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Fair Trade by Any Beans Necessary

By Arash Sharma

Early this fall semester, Concordia was officially granted the status of Canada’s 17th Fair Trade Campus by Fairtrade Canada, the Canadian Fair Trade Network and l’Association québecoise du commerce équitable. This certification means that non-franchised and student run cafés on campus will be selling 100 percent fairly traded coffee. Making fair trade coffee available on campus is definitely a step in the right direction, but many students still have a disconnect between a cup of coffee and all the sets of labouring hands across the supply chain. This disconnect emerges from a gap in available knowledge, the willingness to pay price premiums, and trust in the social impact.

Lack of Fair Trade Knowledge

“The first obstacle in consumers' decision making process in the introduction phase of any initiative is a lack of awareness,” said Dr. Bianca Grohmann, a professor of Marketing at JMSB and a scientific committee member at the David O’Brien Centre for Sustainable Development.

Making the decision to buy the coffee requires little mental effort because it involves a habitual behavioural response. Aside from the taste, convenience, and affordability, not many other criteria enter our minds. Waiting to order in line, we do not consider the farmers that planted the crops, the harvesters that picked the beans, or the roasters that prepared the blend. We certainly do not consider whether the workers received a fair living wage, and we rarely evaluate whether the working conditions were safe.

In reality, coffee farmers face harsh challenges such as rising production costs, reduced land availability, and climate change. These factors contribute to an extremely volatile coffee price, which creates channels for poverty, food insecurity, and illiteracy. Fairtrade Canada reports that while coffee is immensely profitable for food companies, small-scale farmers struggle to reap any benefits.

After the 1994–2004 coffee crisis, the oversupply caused a historically low crash in coffee prices whereby growers received only 1–3 percent of the price of a cup of coffee sold in North America, down from 20 percent in the 1970s2. Farmers are also the most adversely impacted by volatile coffee prices. The price of Arabica coffee has fluctuated from a 30–year low of ¢45 USD a pound in 2001 to a 34–year high of almost $3.09 USD in 2011. Later, between May 2011 and December 2013, prices fell by 65 percent again2. This unpredictable volatility severely impacts farmers who are entirely dependent on coffee for their livelihood. Farmers cannot budget their household and farming needs, nor can they invest in resources such as expensive farming machinery, high-tech crops, or irrigation systems to cope with these challenges. When the volatility and competition causes the coffee prices to drop below the cost of production, farmers struggle to sustain basic needs and pay for their families’ school and medical bills. Yet even after knowing about these harsh realities, some consumers choose not to buy fair trade because of financial reasons.

Unwillingness to Pay for Fair Trade Premiums

Evidence suggests that Canadians are price sensitive to fair trade coffee. In 2010, researchers assessed consumer preferences for fair trade coffee by conducting face-to-face interviews with 400 participants in Toronto and Vancouver. Findings supported that price was the most important attribute to consumers, and so, utility decreased with price.

As such, it is likely that the price premium for fair trade coffee may deter many more consumers than one would otherwise expect. Unfortunately, students may also be driven by this price sensitivity. “I know for a fact that students are extremely cost sensitive consumers, so for an everyday thing like our morning coffee we choose to look for the least expensive option,” said Kyle Davis, the President of the John Molson Sustainable Enterprise Committee (JSEC).

Instead of seeking out fair trade coffee, students may find it easier to walk down to Timmies and order their usual, hot and humble double-double to kick-off the morning. However, this option is undeniably less ideal. Tim Horton’s, Canada’s leading coffee purveyor, with 77 percent of the market share, has refused to work with Fair Trade Canada so far. Instead, it offers its own ethical brand, the “Partnership Blend”, which is displayed in stores, yet never actually brewed for customers. Worse still, most coffee shops, and fast food franchises, do not have a mandated minimum price for producers. This means that coffee farmers face unpredictable volatility and have no say in the matter.   

Unlike non-fair trade coffee, fair trade coffee is beneficial because it is 50 percent owned by producers that represent farming and working organizations. This gives producers an equal voice in the decision-making process within the Fairtrade Board of Directors. Further, to counteract the price volatility, there is a mandated Fairtrade Minimum Price, which covers the cost of sustainable coffee production. This initiative offers farmers a crucial safety net to ensure a stable income. In addition, farmers receive a Fairtrade Premium, an additional sum of money that is invested into a communal fund. For each cup of Arabica coffee, the Fairtrade Minimum is set to $1.40 USD per pound, an extra ¢30 USD is paid for organic versions, and farmers receive a Fairtrade Premium of ¢20 USD2.

Dr. Grohmann said that students would be more likely to pay a premium price for high quality coffee from fair trade sources. “Providing product or price related benefits to Concordia students could reduce the perceived risk of trying fair trade coffee.” The trade-off is small, and the slight premium is really manageable, especially since ¢25 discounts are offered to students who bring their own mugs. Irrespective of personal finances, some consumers choose not to participate in ethical consumption because of skepticism towards fair trade claims.

Lack of Trust in Fair Trade's Social Impact

It is true that we cannot shop our way to a more socially just world. The fair trade movement in Canada is still small with a mere 2 percent share in the coffee market4. However, this does not mean that we should stop trying. According to Fairtrade Canada’s Annual Impact Report, farmers received over $69M CAD in Fairtrade Premiums in 2013-2014 and 44 percent of this sum was invested in producer organizations by building facilities, infrastructure, and human resources. Another 44 percent was invested in farmers’ services such as education, health services, and supplementary incomes.

For example, buying an Arabica fair trade coffee will contribute to an organization like the Oromia Coffee Farmers Co-Operative Union in Ethiopia (OCFCU). So far, ethical shoppers have participated in the development of 15 schools, 42 classrooms, 4 health clinics and 56 clean water supply stations in Oromia. Change is a slow and gradual process, and fair trade coffee is a key case in point.

We should not just buy a fair trade coffee as a self-congratulatory pat on the back or an advertisement of our good will. It is important to become engaged in the fair trade conversation. Fair trade is in solidarity with worldwide groups like the OCFCU, albeit, with limitations. Consumers hold less power than governments. The International Coffee Agreement in 1989 kept prices stable for over 25 million coffee farmers. In 2015, fair trade coffee was providing the same function for just three percent of those farmers.  

Dr. Grohmann suggested that students can contribute to a solution by informing themselves, checking for fair trade certifications, and choosing fair trade coffee over alternatives. More importantly, students could help “by discussing the issue with others, such as friends and family, in order to create a higher level of awareness for these issues and motivate students to pursue social responsibility off campus, which may extend beyond coffee consumption and persist even after graduation.”

The Canadian fair trade initiative is brewing. It is now up to consumers to wake up and smell the the fair trade coffee. With every cup, we can either choose to buy fair trade coffee, or support its competition. Next time you read The John Molson Business Review, you may have a cup of organic coffee on your table, and a friend across it to discuss the movement.


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