Hope you’ll clear this out for us.

RE:1. “Why shouldn’t it be about a percentage of the sale price going to the farmer?”

Answer: Among other reasons because it would be impossible. Take just Fair Trade chocolate in one country, the U.S. There are over 100 distinct fair trade chocolate products on the U.S. coming from companies ranging from mom & pop firms to the largest multi-nationals. Some buy organic cocoa and some don’t. Some use FT sugar and some don’t. So we, the producers of FT chocolates, have very different costs. + The chocolates are sold at thousands of retail locations ranging from tiny expensive boutique shops in Manhattan to big box discounters in Kansas. So while the higher prices paid to farmers remains constant no matter what the eventual retail prices are, naturally, all over the place and are impossible to coordinate or control.

RE: 2. “The strategy of the Fairtrade Labelling Organisation – which I was given following a Freedom of Information request to the British government – shows that they’re contemplating moving away from exclusively working with co-operatives.”

Answer: For now and the foreseeable future FT cocoa will come from cooperatives. But you’re right that plantations are playing an increasing role in the FT market for _other_ categories (like fruit) and already dominate FT tea & cut-flowers. As we have stated repeatedly elsewhere on this blog we oppose the inclusion of plantations in the FT system.

RE 2 (con’t)” . . . there appears to be evidence that these are *should-bes* rather than proven to be available in every case. For example, I have seen reports that credit should be available but often is not.”

Answer: good point and something we’ve seen in the FT coffee sector and so is probably true w/cocoa, too. Unless our chocolate mngr (unavailable right now) has better information I’ll agree that the provision of credit could vary depending on which brand of FT chocolate you pick up.

RE: 3. “I’d be interested to know if there is evidence of that occurring in every case. In my reading, there are many suggestions of bad practice amongst co-ops.”

Answer: We’re not claiming that the co-op sector is perfect – no realm of human endeavor is – but rather that it is better than the status quo and that it systemically increases the chances for desired outcomes like equality, fairness and broad-based economic development. Also, the Fair Trade certification process can (and historically has) identify way-ward co-ops and remove them from the Fair Trade register.

RE: 4. “Again, I think that is a very unusual case.
& 5. Sure this is true. But as most of this work is done in Western countries primarily, it is also true that a disproportionate amount of the value of a chocolate bar remains in rich countries, no?”

Answer: Fair Trade increases the chances of value-added production shifting to producer countries. That it is uncommon now is not a argument against supporting FT, rather it points out the need for _more_ Fair Trade.

RE: 6. “Well, apples and pears. There are many different kinds of chocolate bar and many different kinds of fairtrade chocolate bar sold by a variety of vendors. I don’t think it is possible to state definitively that there is ‘little difference in cost’ – academic studies indicate that there is clearly a difference. And anyway, some of the gourmet chocolate brands have social policies which are as good, or better, than those advocated by the fairtrade system.”

Answer: If you can send me links to the academic studies I’d be happy to take a look and see if I need to modify what I wrote. So stay tuned on that.
Likewise I’d welcome links to social policies of other brands that you think you believe are as good or better than Fair Trade. There’s at least that I think is impressive (www.kallari.com ) but I think it also sells for about twice the price per oz of Equal Exchange chocolate.

Re: 7. [about achieving economies of scale ]“Which is a noble aim. The question is whether it has any hope of fruition.”

Answer: we have to try don’t we? It certainly will not happen if we don’t. Plus, though we are still a small coffee company, we are now handling over 5 million pounds a year and have lower per-unit-costs than we did 10+ years ago when we were much smaller. So that’s an encouraging precedent.

Also thanks to Joe for his remarks.

It shouldn’t it be about a percentage of the sale price going to the farmer, Rodney says. I think he’s right. When you take the common unfair trade system for granted, that is. I know he isn’t taking it for granted.

We’re talking about consumer products here. Consumers usually don’t want to bother about economics too much. They want to do good.

That’s why we have to do our best to our story as good as possible.

You certainely know of this approach: Arlene Birt’s work.

Please also click the link ‘Backgroundstories’.
What do you people over here think about this?

1. Why shouldn’t it be about a percentage of the sale price going to the farmer?

2. The strategy of the Fairtrade Labelling Organisation – which I was given following a Freedom of Information request to the British government – shows that they’re contemplating moving away from exclusively working with co-operatives. As to your other points, there appears to be evidence that these are *should-bes* rather than proven to be available in every case. For example, I have seen reports that credit should be available but often is not.

3. I’d be interested to know if there is evidence of that occurring in every case. In my reading, there are many suggestions of bad practice amongst co-ops. The thing is that most fairtrade is not sold by eq-ex – hence most brands are not as careful as you arr.

4. Again, I think that is a very unusual case.

5. Sure this is true. But as most of this work is done in Western countries primarily, it is also true that a disproportionate amount of the value of a chocolate bar remains in rich countries, no?

6. Well, apples and pears. There are many different kinds of chocolate bar and many different kinds of fairtrade chocolate bar sold by a variety of vendors. I don’t think it is possible to state definitively that there is ‘little difference in cost’ – academic studies indicate that there is clearly a difference. And anyway, some of the gourmet chocolate brands have social policies which are as good, or better, than those advocated by the fairtrade system.

7. Which is a noble aim. The question is whether it has any hope of fruition.

8. Most consumers do not understand marking up – in very general terms, wholesale products are often marked up by a set percentage. Hence products which were originally only a small amount different in price are magnified down the chain.

Good question & a common one, but also one that misses the point and reflects how most people (& I’m not assuming this includes you) do not understand how retail prices are set or by whom.

1st, Fair Trade is _not_ about the idea that X% of your retail purchase goes to farmers.

2nd, Fair Trade _is_ about all of the following, and all of which are true in the case of a Fair Trade chocolate bar:
- The cocoa & sugar was exported by a small farmer co-operative, not a plantation or other traditionally dominant player in these industries. This helps to level the playing field in these growing communities; introduces an element of economic democracy where historically a small handful of people or families wield great economic & political control; helps these small growers to move up the value-chain to where profits are usually greater, more consistent, and which lowers their overall risk.
- The growers are guaranteed a better price than what they would have gotten otherwise – sometimes much more.
- The growers are protected from the periodic busts in commodity market prices that often go to crippling low levels.
- The growers get improved access to affordable credit.
- The growers are guaranteed a premium for certified organic cocoa or sugar. While NON-Fair Trade organic importers sometimes pay premiums for organic, it is also true that sometimes they don’t. With Fair Trade the premium is guaranteed.
- Even with non-organic Fair Trade cocoa many of the most dangerous agricultural pesticides and herbicides are prohibited. This really matters as one of the persistent problems with conventional cocoa farming is the wide spread application of pesticides with little or no safety training or equipment, often by very young people, including teenagers. Fair Trade rules help to lower the otherwise high risks of toxic exposure & chemical poisoning.
- Fair Trade rules, and the farmer co-op’s vested interest in maintaining their access to the Fair Trade market, also help to eliminate the risk of there being forced child labor on cocoa farms (a problem in the Ivory Coast – source of 50% of U.S. cocoa). Were one farmer to break this rule it would be in the interest of his/her fellow co-op members to stop/correct the farmer or kick them out of the co-op.

3rd – a further point about the importance of co-ops. Over the last week, we had representatives visiting from the CONACADO Co-operative in the Dominican Republic. Time and again they noted that even if the price were the same, when they were unorganized and selling through the dominant exporter, farmers would only receive 30-40% of the market price. Organized as a cooperative that has direct access to the market, farmers now receive 70-80% of the market price and the rest of the money goes into running the business they own and control.

4th – To the extent co-ops _can_ move up the value chain (as we are seeing now with our organic baking cocoa and our partner, CONACADO, in the Dominican Republic) than the portion of the retail price going to the growers increases beyond what you cited.

5th – Unlike coffee, and very unlike tea or bananas, with a chocolate bar there is simply A LOT of work involved in making a chocolate bar that happens after the cocoa beans, or sugar have been exported. This includes processing the cocoa nibs, separating out the cocoa butter, conching, sourcing other ingredients like vanilla, nuts, milk powder, actual production of the bar, maintaining an often refrigerated supply chain between manufacturing, warehousing and shipping, and more). And all of that work is going to be reflected in the final price. BUT that does not change the fact the farmers are still getting a much better deal, even though there portion of the final retail price might be lower than some at first expect.

6th – You have to compare apples to apples. In this case one needs to compare a gourmet, organic Fair Trade bar to another gourmet, organic, NON Fair Trade bar (like maybe Dagoba or Nirvana) not to a Mars bar. One will see a much smaller – if any – price difference.

7th – There is the matter of economies of scale. Even if or when all other factors are even, smaller producers like ourselves or Divine chocolate will not have the large production runs of Hershey or Nestle that help to lower per-unit costs. But if we can keep growing then maybe that will change.

8th – the retail price is set, of course, by retailers. So sometimes we and other 100% Fair Trade brands are selling, at wholesale, at pretty competitive prices, yet a retailer might conclude that Fair Trade has a cache or value-proposition that shoppers will pay extra for. So the retailer might mark up the Fair Trade bars more than non-Fair Trade bars.

9th – I’m kidding. I’ll stop here, though seriously I could add another 3 or 4 factors. Most readers probably didn’t get this far anyway.

thanks for your reaction on my comment.

Since your blog seems to be the only place in fairtradecyberspace which takes interest in answering questions, here’s another one:

A recent online-article claims:

“you can’t challenge the facts: only about 5% of the price of a Fairtrade chocolate bar even makes it to the relevant country. So when you pay that 20% more for the Fairtrade feel-good factor, where do you think all that money goes?”

This seems to be true for the chocolatebars of Oxfam Fairtrade in Belgium, according their website:

“3,5% of the consumer price goes to the producers of cacao;
2,19% of the consumer price goes to the producers of sugar;”

What’s your opinion as a fairtrade company?

Thanks for your interest. I asked Rodney North to respond to your observations and questions and this was what he wrote:

At Equal Exchange we’re familiar with the excuse that X or Y company or product cannot be switched to Fair Trade because there is insufficient supply. The same has often been said regarding switching to organic ingredients. We’ve heard this line in industry after industry (coffee, tea, etc) over the last 15 years and it always comes after the industry first attacked Fair Trade as unnecessary, and then they’ll explain that’s Fair Trade actually bad for farmers, and then they say ‘we’d like to but there’s too little supply’ and then, finally, they just go ahead and begin to buy on Fair Trade terms, usually in small amounts and scale up from there.

One problem with this rationalization is that when it comes to other desired items or commodities corporations are fully prepared to do whatever it takes to create the supply that they need. They just need to decide to do it. Consequently, if in fact there is ever a lack of Fair Trade supply in a given commodity at some point it often reflects that the mainstream had done nothing to spur the supply, and has actually often actively undermined the existing Fair Trade infrastructure (that’s a story for another post.)

Another bigger problem with the “too little supply rationalization” is that it is usually not true. Regarding the Kit-Kat matter take these pieces of data.

▪ Total annual global cocoa production is approximately 3,350,000 tons (metric)
▪ 90% of all cocoa is grown by small-scale farmers, most or maybe all of whom could be organized into Fair Trade eligible co-operatives.
▪ Existing Fair Trade co-operatives are already expanding. For example, one who is helping supply the kit-kat cocoa, Kavokiva, already has 2,000 farmers waiting to join.
▪ There are many initiatives already underway, funded both by industry and government programs to create &/or strengthen and expand cocoa farmer co-operatives.
▪ The cocoa required for kit-kats in the UK & Ireland (the countries where Kit-Kats now use FT cocoa) is only 16,000 tons
▪ Assuming that the total requirement for all Kit-Kats produced worldwide was 100,000 tons (an extraordinarily high #) it would still require only 3% of the total global cocoa supply, and easily manageable number.

Lastly, here are some links with interesting further detail on the Kit-Kat conversion and some of the co-ops who are supplying the cocoa.

http://www.fairtrade.org.uk/press_office/press_releases_and_statements/december_2009/kit_kat_gives_cocoa_farmers_in_cte_divoire_a_break.aspx

http://www.fairtrade.org.uk/producers/cacao/kavokiva_cocoa_cooperative_cote_divoire_2.aspx

http://www.fairtrade.net/single_view1.html?&L=0&cHash=74d2bc51cb&tx_ttnews%5Btt_news%5D=117

At this moment it wouldn’t be a good idea for Nestlé to turn KitKat 100% fair trade all over the world, since there’s just not enough fairtrade labelled cacao on the market at the moment.

And what about sugar? Another main ingredient for choclate bars?

Steven

For all the conscientious consumers out there struggling between whether or not fair trade from company x is the same as fair trade with mammoth corporation x, something that I have realized more and more as I’ve worked at Equal Exchange over the last year is how much our dollars directly equate to supporting whichever company we choose to buy from.

I have come to further appreciate how much it means to a company like us that people spend their money on our products verses a huge corporation. We work in a co-operative here, work with other participatory organizations (i.e., small farmer co-ops, etc.) and have a voice, and I want to support us and other companies with good missions and workplaces with my money. After starting Equal Exchange with some skepticism (as I didn’t know who to trust in general), I gradually found not only the standards but the entire mentality of this co-op to go beyond what I was even hoping it might be in terms of social & economic justice- which is pretty awesome! : )

This is similar, too, to other worker-owner co-ops I have seen, such the janitorial co-opeartive my father’s with in Cincinnati, Interfaith Business Builders/Cooperative Janitorial Services. I see how deeply it means to people and communities who are often ignored in society to have opportunities to create a healthy, strong business together, and how much contracts with them mean in comparison to contracts with companies that don’t treat the workers well (things are different if you own it!).

As one of our Co-Executive Directors recently noted, at Equal Exchange we sell products in order to engage people in social justice. This is very different to me from selling a product mainly for profit, that might happen to have some standards thrown in to do a little good (or look a little better as a company). This is the type of company I want to support, even if a huge corporation does have some standards. If I have the choice as a consumer, quite simply, why not support a company that more fully creates the world I want to see over a company that is not as fully doing so?

In my personal life, I’ve been trying harder to shop at places that align more with my values. Not to get all elitist here, because I realize I’ve had the luxury of having circumstances to take that effort and live in a neighborhood condusive to this. So, you know, do what you can and a step at a time is a pretty good start I think, eh?

Hence, I conclude with that while Nestle’s doing some fair trade isn’t all bad, and seems like it might be good in some substantial ways (which is great, too, and especially for the time being, since groups like us just aren’t ubiquitous enough yet to reach the very corners of the broader public), still- as a consumer with options and education on these issues, why not support an organization that is fully committed to social justice and support them to grow the social justice movement?