’s important to us we help producers invest in their quality and production, so it achieves those higher points and gets a better price,” Will says.

“One of the first things a cooperative will do when they become Fairtrade certified is buy their own set of scales, so they know how much they’re selling and can’t be taken advantage of anymore. At the end of the day, Fairtrade isn’t a charity. It’s a development model that says to farmers: ‘you’re in control of your own destiny’.”

With a relationship going back at least 15 years, Bennetts was one of the first coffee importers in Australia to partner with Fairtrade. Over that time, Managing Director Scott Bennett tells BeanScene he’s watched the development of Fairtrade cooperatives, producers, and their communities.

“For farmers, there’s no doubt in the benefits of being in a Fairtrade cooperative and the help and technical assistance that Fairtrade offers,” Scott says.

“But it really goes back to the Fairtrade social premium and what the cooperative wants to do with it. If they want to spend it on a new school, that’s where the money goes. If they want a new hospital, that’s where it goes. It’s different horses for different courses, and the beauty of the Fairtrade system is that it allows that flexibility.”

Though he’s seen the benefits of Fairtrade for himself, Scott admits it can be tough educating the coffee community, especially if they don’t understand the challenges farmers faced before joining the development model.

“You can read as much as you’d like in an email, but until you actually get there and see what they’re dealing with – that people need to walk for hours up the hill every day to get to their coffee trees – that you get an appreciation for the work involved,” Scott says.

One of the Fairtrade cooperatives Bennetts works with in Colombia started with two containers in the 1990s. Now, it produces 80 containers per year.

cost Fairtrade coffee
The Allcity Espresso blend from DC Specialty Coffee Roasters uses Fairtrade-certified coffee from Indonesia and Colombia.

“If you want to better the world and these growers’ outcomes, paying that social premium, about 50 to 60 cents per kilogram, is a small price,” Scott says.

“If you want to lift 1000 people out of the bush and help them produce something that will sustain them for the next 20 years, setting up a Fairtrade cooperative is probably the first thing you’d want to do.”

While Bennetts is passionate about supporting Fairtrade, Scott says they wouldn’t be able to buy the coffee if it didn’t sell, so the quality has to match the price.

“We’ve been working with various cooperatives since they’ve become members of the Fairtrade system. They might start with a low cup quality, but that always improves as a by-product of them managing their farms and processing better,” Scott says.

“Now we’re bringing in these coffees because they’re fantastic in their own right and just happen to be Fairtrade. We’re willing to pay that premium because the coffees stand out that much.”

DC Specialty Coffee Roasters is another longstanding Fairtrade collaborator. General Manager Rob Stewart says Fairtrade has been open to involving and engaging DC as much as possible in the system.

“The more we put into Fairtrade, the more we get out of it,” Rob says. “It’s important to have that third-party validation because consumers recognise and trust it. But there’s more to it than a logo and I’ve seen the difference it can make.”

He says a crucial part of the Fairtrade model is having people on the ground, helping cooperatives and communities identify their most pressing needs and how best to address them. A few of the cooperatives DC works with found the best use of the Fairtrade Premium was to upgrade their skills. 

“We’ve seen that in Sumatra Ketiara [in Indonesia], where most of their Quality Assurance staff have been trained as Q Graders and the cup quality is just fantastic,” Rob says.

“It’s not lost at the top either. They’re even enabled to share this knowledge with the next generation to come through and pick up what they’re putting down. It’s encouraging the young coffee farmers, so we’re not losing this talent because they want to go live in the city.”

Fairtrade has served as a bridge between DC and many producers, taking them to the farms and cooperatives and enabling direct contact over WhatsApp. 

This way, Rob can share his firsthand experiences of Fairtrade and origin with DC’s customers. 

He says the Fairtrade Mark is most valuable when dealing direct to consumer, or you have the opportunity to sit down with a customer and discuss the difference it makes.

“The value plan is extraordinary. When you see the whole chain of how it works and how they reinvest the premium back into their quality, it benefits so much to the community,” Rob says.

cost fairtrade coffee
Café owners are encouraged to support Fairtrade and the long-term sustainability of coffee farming.

“The proof is in the cup at the end of the day.”

DC Coffee Roasters uses Fairtrade-certified coffee in its Allcity Espresso blend, which The Penny Drop in Box Hill, Victoria, runs as its house blend. Owner Steven Liu says serving Fairtrade coffee provides him with reassurance as well as a consistent cup.

“As café owners at the end of the chain, if we go for the cheapest coffees, it’ll work in the short-term, but it won’t be sustainable in the long-term. Farmers will give up growing coffee and that will actually push the prices up,” Steven says.

“I don’t want to have sleepless nights worrying about how the coffee arrived at my café.”

COVID-19 has provided many governments, businesses, and people with an opportunity to analyse how and why we make certain decisions and see the real impacts of our choices. Fairtrade ANZ’s CEO Molly says in order to function long-term, the coffee industry must look at how it can do things better to sustain the livelihoods of the coffee farmers, as well as the markets.

“People say ‘we need to return to normal’, but COVID has shown us that ‘normal’ wasn’t working. Coffee supply chains – in the absence of Fairtrade – unwittingly contribute to grinding poverty, and expect more and more from the people who have the least. A ‘new normal’ can create sustainable livelihoods for all, and ensure quality coffee is a thriving business for the future,” Molly says.

In 2018, Larry Fink, CEO of American investment fund BlackRock said in his annual open letter to CEOs,  “a company cannot achieve long-term profits without embracing purpose and considering the needs of a broad range of stakeholders”. Molly says this was a turning point for many large global corporations, which have readjusted their values accordingly, and that the same rings true for small business.

“Fink conveyed that without purpose, you won’t get profit because you’ll lose your social license to operate. In a social media world, you’re judged before people have even left your premises and access to information sits within their hands, so it will be critical to provide a level of transparency,” Molly says.

“Relying on something not Fairtrade-certified is relying on someone’s word, but who’s measuring that? One of the challenges with ‘self-certification’ is that there’s very little data you can trust and that means a lack of accountability.”

Or, as Steven Liu says: “It’s important as a café owner that you don’t just hope that your coffee is doing good. With Fairtrade, you know it.” 

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This article appears in the February 2021 edition of BeanScene. Subscribe HERE.

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