The Australian, Entrepreneur:
FAIR-TRADE COFFEE
A lot of companies are selling Fairtrade products at a different price to free trade products and pocketing the difference, Ed Charles reports
SOME companies are exploiting the fair and sustainable certification schemes by charging over and above the premium they pay for Fairtrade coffee beans and boosting their own profits.
Getting to the bottom of which is the best and fairest way to buy coffee is a tricky one requiring a deep knowledge of international commodity markets as well as the work practices of developing countries.
The two major certification schemes in Australia are the Rainforest Alliance, which ensures coffee farming is sustainable, and the Oxfam-backed Fairtrade, which ensures coffee farmers also receive a minimum price for their beans.
Tim Wilson, a critic of Fairtrade and a member of the Institute of Public Affairs, says: “What you are finding is a lot of companies are selling Fairtrade products at a substantially different price to free trade products and pocketing the difference. People are just going around and gouging consumers with their profits.”
Oxfam’s CEO, Andrew Hewett, is also aware of the problem, even in cafes near his office in Melbourne.
“We want to increase the number of people who will purchase Fairtraded coffee,” he says. “We’ve seen the market grow and we want to see any barriers to Fairtrade coffee to wither away or be removed. Clearly, price is one of those barriers. I would prefer them not to charge a premium but they are charging a premium and pass the cost on.”
Hudsons Coffee charges online $8.95 for 200g of its Fairtrade coffee, while other blends cost between $7.95 and $8.50 for the same quantity.
Cafe 16 on Little Latrobe Street in Melbourne explicitly states that there is no price differential on its Fairtrade products versus free trade.
At Starbucks, Fairtrade coffee costs less than coffee from its own approved growers who themselves have to meet special conditions. At Jasper Coffee, a Fairtrade pioneer in Melbourne, there is little difference between the cost of its Fairtrade and other blends and it is benefitting from the growth in the market.
According to Ben Romeril, marketing manager at Jasper Coffee, the market for Fairtrade coffee is one of the fastest growing in Australia. In 2003, barely any was sold — about $113,00 worth. In 2006, almost $5.2 million worth of Fairtrade coffee was sold in a market worth about $900 million. That gives Fairtrade a 0.6 per cent share compared to Britain, where the certification has a much higher profile and has about a 20 per cent share of the market through cafes and the shelves of supermarkets.
Romeril says that Fairtrade isn’t necessarily about the quality of product but about philosophy for sustainability. “We are are very keen on rehumanising the supply chain and that’s what Fairtrade is all about,” he says.
“Coffee is the second most traded commodity in the world behind oil. There are plenty of wealthy oil companies but there aren’t many wealthy coffee growers and 50 per cent of the world’s coffee is grown by small-plot farmers. These farmers don’t have any market power and they don’t have the ability to dictate prices. As a result, the market price of coffee is very low and for many of these farmers is below the cost of production.
“The real benefit of Fairtrade isn’t just that it is a higher price but also that it is a guaranteed price. The second aspect is that the farmers are getting a greater share of that higher price.”
Brett Simpson, operations manager at coffee importer HA Bennett & Sons, says that Certified Fairtrade organic coffee costs US151c a pound compared to a base price of about US118c a pound. Different grades can cost up to 40 per cent more and the theory is the price differential goes to the farmers.
In reality the cost of the beans should make little difference to the prices paid for roasted coffee beans or a cup of coffee bought in a cafe.
Most micro-roasters will pay between $5 and $8 a kilo for the green coffee that they roast, some, such as St Ali in Melbourne, even visiting them to help with the harvest.
About 20 per cent of that coffee will be lost in roasting. The costs of roasting equipment and packaging add about another $3 to $4 a kilo.
Phillip Di Bella, founder of Brisbane-based roaster Di Bella, says he makes a net profit of $10 on every kilo of roasted beans, which retail for just under $30.
Caption: `Rehumanising supply chain’: Jasper Coffee’s Ben Romeril Picture: Andrew Henshaw
Illus: Photo
Column: Entrepreneur
Section: FEATURES
Type: Feature
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