Precio socavado del Comercio Justo – Combos y el Poder del Mercado

In September 2019, a Facebook post by Ángel Barrera caused quite a stir. The green coffee trader from Belco described in detail how certified Fair Trade* coffee is sold below the Fair Trade price in questionable deals. This works when Fair Trade coffee is sold as part of a mixed invoice with conventional coffee.

At the end of the day, consumers are exploited in their ignorance. It is a thorny issue, as it calls into question the credibility of fair trade, puts roasters in a dubious position, and can harm producers in the long run.

At the same time, it is just an anecdote from a much broader discussion: Where is the journey of certified coffees heading? What about consumer trust in labels? Do we need a new certification for "truly fair" coffee that can guarantee a living income? Will this continue to be done through labels, or will Blockchain take on this task in the future?

As coffee makers, we aim to understand complex issues, address unpleasant things, integrate loose ends into a whole, and convey what we have learned. That is why we have decided to use this article to illustrate the various facets of "Combos and Co."

We spoke with Max Havelaar of FairTrade, with large roasters, with retailers, and with traders and producers, to gain and understand different perspectives.

So, what is all this talk about? The short answer is… it's not easy. The longer answer is provided here in a structured way.

For this purpose, we have provided a "self-check" for all roasters. Perhaps you, as a roaster, don't know if you are buying coffee from a combo? Raphael Studer, CEO of Algrano has done the math for you. With Peter Lerch, we were able to get another expert who examined the facts and calculations in a counter-version.

We treat all sources anonymously, except for those who have given us their consent. Many thanks for your trust, the courage to face injustices, and to find clear words.

In three parts, we will discuss what the challenges and opportunities are, and what paths can lead us out of the dilemma.

Benjamin Hohlmann and Philipp Schallberger. Original article in German.

Spanish Translation: Kleber Cruz

*The word "Comercio Justo" is used as a synonym for "FairTrade."

---

 

Combos: when fair trade is no longer fair

Producers as part of the whole

Imagine the following scenario: You are one of the approximately 15 million small coffee farmers worldwide and you grow coffee on your farm or plot, which is no larger than three football fields. You belong to a cooperative that is your central partner for all coffee-related matters.

The cooperative gives you access to agronomic knowledge that might otherwise be denied to you. The cooperative gives you the opportunity to buy seedlings and obtain fertilizers and pesticides at a lower cost. The cooperative also buys your coffee cherries, processes them into transportable coffee, and brings your coffee to the world. The cooperative can be a gateway to the coffee world for coffee farmers. A gateway that can provide access to markets that could not be reached as an individual.

How FairTrade – Max Havelaar works

The certified FairTrade coffee market is one such market. FairTrade International certifies cooperatives, but not individual producers. Grouping producers into a cooperative allows Fair Trade to reach more producers at once and establish democratic structures in the sales organization. Thus, fair trade can help individual producers gain more market power. Producers are now asked to follow FairTrade International guidelines themselves in order to market their coffee as certified Fairtrade coffee in return.

Marketing under the FairTrade label, or Max Havelaar in Switzerland, guarantees a minimum FOB price of 140cts/pound (a bare pound: 0.457kg). In addition, a Fair Trade premium of 20cts/lb is paid to the cooperative. The cooperative must be democratic regarding the use of the common premium fund and invest in long-term projects or necessary infrastructure.

Minimum Fair Trade Price FOB 140 cts/pound 3.08 USD/kg from which the exporter's costs from the country of origin are deducted (transport, paperwork, etc.), drying services (peeling, grading, cleaning), storage costs, financing costs of loans.

Total deductions according to the cooperative in Peru amount to 25 cts/lb 55 cts/kg. Cooperative X obtains from the FOB price approx. 115cts/lb 2.53 USD/kg. Cooperative X receives a Fair Trade premium of 20 cts/lb 0.44 USD/kg.

Minimum Fair Trade Price	140 cts/pound	3.08 USD/kg
from this amount is discounted
Exporter country of origin (Transport, export procedures)
Processing/plant services (cleaning, hulling, sorting)
Warehouse costs
Financial costs for credits
Total discounts according to the Coop of Peru	25 cts/lb	55 cts/kg
Cooperative X receives from the FOB price	ca. 115cts/lb	2.53 USD/kg
The Cooperative receives the FairTrade premium of	20 cts/lb	0.44 USD/kg

 

“140cts/lb is a figure that for a long time was considered a price level for washed coffee, where coffee can be produced at a cost-covering level with a small margin," says Peter Lerch in a podcast with us.

However, these 140cts have lost value in recent years as fertilizer, living costs, and labor have become more expensive. Nevertheless, in contrast to the coffee price on the stock market, the 140 cts. have performed significantly better in most cases in recent years.

The chart shows when the market price was higher than the Fair Trade minimum price (blue) and when it was lower (brown).

Source: https://www.fairtradecertified.org/news/fair-trade-coffee-myths

At times when the stock market price fluctuates strongly and repeatedly falls below the psychological threshold of 100cts/lb, these 140cts/lb are a blessing for many producers because they guarantee a minimum price. Or rather: if they guarantee a minimum price.

A saturated market

The roasted coffee market is huge. At least one in two people on this earth drinks coffee. According to the ICO, the number of coffees consumed worldwide is increasing at an annual rate of between 1.5 and 3%. Coffee consumption is also increasing in Europe, although less rapidly than in emerging coffee markets in Southeast Asia and South America.

In Europe, the coffee market appears to be largely saturated; it has a less broad but deeper base. For years, the market has been diversifying into single-serve coffees, such as capsules, but there is also a growing appetite for whole bean coffees, which are being used in increasingly better fully automatic machines.

Interestingly, this is precisely where two markets that are particularly interesting to us in our endeavor differ: the German and Swiss coffee markets. The two markets differ significantly in some respects. In Switzerland, single portions are the sole market leader for end-consumer consumption, while in Germany, "whole bean" is still the best-selling product, even with more competing products.

The market in Germany is price-driven, according to a source from a major German roasting company. In Switzerland, we sometimes find ourselves in a kind of "buying bubble." In Germany, less money is spent on food than in Switzerland. This is no different with coffee.

The German Coffee Association confirms that only 12% of all coffee in the roasted coffee market is certified – including organic, Fair Trade, Rainforest Alliance/UTZ certifications. The total FairTrade certification in Germany only reaches 4.9%. (Confirmed in the TransFair 2019 Annual and Effectiveness Report – download here).

 

We know from an Instagram chat at the Darboven roasting plant that the proportion of FairTrade certified products is also just under 5%. Darboven therefore corresponds to a part of Germany, but the FairTrade percentage is still frighteningly small.

“The fair trade coffee market is developing slowly and only growing minimally,” says another source from a medium-sized German roasting company.

For the German coffee market, which is usually very sustainable and deliberate in its approach to the outside world, 4.9% of fair trade coffees is not much. And somehow this is the truly absurd thing about the whole matter: Fair Trade has become an idealistic criterion for “correct coffee consumption” for many people, but the reality of buying coffee simply looks different.

Philipp Schallberger & Benjamin Hohlmann

 

The reality looks even worse than expected. Only about 33.8% of certified FairTrade green coffee ends up in a roasted coffee product designated as Fair Trade. FairTrade notes that this is, after all, an increase of 15% since 2016. And yet: the remaining 66% of certified FairTrade coffee must be sold on the conventional, i.e., uncertified, coffee market, even though it meets all the requirements for a premium. And who covers this loss? No one. Once again and with full clarity: 66% more certified Fairtrade coffee is produced than finds buyers!

FairTrade coffee as a SALE offer

The glaring surplus of Fair Trade certified coffee then triggers strange flowers on the retail side: again and again we see Fair Trade coffee offered with special discounts in supermarkets. Several roasters are also starting to sell fair trade coffees at discounts. It is really difficult for us to see the full conviction of the retailer or roaster for a certified product.

Certainly, attracting customers to the supermarket with tempting offers for one product, who then buy other products, brings additional sales and keeps the capital machine running. But the message that you can get "fair coffee" at "cheap prices" is then simply wrong – because it doesn't work that way.

Yes, we are seeing the price pressure of the retail market; yes, we are seeing that cheaper is still great in many places. But there are certain products, such as those from Fair Trade, that are disqualified in this race for the lowest prices. We can all hold a discourse on sustainability, fair prices, etc., but if at the end of the day fair trade coffee is no longer fair, we are all deceiving ourselves.

The main thing is that green coffee is sold

Remember the thought experiment at the beginning of this text? You as a small coffee farmer? Then we go back there, somewhere on a small farm near the Equator. The cooperative management is currently in contact with potential buyers who need Fairtrade certified coffee, preferably "a coffee with a story," as if there were coffees without a story. You as a producer are part of this story, even more, only through your work can someone far away tell a story.

Potential buyers analyze the situation clearly: they know that in their domestic market the demand for Fair Trade certified coffee is stagnant. At the same time, buyers see that cooperative members have produced a lot of coffee. Of the total of 50 containers they produce together each year, 25 are Fair Trade certified. The potential buyer needs a total of two containers of FT coffees, but sees that their demand is less than their supply. The cooperative management can also see this – after all, they are businessmen, as Pablo (fictitious name), the head of a Honduran cooperative, told us.

"Look," says Pablo, "if I can sell 2 instead of 1 container, but remove 1 container of FT goods at FT price, that's good. But the fact is that I then give a discount for the second container, for the conventional goods."

Pablo, Honduras

 

We wonder if it's a duty, can, wants to be - "it just is." We'll make a combo there."

The combo is nothing more than a discount system on the purchase of green coffee. Only if it were a discount for the same product, then it would be business as usual.

But if the two components of sales are once certified and once not, then it not only makes you wonder – this method undermines the Fair Trade system, it perverts it. Yes, it buries the ethical responsibility of green coffee traders and buyers. A combo means that the second container (of conventional coffee) disappears for a price often below the world market price. The average price of the two coffees is then often so low that the Fair Trade premium is gone again.

As Peter Lerch explains: "The practice of combos is not only practiced with conventional coffees, but also with organic or Utz certified coffee. An example: organic would have to be around +40 cts/lb if sold alone. In the Combo it can happen that it is sold at +10. The same for Utz. The price should be +30 for the moment, but the coffee will be sold at +10 or less in the Combo."

Peter Lerch

 

An example calculation

Peru Grade 1, conventional: approx. 127cts/lb (7/9/2020)
	regular	with combo
Conventional coffee	+30cts/lb (Plaza) (Peru Differential)	Ca. +10cts/lb (Combo)
Market price: 0.97US$/lb as of 7/9/2020	0.97 USC/lb	0.97 USC/lb
	127 cts/lb	107 cts/lb
Peru, Grade 1, FairTrade Certified approx. 160 cts/lb (7/9/2020)
Minimum FOB price	140 cts/lb
FairTrade Premium	20 cts/lb
	160 cts/lb
A possible combo would look like this
1 uncertified container for 107 cts/lb (20 cts less than market price)1 certified container for 160 cts/lbAverage price: 133.5 cts/lb for both containers Therefore, the cooperative has a loss of 20 USC/lb for uncertified coffee
A correct mixed calculation with the market price should look like this
1 uncertified container for 127 cts/lb 1 certified container for 160 cts/lb Average price: 143.50. "Loss" for the cooperative and ultimately the farmer: USC10/lb

Especially in times of low world market prices, combos are increasingly used, as the difference between the world market price and the Fair Trade minimum price can be more than 40%," says Simon Aebi of Max Havelaar Switzerland.

As a result, when prices are really low, they are reduced even further by combined contracts from buyers or traders.

However, with all the cooperatives or exporters we have spoken to about combos, we hear similar stories. The oversupply of FT coffee is so drastic that many producers are often "happy" if they can sell their coffee and are not stuck with it. "Most cooperatives have many certifications at the same time and try to sell FairTrade Organic first, then FairTrade, Rainforest Alliance, and UTZ," Peter Lerch interjects. This order is determined by the size of the premiums.

Other cooperatives we have spoken with are simply frustrated and have lost faith in the system. The fact that it is not "the system" itself that is responsible, but those who operate within it, must be clearly stated here.

FairTrade does not play the role of the police. Fairtrade is an NGO. The costs of structures are high, Fair Trade is also a certification machine, but: Fair Trade is something like "democracy under the seal" – God knows, not perfect, inadequate for many, but nevertheless one of the best things we have.

Simon Aebi, from Max Havelaar Switzerland, is equally concerned about the development of unfair trade practices. FairTrade International is not just watching, but quite the opposite. But Aebi says:

“We cannot solve unfair trading practices solely by regulating the fair trade standard and audits, but only together with small farmer organizations, traders, processors and licensees. In order to discuss this topic openly, Fairtrade International has invited to a round table on May 23, 2019 in Amsterdam. Further rounds of discussions are planned. During these discussions, unfair trading practices and their consequences will be openly addressed and possible solutions will be jointly evaluated and discussed.”

Simon Aebi, Commercial Director, Max Havelaar Foundation Switzerland

 

FairTrade International clearly distances itself from combo practices, but has little control over them, as these are practices that fall outside the actual scope of Fairtrade criteria. Aebi on this:

“The contracts in question are not fair trade sales, but conventional sales that are concluded below market price. In our opinion, the issue of combos needs to be further discussed with all actors along the value chain and all actors need to be aware that unfair trading practices lead to a long-term lose-lose situation. (…) Fair trade cannot solve this challenge alone. Responsibility lies with all actors along the value chain.”

 

Aebi is right, it’s about responsibility. What can be traced in this mechanism in a textbook-like manner is namely the shifting of responsibility along a supply chain.

What aids this circumstance is anonymity in this chain. The spatial distance between producers and consumers is so great that even the smiling, happy face of a coffee farmer’s wife on the packaging cannot create a feeling of closeness.

In addition, you are buying a certified and fair product, so a fair price must have been paid for it. In reality, yes, but in practice often not – often only an average price was paid.

So if we think this mechanism through to the end, consumers are misled at the shelf. They buy fair trade coffee that deserves the seal because the coffee itself meets fair trade guidelines. At the same time, however, they become victims of a mechanism that undermines the basic idea of fair trade. This is precisely where fair trade is no longer fair – and fair trade itself can only watch. For now… but we will come back to that later. Let’s now ask the questions we need to ask:

Who benefits?

• Mainly very large roasters. Those who actually need a lot of coffee and for whom Fair Trade certified coffee must be part of their portfolio
• Typically bean roasters, because they need more coffee… for medium roasters for single-serve coffees, capsules, etc., this system is less interesting because it’s less certified, but certainly also suitable for large roasters.
• The largest coffee markets in Europe: DE, Netherlands, and France
• In markets where there is more bean coffee, the risk of excesses in the system increases.

Who does it harm?

• The credibility of Fair Trade is highly questioned here, even if it is not a direct problem of Fair Trade.
• It is much more likely that shoddy work is being done behind FairTrade's back
• Not only Fair Trade is harmed, but also the "good faith" in a truly fair trading chain. Once a producer has gotten into such a system, it takes a lot of persuasion to convince them that there must be an even fairer system

Whose fault is it?

• To ask the question of guilt in a well-oiled system, where everyone is a little ashamed, cannot / may not / must not come out with open words, everyone is partly to blame
• Everyone who makes a purchase decision, but not the consumer. Consumers are groping in the dark here for once
• The roaster would therefore be the first in the chain of blame to take responsibility
• Then comes the trade that "invented" the combos
• But trade is under pressure to come up with these solutions, because those who don't participate don't sell to the big players

What could be the solutions?

• Stop drinking Fair Trade coffee? Then demand will be even lower and more FT coffee will end up on the conventional market
• Drink more FairTrade coffee? Yes, and check with the retailer and roaster to make sure they are not combo coffees.
• So we need education, and we can provide that through transparent prices that are accessible to everyone.
• Peter Lerch suggests: make transparent market differentials for various coffees available to the public, monitored by an independent institution, and notes that “implementation would be difficult, who is independent?”
• Sell fair trade coffee more expensively, even if it is not automatically better sensorially? Yes, because "fair" is not enough for life. The solution must be a living income.

What does Fair Trade say to this?

The big challenge with Combos is that the contracts in question are not fair trade sales, but conventional sales below market price.

The Fairtrade trader standard only regulates the trading of Fairtrade certified raw materials, but not conventional commercial transactions. As a certification and control body, FLOCERT therefore conducts independent audits to check only those sales that take place under Fairtrade conditions (payment of minimum price, premium, payment terms, etc.). FLOCERT has no mandate to audit non-fair trade commercial transactions. This restriction makes it virtually impossible for FLOCERT to detect combos in an audit and thus prove them with facts

Simon Aebi

 

And what will Fair Trade change?

FairTrade wants to prevent combos, says Aebi, "because this unfair trading practice weakens small farmers and thus clearly contradicts the Fairtrade philosophy". Below are some of the measures Fair Trade has implemented so far to counteract combos and other unfair trading practices:

What do the large roasters say?

Switzerland's two largest retailers, Migros and Coop, have stated that there is no combo coffee in their stores. Migros coffees are roasted by Delica AG, while most Coop coffees are roasted by UCC. The green coffee buyer from Delica, Migros' coffee roaster, assured:

“As long as I buy the coffee for Migros products, it won’t exist.”

Bruno Feer, Senior Coffee Buyer, Delica

 

“We should ask the big ones,” we kept hearing from green coffee buyers. Only the really big ones had little appetite to talk to us about these things.

Who has the greatest responsibility?

Something emerged from our conversations: in a system that works if everyone participates, if everyone passes responsibility on to the next person, then green coffee purchasing holds the greatest responsibility. Because that is the position that ultimately buys the coffees, to stay within the company’s goals. The Green Coffee Purchasing Department knows the Combo system – and if not, the buyers know that a Fair Trade coffee cannot be that cheap.

It is the position that as the sole actor, knowingly or not, can advance the system in which coffee is purchased. The role of green coffee purchasing is the hinge. While green coffee purchasing relies on digital tools, real arrangements are made between people.

Knowledge is power, and therefore responsibility. Whoever knows about such practices, exercises this power, is responsible for it. So whether a combo contract is carried out or not depends on the internal attitude of the person responsible for green coffee purchasing. Yes, even this person has to give way under customer pressure – if the customer wants to pay less, so be it. And yet, it falls back to the purchasing department.

What role do traders play here?

The coffee trade wants to resell coffee. Those who are cheaper than their competitors have competitive advantages.

The trade has introduced Combo and Confidential practices to gain advantages for the moment and increase margin potential. Now this potential has long been exploited and the trade can only keep up with the competition if it participates in tenders for large roasters. Of course, it would also have the opportunity to provide information and reject these practices.

Old trade, new trade

Green coffee trading has undergone major changes over the last decade. Demands from certain consumer groups have become more discerning and public pressure for transparent commodity chains has increased. In some cases, roasters have to communicate more and more where the coffee comes from.

For many roasters, romantic stories and pictures from coffee production are still sufficient for simple communication. However, we are also noticing a shift here. Increased demand for transparency means that the green coffee trade would have to change.

Some smaller traders are moving forward and acting as a digital, completely transparent platform, and are integrating Blockchain into their apparatus. Others, like the very traditional players, often practice the opposite. If one's own demands, or customer demands, do not expect transparency, then the potential for strange trading practices increases.

A source from a large German coffee roasting company reminds us that in trade, an exporter and a counterparty, the importer, always work together. These connections have grown over decades. And as the trade has grown, so have the people, which of course makes everyone's job much easier. At the same time, it is also important to look there, because where knowledge meets power, even exclusive, the potential for questionable trading practices is greater than elsewhere.

Is it more absurd than combos? Yes – Confidentials and “defects”

Absurdity 1: Confidentials

We’ve learned that combos are almost a necessary evil for many producers. However, during the research for this article we learned something else. Is there something even more perverse than combos? Yes: we’re talking about confidentials.

We received this Whatsapp message from a source on the coffee production side:

“Combos must be differentiated from confidentials: with confidentials, the buyer only buys fair trade coffee, pays the fair trade price to the grower according to the official contract, and then asks the grower to give him back the value of the “confidential discount”

Anonymous coffee producer

 

We didn’t quite understand what was going on, so we looked into it, and it was true – a contract was issued for FairTrade coffee, because it’s checked by FLOCERT. Payment is made. Nothing is questionable yet.

However, later, in some cases, the buyer demands a “confidential discount” from the exporter. And why?

“Often because the buyer has extra effort in marketing the fair trade coffee, which in turn has to be covered,” according to our source.

Anonymous coffee producer

 

This is particularly bad because here not even a mixed calculation is made and volumes are pushed. We’ve said it, it couldn’t be more absurd.

It even hurts.

We don't want to be in the shoes of the buyer who has to make this spin from a well-intentioned approach based on increasing margins. Greetings from the Wolf of Wall Street.

Absurdity 2: Devaluation of FT price due to defects

Fair trade certification applies to coffees that meet clearly defined production standards, but not quality standards. The fair trade blends that we know in large quantities are generally cooperative blends and not microlots. Quality ranges from good, to orderly, to with various defects. But many buyers have less detailed specifications for FT coffees than for other coffees in their assortment and quality actually plays a secondary role for many, confirms a source from a leading German roaster.

If a green coffee in the buyer's cupping room is still defective, we often ask for a price reduction, even if quality was not the main goal of the purchase contract.

This practice is not allowed.

“Even if the coffee had 90 defects, you can’t get a discount for quality,” Lerch continues

Peter Lerch

 

However, it appears that a quality discount is often demanded and the coffee is only accepted under these conditions. Unfortunately, this is difficult to prove, as it does not appear anywhere in the accounts.

Courage: what it takes for us to talk about it.

In our research for this article, one word constantly hovered over our heads like a sword of Damocles – discretion. Some roasters demanded discretion because they were unsure whether the coffee was a combo or not and didn't want to "tarnish anyone's name."

Buyers demanded discretion, as they "act on behalf of roasters." Producers demanded discretion because they are simply the most affected when names come into play.

 

However, in these specific cases of Combos and Confidentials, discretion is only justified when it is necessary to protect individuals. We have done this in this article. However, there is no reason not to make the facts public and not to explain them. Coffee drinkers should know this and be even more critical.

It takes courage from all sides to talk about it. Especially from the producer side, we realized how sensitive this topic is. Even after several follow-ups to multi-year contacts, we only received very superficial answers, if any at all.

A contact from Honduras, however, was open. He wrote to us that as a cooperative they had to give discounts for several years in order to be able to sell coffee. “This has diminished, but actually no longer happens (…) except to two buyers who demand a discount every year for FT certified coffee.”

More voices from Peru confirm this practice. Both Peru and Honduras are major coffee producing countries when it comes to fair trade coffee.

Our source goes on to say that premiums should have gone to the cooperative via the exporter. But not all cooperatives are exporters at the same time. At the interface between exporter and cooperative, irregularities can occur again.

“In theory, the exporter would have to pass on 100% of the FT premium to the cooperative, but in several cases known to us this also does not happen. (…)” The exporter keeps a considerable part of the premium and passes on a fraction to the cooperative

Source from Peru

 

We have heard of many individual cases in recent months. However, it appears that these individual cases show a larger pattern and are not that rare. All of our contacts have mentioned that they have at least “heard” of Confidentials, Combos and Irregularities. Often combos are made with large buyers, or when a cooperative is a new seller – as a welcome discount, so to speak.

The aforementioned source from Honduras also had the courage to write to us precisely what they think, bringing us to the core of the dilemma.

Combos are an unfair way to market small producers' coffee. The greatest effort in meeting compliance criteria happens at the producer level. They are the most demanded and the ones who lose the most with the issue of Combos. A cooperative seeks FAIRTRADE certification to find better income for its producers in the fairest way possible. But when you can only sell 50% of your Fairtrade production as a Fairtrade product, the certification is not attractive to producers. FAIRTRADE must supervise buyers and exporters much more closely, so that the incidence of Combos continues to occur.

Source from Honduras

 

Aside from courage, what is primarily needed is vision and a clear inner attitude, like that of Bruno Feer, Delica's green coffee buyer, who made it clear to us, more than any other buyer, that he will not tolerate combos as long as he buys coffee. We need these strong convictions. As an expert body, purchasing departments must be aware of all practices, gratefully reject offers indicating combos, and act conscientiously, especially nowadays.

What can fair trade do? Simon Aebi has described Fairtrade's action plan above. Something is happening, albeit slowly. Meanwhile, anyone with evidence of unfair business practices can file a complaint with FLOCERT here: https://www.flocert.net/de/ueber-uns/qualitaet-und-einsprueche/. We appreciate this openness from Max Havelaar of FairTrade to invite courageous criticism.

 

Could it be that, as a coffee roaster, I unknowingly bought combo coffee?

Raphael Studer from Algrano crunches the numbers:

 

Change. Does it need a new label?

In this article, we have tried to show the complex realities of the interaction between the various links in the FairTrade coffee chain.

It's complex!

And it remains to be seen which labels will have which tasks in the future, and which certificates have served their purpose and will be replaced.

It is essential to classify the expressiveness of a label and check the reality. Gebana has taken a courageous and, in our opinion, forward-looking step on the occasion of its 20th anniversary. "There is no fair product, fair trade is a process."

This classification is particularly important for the credibility of a certificate. Announcing more than what has been achieved is detrimental to trust. Great precision is needed in describing the measures and the resulting effectiveness of certificates and labels. At the same time, we cannot label ethics. We need roasters who negotiate the price directly with producers.

A folklorization of images such as "traditionally hand-picked coffee" is problematic. It is true that better quality can be achieved with hand-picking. In the commodity market, however, this does not express quality, but poverty.

Benjamin Hohlmann and Philipp Schallberger

 

A more precise definition of measures and transparency about their effect is particularly important when more and more critical issues appear in the media and it also becomes clear how a system is undermined by machinations such as combos and confidenciales.

A future for the FairTrade label

Fair trade paves the way. The label helps ensure that a minimum selling price for coffee can be achieved. In times of low stock market prices, this is a decisive and important safety net. It is in this spirit that we must continue the discussion.

After all, fair trade certification was originally taken to convert a complex issue into an easily understandable name and logo.

But the label's goals do not help producers out of poverty. They only provide protection against even greater hardship in times of low stock market prices. We must work together to ensure that the minimum requirements of the Fair Trade label become the minimum standard for the entire industry.

As with the "Green Dot," it must be the case for coffee that it cannot be achieved under the criteria of the current Fair Trade label. Production costs must be covered at least. It becomes truly fair when there is still something left to live on.

Proposal 1: Minimum purchase price for large roasting plants

With regard to large roasting plants, one measure could be that, as of 2022, the fair trade label can only be displayed by roasting plants that purchase at least 30% of their coffee at a minimum purchase price. A corresponding timetable could provide for an increase in requirements by 2030, requiring all coffee to be purchased at a minimum price corresponding to production costs.

This would also eliminate the practice of roasting companies hiding behind "fair" private labels, which, upon closer inspection, represent only a fraction of the coffees purchased under fair trade standards.

Fair trade reduces its communication by leaving "fair" as an impression. However, the adjective "fair" can hardly be justified and, in fact, can only cease to be so in a context such as coffee production, which is constantly plagued by inequalities and unfair practices. In almost no country is the Fair Trade price enough to cover production costs, let alone living costs, and even less does it allow for escaping poverty. Making consumers "feel good" is a problematic trend that too easily plays into the hands of the often lavish and cheerful coffee campaigns.

Proposal 2: Definition of living income for coffee producers through fair trade

Transparency and honesty are required. Fair trade has to catch up if it wants to play a role in times of new and momentous impulses from a post-certificate movement (see also transparency.coffee). At the same time, FairTrade probably has the greatest opportunity to drive the certification industry.

We need a social exchange about prices on plots and minimum living incomes, the collection of information on production costs and living costs that make a decent life possible. There is much to be done here and Fairtrade, with its branched network, could make a decisive contribution to the collection of this data and far-reaching awareness.

One option could be for FairTrade, with the already available information density, to make it public and publish the specific living income per cooperative. In this way, consumers and roasting companies would know what the cost of living is in a specific place and how a truly fair coffee price could contribute to this.

And who else?

In the case of coffee, we can only hope that we can define an ISO standard for sustainability and traceability, similar to the 2019 standard for cocoa.

This requires sanctions from national coffee associations, for example the German Coffee Federation - because where there is no plaintiff, there is no judge. Fair trade alone is in a difficult position, with poor negotiating power against roasting companies.

Everyone has to join in - small roasting companies, like us, can create the atmosphere and are obliged to act as the spearhead of more appropriate purchasing. The big ones, for whom combos and confidential deals are important, must act.

This requires immense solidarity from all actors in trade. Anything less cannot be our goal.

Benjamin Hohlmann and Philipp Schallberger, July 2020

Spanish translation: Kleber Cruz

Original article in German.