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110. Coffee quality: Fair Trade’s competitive advantage

Roast Magazine‘s recognition of Conscious Coffees as its Microroaster of the Year has prompted me to reflect here this week on the connection bewteen Fair Trade and quality.  Yesterday I suggested that Fair Trade has little to do with quality on the roasting and retail end of the coffee chain.  On the sourcing end, however, I believe that there are elements of the Conscious Coffees trading model that help it get a leg up on the competition.

Conscious Coffees is a member of Cooperative Coffees, a sustainable coffee importer that directly sources Fair Trade, organic coffees from smallholder farmer organizations.  Three elements of this trading approach seem to me to be relevant to the ability of its member roasters like Conscious Coffees and Kickapoo Coffee (Roast’s 2010 Microroaster of the Year), to source quality coffee.

  • High prices.
    Cooperative Coffees has been a leader in terms of its pricing.  In 2005, before FLO launched its formal price review, Coop Coffees increased its guaranteed minimum price and organic differential.  In 2007, while FLO was still reviewing minimum prices, Cooperative Coffees raised its guaranteed minimum prices again.
  • Transparency.
    Coop Coffees has also been a leader in terms of transparency.  At Fair Trade Proof, it publishes the document trail for every lot of coffee it buys, including pricing information.  The ability to show this information to farmer organizations gives a roaster a lot of credibility when it says it works to achieve stable, long-term relationships, leaves contracts open so farmers aren’t left holding the bag, and pays high prices.

I believe that Direct Trade is a subset of Fair Trade, and therefore there is no Fair Trade vs. Direct Trade. It is very possible for a Fair Trade Certified roaster to be also a Direct Trade roaster – and vice versa – there is much common ground between the two. I don’t want to support a false dualism. There are, however, Fair Trade Certified companies who don’t “do” the Direct Trade thing, and some companies use Direct Trade as a kind of substitute for Fair Trade in their language.

Direct Trade roasters might say that the trading practices highlighted here — high prices, transparency and direct trading relationships — are defining characteristics of their approach.  (Combined with yesterday’s reference to quality obsession, this list is not far off from the Direct Trade Coffee Club roaster pledge.)  There may be, as Peter suggests, plenty of overlap between Fair Trade and Direct Trade.  But the historical fact is that the trading practices that have become defining characteristics of Direct Trade originated with Fair Trade.  This is a point I made in a case study on Fair Trade coffee in Nicaragua published last year in a CRS publication on linking smallholder farmers to markets.  (What?  You didn’t read that?!?)

Fair Trade principles are being adopted beyond the Fair Trade marketplace. Fair Trade started more than 60 years ago as a development program, but it has made a business case for trading models that give farmers a fair say, a fair share and a fair chance in the marketplace. More and more, buyers in the market for specialty coffees are adopting traditional Fair Trade practices, whether they sell Fair Trade Certified coffee or not. They have come to recognize what Fair Trade’s pioneers knew from the beginning: the retailer’s ability to meet the demands of its consumers depends on the strength of the chain that connects it to producers.

Over the long run, this may be Fair Trade’s greatest legacy.  In the meantime, with a quality coffee supply crunch looming, it is likely that more roasters will move to embrace these principles.  While this could mean higher returns for farmer and higher quality for consumers, it may mean the lines between Fair Trade and Direct Trade may remain blurred for the foreseeable future.

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