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Fair to the last drop?

Not long ago, 'fair trade' coffee was hopelessly fringe. Today you'll find it at Starbucks, Dunkin' Donuts and even McDonald's. For some, this proves the movement has arrived. For others, the label has lost its meaning.

Flora Montenegro and her husband Antonio on their small coffee farm in the Jinotega region of Nicaragua, where they produce Fair Trade Certified coffee for export to the United States.
Flora Montenegro and her husband Antonio on their small coffee farm in the Jinotega region of Nicaragua, where they produce Fair Trade Certified coffee for export to the United States.

Dean's Beans, a coffee company in the rolling woods of Orange, north of the Quabbin Reservoir, comes across like a hyperactive little international development organization: The company shares profits with farmers and funds reforestation initiatives, health programs, and women's loan projects from Nicaragua to Ethiopia. Its 10 employees enjoy profit sharing and full retirement plans and the company contributes to programs for the disabled and the homeless across the state.

But first and foremost, Dean's Beans sells only coffee that has been bought directly from family farmers according to internationally-recognized "fair trade" practices.

The fair trade concept, which originated among European importers in the 1970s, is straightforward: Rather than using their superior bargaining position to drive prices as low as possible, coffee buyers from wealthy countries establish trading relationships with suppliers in developing countries that advance the needs of both. It's an explicit acknowledgement that there's something wrong with pitting impoverished Third World farmers against one another--growers in Vietnam, for example, versus growers in Guatemala--to shave a few pennies from a pound of coffee.

The familiar black-and-white fair trade label embodies this mission. Beyond the fact that the farmer was paid a premium above world commodity prices, the label means the coffee was grown and exported by a democratically-run cooperative of small family farmers, and that direct financing was available to the farmers. Small farmers trading in the conventional manner must rely upon loan sharks and rapacious middlemen. For many, the fair trade system has meant the difference between keeping their land and farming successfully or losing it and drifting into urban slums.

Since 1999, when Oakland, Calif.-based TransFair USA introduced the fair trade label and began licensing roasters to use it, more than 100 million pounds of Fair Trade Certified coffee have been sold in the United States. The fair trade label is now in use by more than 500 companies in the United States, including giants like Starbucks, Dunkin' Donuts, and even McDonald's. Wal-Mart is currently testing fair trade coffee in stores in Texas, a development that would have been unimaginable just a few years ago.

"Our claim is quite simple," says Paul Rice, TransFair's founder and CEO. "When you see our label on a bag of coffee, no matter where you find it--whether it's your local natural food store or a Costco or a Sam's Club or a McDonald's--you are guaranteed that those farmers got a fair price and that they're living a better life."

And yet, as good as all this sounds, fair trade is at a crossroads. As it becomes ubiquitous, idealism is giving way to marketing, leaving some early proponents feeling sidelined as big companies adopt the label they worked so hard to create.

"TransFair USA is paying a lot of attention to large companies with meager commitments to fair trade," says Dean's Beans founder Dean Cycon, "and not paying a lot of attention to the dedicated people who are 80 to 100 percent fair trade."

Three years ago, frustrated by large companies making superficial commitments to a concept he helped pioneer, Cycon removed the fair trade label from his coffee. "Fair trade is supposed to be a movement about social change," says Cycon, "but it is turning into a marketing exercise."

. . .

Fair trade's first wave of growth came as specialty coffee--the dark-roasted beans and espresso-based drinks most associated today with Starbucks--was revolutionizing the way Americans administered their caffeine. The National Coffee Association reports that almost three-quarters of American adults now drink specialty coffee at least occasionally. And specialty coffee accounts for more than half the value of the $20 billion US coffee market.

As the fastest-growing element of the sector, fair trade is reaching critical mass. According to TransFair, one in four people nationwide has heard of fair trade, and sales of fair trade coffee are doubling each year, allowing TransFair to apply the label to other products like tea, chocolate, spices, rice, sugar, and fruit.

In 2003, when Canton-based Dunkin' Donuts decided to begin selling espresso drinks, the company announced that all of its espresso would be Fair Trade Certified. Suddenly, Dunkin' Donuts was one of the largest roasters of fair trade coffee. For many in the coffee industry, this was the singular event that announced fair trade had arrived. It also confirmed New England's position at the forefront of the fair trade movement: Equal Exchange, a roaster in West Bridgewater, introduced fair trade to this country in the 1980s, and Vermont-based Green Mountain Coffee has helped take the label mainstream.

Yet just two decades ago fair trade seemed hopelessly fringe. Equal Exchange was founded in 1986 in order to put the then-nascent fair trade concept into practice. The company embarked on a tireless educational campaign, selling not just coffee, but the idea of fair trade in natural food stores, college campuses, and places of worship.

"We were ridiculed by the coffee industry for being naive," says Rob Everts, Equal Exchange's codirector. "The conventional wisdom was that you couldn't pay small-scale producers more than the world commodity price and still expect to compete at retail. And we believed that you could."

The company has since been vindicated. With 4 million pounds of coffee projected to be roasted this year, nationwide distribution in mainstream outlets like Shaw's, and an annual growth rate of more than 25 percent, Equal Exchange remains by far the largest 100 percent fair trade coffee roaster in the nation.

From the start, the fair trade label has been more than just a way for consumers to reward companies for doing the right thing--it is progressive trade and development policy transformed into a product on the supermarket shelf.

The concept's early proponents embraced this radical message. "It was alternative through and through," recalls Everts. The company's first coffee import, from Nicaragua, was explicitly intended to challenge the Reagan-era embargo against the Sandinista government. TransFair's Paul Rice spent the late 1980s helping coffee farmers set up cooperatives on lands seized from Somoza cronies.

Now, the activist-roasters who laid the groundwork are facing a new reality: After decades of working on the fringe, companies like Equal Exchange have created a market that the industry's largest players are eager to enter. To Everts, that just means they've been doing something right all along. "We've always known that to really do damage, Equal Exchange would never be of the scale to do it by ourselves. We sought competition and now we have it, and we're glad."

Last year, in an effort to boost its flagging morning business--a time of day when it competes with both Dunkin' Donuts and Starbucks--McDonald's began to revamp its breakfast offerings at more than 600 Northeast restaurants, adding Newman's Own coffee, roasted by Green Mountain and bearing the fair trade label.

But to Dean Cycon, the new competition is just using fair trade to sell coffee, rather than to change the world. Cycon fumes when companies like Starbucks feature fair trade prominently in their marketing materials, as though it were just another exotic flavor of coffee. Although Starbucks roasted 11.5 million pounds of Fair Trade Certified coffee in 2005--more than any other roaster in the world--it includes just a single Fair Trade Certified blend among the more than 40 coffees in its stores. And it has steadfastly refused to add more fair trade lines since it started using the label in response to a consumer boycott six years ago.

"If you're going to do any fair trade," Cycon says, "you have to do 100 percent fair trade, because there's no ethical justification for anything less."

Starbucks is widely considered a good corporate citizen, and if it is dragging its feet on fair trade, it has numerous other programs for workers and farmers it can point to. But as companies with less stellar reputations begin to adopt the label, they can find themselves facing awkward questions.

Shortly after McDonald's started selling fair trade coffee late last year, the Coalition of Immokalee Workers, a group advocating better conditions for Florida farm workers who grow McDonald's tomatoes, seized on the hypocrisy of touting "fair" conditions for some farmers but not others--prompting McDonald's to play down fair trade after the initial marketing splash.

Indeed, as bigger and bigger companies have gotten involved, some fair trade provisions have been de-emphasized. Financing, which is in practical terms more important to many farmers than selling at a premium of a few more cents per pound, is becoming less available. Companies are required to offer it if requested, but as Cycon and others note, multinationals don't make it a priority and many farmers fear losing a contract if they ask.

Worse, there has been persistent pressure from large roasters to open certification to big plantations--a move that would directly undermine the fair trade concept, which promotes the interests of small family farmers. Everts says such a development would push Equal Exchange to drop the label and follow Cycon's lead down a more stringent, independent path.

. . .

It's with good reason that larger companies are looking at fair trade. Customer loyalty to the concept is tremendous: According to the National Coffee Association, more than half of coffee drinkers who have heard of fair trade buy it--nearly twice the rate of organic.

But its penetration outside specialty coffee is minimal. The United States consumes more coffee than any other country: 2.3 billion pounds each year. That's 23 times more than all certified fair trade sales in this country--ever. But more than 80 percent of it is the kind of low-quality conventional coffee you find in cans on the supermarket shelf: brands like Folgers and Maxwell House that are far more interested in buying cheap beans than worrying about fair trade certification.

So Wal-Mart's interest could mark the beginning of a new, much larger phase in fair trade's growth, even if, in the eyes of Cycon and other hardcore fair traders, the ends don't justify the means.

That may sound like sour grapes, but Cycon and other critics say that allowing companies to trumpet minimal fair trade offerings undermines the movement. It can give the impression that, for example, entire brands are certified, rather than just individual coffees. "It gives the public a very false sense, not only of the participation of those companies," he says, "but a false sense that something's being done."

TransFair's Paul Rice says that the success of his label is based on the easily-measured bottom line it brings to social justice. Ninety-five percent of fair trade sales this year will be through companies selling less--usually substantially less--than 100 percent fair trade. Yet since the label was introduced, purchases have sent more than $75 million in additional income to 800,000 people in 25 countries--people for whom earning a few cents more on each pound of coffee can mean keeping the kids in school, better nutrition, and eluding the worst forms of debt.

"Frankly, from the farmer's perspective," says Rice, "they're happy to sell into any corner of the fair trade market regardless of who the company is."

Gregory Dicum is the coauthor of "The Coffee Book: Anatomy of an Industry from Crop to the Last Drop" (New Press).

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