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3.2 Fair Trade Coffee in the UK 3-13 Fair Trade:Overview, Impact, Challenges Annex 3: Case Study - Coffee in Tanzania Coffee has been sold by FT organisations in the UK for decades. In the 1970s and 1980s it was primarily marketed on solidarity grounds and sold through Oxfam shops and mail order channels. However, in parallel with developments in other European countries, the 1990s saw the focus shift to broadening the awareness and sales through the development of a clearly branded FT product sold through mainstream as well as alternative outlets. One major retail chain stocks 10 types of FT coffee across its mainland UK stores. Coffee is one of the commodities for which there is an international fair trade register, operated under the auspices of the Fair Trade Labelling Organisation (FLO) International. Organisations who purchase all the coffee for a particular product through the fairtrade register and meet the conditions set out below can label those products with the Fairtrade label. Table 3.6. Guaranteed minimum prices (U.S. cents per pound F.O.B.) for FT coffee as specified by FLO-International. Type of Coffee Regular Certified Organic Central America, Mexico, Africa South America, Caribbean Central America, Mexico, Africa South America, Caribbean Washed arabica 126 124 141 139 Unwashed arabica 120 120 135 135 Washed robusta 110 110 125 125 Unwashed robusta Source: FLO-International. 106 106 121 121 By far the most significant FT brand is Cafédirect, which has developed a small but enduring niche in both the instant and roast and ground market. Set up by a consortium of four FT organisations, it is now probably the most consumer oriented of all the FT organisations in the UK. Its managing director has a marketing background and has been successful in developing Cafedirect as a distinctive brand in its own right, as well as a figurehead for the FT movement. Initially it sold a blended brand but is now developing a range of products, including single origin Kilimanjaro coffee which it purchases from KNCU in Tanzania and organic Machu Picchu, from Peru. Having successfully developed mainstream distribution channels, Cafedirect now faces challenges common to many small businesses; maintaining shelf space and decent margins in the face of increasingly cut-throat competition in the retail sector and pressure from the dominant brands in their sector. Historically, there has been a high degree of hostility between FT organisations and mainstream coffee players. The large companies resent the implication that in comparison to FT products theirs are ‘unfair’. Indeed Nestle has produced a
Fair Trade:Overview, Impact, Challenges Annex 3: Case Study - Coffee in Tanzania publication entitled Nestle: A Partnership for Fair Trade, setting out its perspectives on good trading practice. However, compared to other sectors there seems to have been little serious effort by mainstream companies to assess the ethical issues involved in their supply chain or to develop guidelines or codes of conduct on social and environmental issues. According to the Coffee Trade Federation some of its members are beginning to evaluate whether the Tea Sourcing Partnership holds lessons for coffee sector 10 . Disagreements between FT and non-FT organisations centre round a number of issues: The benefits of direct sourcing: FT aims to cut out intermediaries, so that farmers receive a higher proportion of the market price and the supply chain becomes more transparent. While companies such as Nestle do buy directly from farmers in some instances, generally in countries where they undertake local processing, direct sourcing makes up a very small proportion of their overall purchases. Most large companies feel purchasing a greater proportion of coffee directly is impractical and that intermediaries have a very useful role to play in the coffee chain. The impacts of speculation. Coffee is one of the cash crops produced in developing countries for which prices are most volatile and where speculators have been most active, particularly since the collapse of the International Coffee Agreement in 1989. The British Association of Fair Trade Shops argues that the activities of speculators intensify the degree of price instability, and that coffee farmers 'hardly see any of the benefits of speculation'. However, speculation can fulfil an important economic function, providing liquidity to markets which, in principle if not always in practice, allow those involved in the production, trading and processing of coffee to manage their price risk. Barriers to an expansion of coffee processing in producer countries: BAFTS quotes the example of the European Union which implements an escalating tariff regime for coffee. While escalating tariff regimes do hinder the establishment and expansion of coffee processing activities in producer countries, processors cite many other reasons for processing coffee in the developed world: the benefits of being closer to markets, the blending of coffee which is hindered by import restrictions in many producer countries and the better investment climate. 4. Coffee Production and Marketing in Tanzania 4.1 Production and Exports Tanzania became a substantial producer of coffee between the First and Second World Wars. The country produces both high-grade mild arabica coffee and robusta coffee. The geographical focus of the mild arabica coffee industry has traditionally been Arusha and Kilimanjaro regions 11 . 10 Interview, December 1999 11 It is notable that the coffee year in Tanzania runs from July to June and not from October to September as in most of the coffee producing countries. 3-14
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