Hollowed-out Fairtrade price – Combos and the power of the market

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

At the end of the day, consumers are exploited in their ignorance. It's a tricky subject, as it calls into question the credibility of Fair Trade, puts roasters in a questionable light, and can harm producers in the long run.

At the same time, it's just an anecdote within a much larger discourse: where is the journey of certified coffees heading? What about consumer trust in labels? Is there a need for 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 Kaffeemacher, we aim to understand complex issues, address uncomfortable truths, connect loose ends into a whole, and share what we've learned. And so, we set out to illustrate the various facets of "combos and co." with this article.

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

So what is this whole discourse about? The short answer is – it's not simple. The longer answer is provided here in a structured manner.

In addition, we have provided a "self-assessment" for all roasters. Perhaps a roaster doesn't know if they are buying coffee from a combo? Raphael Studer, CEO of algrano, has done the math for you. With Peter Lerch, we were able to bring in another expert who cross-checked the facts and calculations.

All sources are treated anonymously, except for those who have given us their consent. Thank you for your trust, your courage to address injustices, and for speaking plainly.

In three parts, we discuss the challenges and opportunities, and what possible ways out of the dilemma there are.

Benjamin Hohlmann and Philipp Schallberger

There is a Spanish version of the article. ->

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-scale coffee producers worldwide, producing coffee on your farm, which is at most the size of three football fields. You belong to a cooperative, which 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 chance to buy seedlings and get fertilizer and pesticides more cheaply. The cooperative also buys your coffee cherries from you, processes them into transportable coffee, and brings your coffee to the world. The cooperative can be a gateway to the coffee world for coffee producers. A gateway that can provide access to markets that you, as an individual, could not reach.

How does FairTrade – Max Havelaar work?

The market for FairTrade-certified coffee is such a market. FairTrade International certifies cooperatives, but not individual producers. The bundling of producers into a cooperative allows FairTrade to reach more producers at once and to establish democratic structures in the sales organization. FairTrade can thus help individual producers gain more market power. The producers themselves are now required to follow the guidelines of FairTrade International in order to be able to market their coffee as Fairtrade-certified coffee in return.

Marketing under the FairTrade, or Max Havelaar label in Switzerland, guarantees a minimum FOB price of 140cts/pound (just under a pound: 0.457kg). In addition, there is a Fairtrade premium of 20cts/lb, which is paid to the cooperative. The cooperative should democratically decide on the use of the premium pool and invest in long-term projects or necessary infrastructure.

However, the 140cts/lb FOB does not mean that everything reaches the producers. According to information from a cooperative in Peru, approximately 115 cts/pound reach the cooperative.

25 cts/pound are used for dry mill services, inland transport, and financing costs. These costs also apply to other coffees.

"140cts/lb was a figure that was long considered the standard for washed coffee, at which coffee could be produced cost-effectively with a small margin," said Peter Lerch in a podcast with us.

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

The graphic shows when the market price was higher than the FairTrade minimum price (blue), and when it was lower (brown).

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

In times when the achieved 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 market for roasted coffee is huge. At least every second person on this earth drinks coffee. According to the ICO, the numbers of globally consumed coffees rise annually between 1.5 and 3%. Coffee consumption is also increasing in Europe, albeit less rapidly than in the emerging coffee markets of Southeast Asia and South America.

In Europe, the coffee market seems largely saturated – it's expanding less in breadth, but more in depth. For years, the market has diversified into single-portion coffees like capsules, but also a growing desire for bean coffee, which is used in increasingly better automatic coffee machines.

Interestingly, two markets, which are particularly interesting for our endeavor, differ precisely here: the German and the Swiss coffee markets. The two markets differ significantly in some respects. In Switzerland, single portions are the sole market leader in the end-consumer market, while in Germany, "whole bean" remains the bestseller, even with more competing products.

The market in Germany is extremely price-driven, according to a source from a large German roastery. In Switzerland, we are sometimes a bit in a "buying bubble." In Germany, simply 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, FairTrade, Rainforest Alliance/UTZ certifications). The total FairTrade-certified coffee in Germany is only 4.9%. (Confirmed in the TransFair Annual and Impact Report 2019 – available for download here).

From the Darboven roastery, we know from an Instagram chat that the proportion of FairTrade-certified products is also close to these 5%. Darboven thus corresponds to a Germany-wide share, which is still alarmingly small.

"The market for Fair Trade coffee is developing only slowly and is only minimally growing," according to another source from a medium-sized German roastery.

For the German coffee market, which often presents itself as very sustainable and conscious to the outside world, 4.9% Fair Trade coffees is not much. And somehow that's the real absurdity of the whole issue: Fair trade has become the idealistic benchmark for "correct coffee consumption" for many, but the purchasing reality simply looks different.

Philipp Schallberger & Benjamin Hohlmann

The reality is even worse than assumed. Only around 33.8% of FairTrade certified green coffee ends up in a roasted coffee product labeled as Fair Trade. FairTrade points out that this is still an increase of 15% since 2016. And yet: The remaining 66% of FairTrade-certified coffee must be sold on the conventional, i.e., non-certified, coffee market – even if it meets all the requirements for a premium. And who covers this loss? Nobody. Once again and in all clarity: 66% more Fairtrade certified coffee is produced than there are buyers!

FairTrade Coffee as a SALE Offer

The drastic surplus of Fairtrade-certified coffee then leads to strange developments on the retail side: again and again, we see Fairtrade coffee being offered at special discounts in supermarkets. Various roasters are also starting to sell FairTrade coffees at a discount. It is really difficult for us to see the full conviction of the retailer or roaster for a certified product in this.

Certainly, enticing customers into the supermarket with special 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 simply wrong – because it doesn't work that way.

Yes, we observe price pressure from the retail market; yes, we observe that cheaper is still cool in many places. But there are certain products, such as FairTrade products, that are disqualified in this race for the lowest prices. We can all uphold a discourse about sustainability, fair prices, etc., but if at the end of the day Fairtrade coffee is no longer fair, we are all cheating ourselves.

The main thing is that the green coffee sells

Do you remember the thought experiment from the beginning of this text? You, as a small coffee producer? Then let's go back there, somewhere on a small farm near the equator. The cooperative's leadership 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, indeed, even more so, only through your work can someone far away tell a story.

The potential buyers clearly analyze the situation: they know that demand for FairTrade-certified coffee is stagnating in their home market. At the same time, the buyers see that the cooperative members have produced a lot of coffee. Of their total of 50 containers that they produce together annually, 25 are FairTrade-certified. The potential buyer needs a total of two containers of FT coffee, but sees that their demand is lower than their supply. The cooperative leadership sees this too – after all, one is an hombre de negocio (businessman), as Pablo (fictitious name), a head of a Honduran cooperative, described to us.

"Look," says Pablo, "if I can sell 2 instead of just 1 container, but get 1 container of FT goods at the FT price, that's good. However, it's the case that I then grant a rebaja (discount) for the second container, the one with the conventional goods."

Pablo, Honduras

We ask if it's a must, can, or want – "that's just how it is. Then we make a combo."

A combo is nothing more than a discount system in green coffee purchasing. However, if it were a discount for the same goods, it would be business as usual. But when the two sales components are one certified and one not certified, it's not just puzzling – this method undermines the FairTrade system, it perverts it. Yes, it buries the moral responsibility of green coffee traders and buyers. A combo means that the second container (with conventional coffee) often goes for less than the world market price. The average of the two coffees is then often so low that the FairTrade premium is gone again.

Peter Lerch on this: "The practice of combos is not only used with conventional coffees, but also with Organic or Utz certified coffee. An example: Organic should be around +40 cts/lb if sold alone. In a combo, it can happen that it is sold at +10. The same for Utz. The price should currently be at +30, but the coffee is sold at +10 or lower in the combo."

Peter Lerch

An example calculation

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

This means that when prices are really low, they are reduced even further by combo contracts from buyers or traders.

However, with all the cooperatives or exporters we spoke 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 at all and don't get 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 based on the amount of premiums.

Other cooperatives we spoke with, on the other hand, are simply frustrated and have lost faith in the system. It must be clearly stated here that "the system" itself is not responsible, but rather those who operate within it.

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

Simon Aebi from Max Havelaar Switzerland also expresses concern about the developments of unfair trading practices. FairTrade International is not just watching, quite the opposite. But Aebi says:

"We cannot solve unfair trading practices solely through regulations in the Fairtrade Standard and audits, but only together with smallholder organizations, traders, processors, and licensees. To openly discuss this issue, Fairtrade International invited to a round table discussion in Amsterdam on May 23, 2019. Further discussions are planned. In these discussions, unfair trading practices and their consequences will be openly addressed, and possible solutions will be jointly assessed and discussed."

Simon Aebi, Commercial Director, Max Havelaar Foundation Switzerland

FairTrade International clearly distances itself from combo practices but has little leverage, as these practices are outside the actual scope of Fairtrade standards. Aebi comments:

“The contracts in question are not Fairtrade sales but conventional sales concluded below market price. In our view, the issue of combos must be addressed more frequently with all actors along the value chain, and all actors must be aware that unfair trading practices ultimately lead to a lose-lose situation. (…) Fairtrade cannot solve this challenge alone. All actors along the value chain are responsible.”

Aebi is right – it’s about responsibility. What can be traced in this mechanism, textbook-style, is the passing on of responsibility along a supply chain.

What helps this situation is the anonymity in this chain. The spatial distance between producers and consumers is so great that even the cheerfully smiling face of a coffee farmer on the package can no longer create proximity.

Furthermore, one buys a certified, fair product, so a fair price must have been paid for it. Theoretically, yes, but in practice often no – often only an average price was paid.

So, if we take this mechanism to its logical conclusion, consumers are being deceived at the shelf. They buy Fairtrade coffee, which deserves the seal because the coffee itself meets Fairtrade guidelines. At the same time, however, they fall victim to a mechanism that hollows out the basic idea of Fairtrade. It is precisely at this point that fair trade is no longer fair – and Fairtrade itself can only watch. For now – but we will get to that point later.

Now let's ask the questions we need to ask:

Who benefits from it?

• primarily really big roasters. Those who need a lot of coffee and for whom FairTrade certified coffee must be part of their portfolio
• generally, these are bean roasters, because they need more coffee
• for medium-sized roasters for single-portion coffees, capsules, etc., this system is less interesting because it is less thoroughly certified, but certainly also for larger ones
• The largest bean markets in Europe: DE, Holland and France
• in markets where more bean coffee is present, the risk of excesses in the system increases.

Who does it harm?

• The credibility of FairTrade is extremely challenged here, even if it is not a direct FairTrade problem
• rather, mischief is being done on the back of FairTrade
• it harms not only FairTrade, but also the "good faith" in a truly fair supply chain. Once a producer has jumped into such a system, it takes a lot of convincing that there should be an even fairer system

Who is to blame?

• in a well-oiled system, asking the question of guilt, where everyone is somewhat ashamed and cannot/will not/should not speak openly, everyone shares some blame
• everyone who makes a purchasing decision – but not the consumer. For once, consumers are in the dark here
• the roaster would therefore be the first in the chain of blame who would have to take responsibility
• then comes the trade, which "invented" the combos
• however, the trade is forced into these solutions by pressure, because whoever does not participate does not sell to the big players

What could be solutions?

• Stop drinking Fairtrade coffee? Then demand will be even lower and even more FT coffee will end up on the conventional market
• drink more FairTrade coffee? Yes – and ask the retailer and roaster if they are not combo coffees
• So, education is needed – and we create that through transparent pricing that would be accessible to everyone
• Peter Lerch suggests: make transparent market differentials for individual coffees publicly accessible, controlled by independent institutions, and notes – “implementation would be difficult, who is truly independent?”
• Sell FairTrade coffee at a higher price – even if it is not automatically sensorially better? Yes – because "fair" is not enough to live on. A living income must be the solution.

What does FairTrade say about it?

The major challenge with combos is that the contracts in question are not Fairtrade sales but conventional sales below market price.

The Fairtrade Trader Standard (https://www.fairtrade.net/standard/trader) exclusively regulates the trade of Fairtrade-certified raw materials, but not conventional trade transactions. FLOCERT, as the certification and control body, therefore only audits those sales that are conducted under FairTrade conditions (payment of minimum price, premium, payment deadlines, etc.) in independent audits. FLOCERT has no mandate to audit trade transactions outside of Fairtrade. This limitation makes it practically impossible for FLOCERT to uncover combos in an audit and thus prove them with facts.

Simon Aebi

And what will FairTrade change?

FairTrade wants to prevent combos, says Aebi, "as these unfair trading practices weaken small-scale farmers and thus clearly contradict Fairtrade's philosophy." Below are some measures that Fairtrade has implemented so far to counteract combos and other unfair trading practices:

What do large roasters say about it?

Switzerland's two largest retailers, Migros and Coop, affirmed that no coffees from combo deals were on their shelves. Migros coffees are roasted by Delica AG, while Coop's coffees are mostly roasted by UCC. The green coffee buyer for Delica, Migros's coffee roastery, assured:

“As long as I'm buying coffee for Migros products, this won't happen.”

Bruno Feer, Senior Purchaser Coffee, Delica

“We should ask the really big ones,” we heard repeatedly from green coffee buyers. But the really big ones have so far shown little appetite to talk to us about these matters.

Who bears the greatest responsibility?

In our discussions, something became clear: in a system that works when everyone participates, everyone passes responsibility on to the next, then green coffee purchasing bears the greatest responsibility. Because that is the position that ultimately buys the coffees, as cheaply as possible, to stay within the company's targets. Green coffee purchasing knows about the combo system – and if not, then the buyers know that a Fairtrade coffee cannot be that cheap.

It is the position that, as the only actor, can knowingly drive the system forward by purchasing coffee, or not. The role of green coffee purchasing is the hinge. Green coffee purchasing is based on digital tools, but the actual agreements happen between people.

Knowledge is power, and therefore responsibility. Whoever knows about such practices, and exercises this power, is responsible for them. So, whether a combo contract is executed depends on the inner attitude of the responsible person in green coffee purchasing. Yes, they too must yield to customer pressure – if the customer wants to pay less, then so be it. And yet it still falls back on purchasing.

What role do traders play here?

Coffee traders want to resell coffee. Whoever is cheaper than their competition has a competitive advantage.

Trade introduced the practices of combos and confidentials to initially carve out advantages for itself and increase margin potential. Now this has long been exploited, and trade can only keep up with the competition if it participates in tenders for large roasters. Of course, it also has the option to clarify and refuse these practices.

Old Trade, New Trade

The green coffee trade has had to change significantly in the last decade. The demands of certain consumer groups have increased, and public pressure for transparent supply chains is growing. Roasters increasingly have to communicate where the coffee comes from.

For many roasters, romanticized stories and images of coffee production are still sufficient for simple communication. But we are also noticing a change here. More demand for transparency means that the green coffee trade would have to change.

Some smaller traders are leading the way and acting as digital, completely transparent platforms, incorporating blockchain into their apparatus. Others, however, such as very traditional agents, often practice the opposite. If one's own standards, or the standards of customers, do not expect transparency, then the potential for questionable business practices increases.

A source from a large German coffee roastery reminds us that in trading, an exporter and a counterpart, the importer, always work together. These connections have grown over decades. And as trade aged, so did the people – which of course greatly simplifies everyone's work. At the same time, it is also important to look there, because where knowledge meets power, and this is even exclusive, the potential for questionable business practices is higher than in other places.

Can it get any more absurd than Combos? Yes – Confidentials and “Defects”

Absurdity 1: Confidentials

We learned that combos are almost a necessary evil for many producers. However, during our research for this article, we learned something else entirely. Can it get any more absurd than combos? Yes: we're talking about confidentials.

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

“Combos are to be differentiated from confidentials: with confidentials, the buyer only purchases fairtrade coffee, pays the Fairtrade price to the grower according to the official contract and then asks the grower to send the value of the „confidential discount“ back.”

Anonymous Coffee Producer

We didn't quite understand, we followed up, and it was really true – a contract was issued for FairTrade coffee, because this is checked by FLOCERT. Payment is made. Nothing is questionable yet.

Later, however, in individual cases, the buyer demands a "confidential discount" from the exporter. And why?

“Often because the buyer has extra marketing effort for the Fairtrade coffee and needs to cover that,” according to our source.

Anonymous Coffee Producer

This is particularly bad because it's no longer even about mixed calculations and pushing volumes. We said it – it can't get any more absurd.

It even hurts.

We wouldn't want to be in the shoes of the buyer who has to twist a well-intentioned approach due to margin enhancement. The Wolf of Wall Street says hello.

Absurdity 2: Downgrading of the FT price due to defects

FairTrade certification is applied to coffees that meet clearly defined production standards – but not quality standards. The Fairtrade blends known to us in large quantities are generally cooperative blends and not microlots. The quality ranges from good, to decent, to having several defects.

However, many buyers have less detailed specifications for FT coffees than for other coffees in their assortment, and quality often plays a secondary role, confirms a source at one of the large German roasters.

Should a green coffee in the cupping room at the buyer's still have defects, a price reduction is not uncommonly demanded – even if quality was not the main focus of the purchase agreement.

This practice is not permitted.

“Even if the coffee had 90 defects, no discount should be given for the qualities,” Lerch continues.

Peter Lerch

However, a quality discount is apparently 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 accounting records.

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

In our research for this article, a word constantly hung 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 they didn't want to "denounce anyone."

Traders demanded discretion because they "act on behalf of the roasters." Producers demanded discretion because they are simply the hardest hit as soon as names are involved.

In these specific cases of combos and confidentials, however, discretion is only justified when it comes to protecting individuals. We have done that in this article. However, there is no reason not to make the facts public and not to explain them. Coffee drinkers need to know about this and become even more critical.

It takes courage from all sides to talk about it. Especially from the producer side, we noticed how delicately this topic is handled. Even after repeated inquiries with contacts we had for years, we received very superficial answers, if any.

However, a contact from Honduras was frank. He wrote to us that as a cooperative, they had to give price reductions for several years just to be able to sell coffee.

“But that has now subsided, it actually doesn't happen anymore (…) except for two buyers who demand a discount for FT-certified coffee every year.”

Further voices from Peru confirm this practice. Both Peru and Honduras are leading coffee producing countries in terms of FairTrade coffee.

Our source further explains that the premiums should reach the cooperative via the exporter. However, not every cooperative is also an exporter. At the exporter-cooperative interface, irregularities can now occur again.

“Theoretically, the exporter should pass on 100% of the FT premium to the cooperative – however, in several cases known to us, this also does not happen. (…)” The exporter keeps a substantial part of the premium and passes on a fraction to the cooperative.

Source from Peru

In recent months, we have heard of many individual cases. However, it seems that these individual cases reveal a larger pattern and are not so rare at all. All our contacts mentioned that they had at least "heard" of confidentials, combos, and irregularities. Often, combos are made with large buyers, or when a cooperative is new as a seller – almost as a welcome discount.

The mentioned source in Honduras also had the courage to write to us exactly what they think and succinctly summarizes the dilemma.

Combos are an unfair way of marketing coffee from small producers. The greatest effort to meet compliance criteria happens at the producer level. They are the most demanding and lose the most with combos. A cooperative seeks FAIRTRADE certification to seek better incomes 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 monitor buyers and exporters much more closely to prevent the incidence of combos from continuing.

Combos are an unfair practice for selling coffee from small producers. The greatest effort to meet the criteria required (by Fairtrade) is borne by the producers. They are the ones who are most demanded and who lose the most through combos. A cooperative gets certified so that it can generate higher incomes for its members. However, if you can only sell 50% of your FT production as such, then the certification is no longer attractive. FT must monitor buyers and exporters much more closely to put a stop to combos.

Source from Honduras

Besides courage, what is primarily needed are visions and a crystal-clear inner attitude, such as that of Bruno Feer, green coffee buyer at Delica, who, unlike any other buyer, made it clear to us that he does not tolerate combos as long as he buys coffee. We need these strong convictions. The purchasing department, as an expert body, must be aware of all practices, gratefully decline offers that indicate combos, and act conscientiously, especially today.

What can Fair Trade do? Simon Aebi outlined Fairtrade's action plan further up. Things are happening, albeit slowly. Meanwhile, anyone with evidence of unfair trade practices can file a complaint with FLOCERT here https://www.flocert.net/de/ueber-uns/qualitaet-und-einsprueche/. We like this openness of FairTrade Max Havelaar to invite courageous criticism.

Could it be that as a coffee roaster I bought a coffee from a combo without knowing it?

Raphael Studer from Algrano calculated with us:

“If a roastery buys FTO (FairTrade-Organic, i.e., double-certified) coffees for CHF 4.20/kg, specifically

FairTrade Organic certified coffee from Peru:

FOB 1.90 USD/lb

+ Import to Hamburg, incl. customs clearance: 0.07USD/lb

+ Storage 6 months: 0.07USD/lb

+ Financing 6 months: 0.04USD/lb

Converted to a kilogram at an exchange rate of 0.95USD/CHF, the coffee thus has a value of CHF 4.36/kg.

And the coffee is not yet at the roastery; truck transport is still missing. To Switzerland, it's almost another CHF 0.1/kg.

So the dealer has not yet made any profit at CHF 4.50/kg for a FairTrade organic coffee.

Then, based on the minimum price plus transparent costs without dealer margin, it should be CHF 4.60/kg. Available, for a year, financed, transported, customs cleared.

FTO coffee under CHF 4.60/kg? Risky…

Change. Is a new label needed?

In this article, we have attempted to illustrate the multifaceted realities in the interplay of the various links along 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.

An assessment of a label's meaningfulness and a verification of reality are indispensable. Gebana took a courageous and, in our view, forward-looking step here for its 20th anniversary. “There is no fair product, fair trade is a process.”

Such a classification is particularly important for the credibility of a certificate. Promising more than has been achieved harms trust. Great precision is required in describing the measures and the resulting impact of certificates and labels. At the same time, we cannot label ethics. We need roasters who negotiate the price directly with the producers.

A folklorization of images, such as "traditionally hand-picked coffees," is problematic. While hand-picking can achieve better quality, in the commodity market, this does not express quality, but rather poverty.

Benjamin Hohlmann and Philipp Schallberger

Clarifying measures and transparency about their impact is particularly important when more and more critical questions appear in the media and it also becomes clear how a system is undermined by machinations like Combos and Confidentiales.

A future for the FairTrade label

Fair Trade paves a way. The label helps ensure that a minimum sales price can be achieved for coffees. In times of low stock market prices, this is a decisive and important safety net. In this sense, we must continue the discussion.

Because the Fair Trade certification was originally created to distill a complex issue into an easily understandable name and logo.

However, the goals of the label do not help producers find their way out of poverty. They only provide protection against even greater hardship during periods of low market prices. We must work together to ensure that the minimum requirements of the Fairtrade label become the minimum standard for the entire industry.

Similar to the "Green Dot," it must be true for coffee that it cannot go below the standards of the current Fairtrade label. Production costs must at least be covered. It only becomes truly fair when there is something left to live on.

Proposal 1: Minimum purchase price for large roasters

With regard to large roasters, one measure could be that from 2022 onwards, a Fairtrade label may only be displayed by roasters who purchase at least 30% of their coffee at a minimum purchase price. A corresponding timetable can provide for an increase in the requirement up to 2030, demanding that all coffee must be purchased at a minimum price that covers production costs.

This would also eliminate the practice of roasters hiding behind "fair" private labels, which, upon closer inspection, represent only a fraction of the coffees purchased according to FairTrade standards.

Fairtrade reduces its communication by leaving the impression of "fairness." However, the adjective "fair" is hardly justifiable and can only miss the mark in a context like coffee production, which is continuously characterized by inequalities and unfair practices.

The FairTrade price is hardly sufficient in any country to cover production costs, let alone living expenses, and even less so to provide a way out of poverty. To convey a "feel good" message to the consumer here is a problematic tendency that plays too easily into the hands of the often lavish and cheerful coffee campaigns.

Proposal 2: Living Income Definition for Coffee Producers by Fair Trade

Transparency and honesty are required. FairTrade needs to catch up here if it wants to play a role in times of new and far-reaching impulses from a post-certification movement (see also transparency.coffee). At the same time, FairTrade has perhaps the greatest opportunity to advance the certification industry.

We need a societal dialogue about farmgate prices and living income, gathering information about production costs and living costs that enable a dignified life. There is much to be done here, and Fairtrade, with its existing dense network of information, could play a decisive role in collecting this data and contributing to widespread awareness.

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

And who else?

For coffee, we can only hope that, similar to what was achieved for cocoa in 2019, we will define an ISO standard for sustainability and traceability.

This requires sanctions from national coffee associations, for example, the German Coffee Association – because where there is no plaintiff, there is no judge. FairTrade alone is in a difficult position, with a poor negotiating position against roasters.

Everyone must pull together – small roasters, like us, can stir up sentiment and are obliged to be at the forefront of more appropriate purchasing. The big players, for whom combos and confidentiales are important, must act.

This requires an immense concerted effort from all players in the trade. However, anything less cannot be our goal.

Benjamin Hohlmann and Philipp Schallberger, July 2020