Cost of coffee.indd - RISC

what you do
s Distribute Actionpage: A good deal for growers?, which provides detailed analysis of the
claims made by Nestlé in the booklet and case studies of the difficulties faced by growers.
s Ask the groups to look at the booklet in the light of the comments made in the Actionpage.
whole group discussion
◆ Which comments made in the Actionpage match with points raised in the groups’ initial
analysis?
◆ Which of the comments are a fair criticism of Nestlé’s role in the world coffee market?
◆ How far do the comments change your reaction to The Coffee Cycle?
◆ In the light of the comments do you think Nestlé gives a “good deal to coffee growers”?
key ideas
◆ Businesses are very concerned about safeguarding their reputation, and employ public
relations (PR) consultants to devise strategies to create and maintain a positive image. A
brand with positive associations will be able to command better prices and profits, maintain
shareholder confidence, introduce new products and recover from a crisis.
◆ ‘Reputation Mangement’ brings an integrated approach to creating a positive corporate
image among all ‘stakeholders’ – customers, employees, investors, etc. This includes:
community involvement, eg sponsorship of sports, arts or education and lobbying politicians.
◆ Businesses which have been criticised about their operations because of their impact on the
environment, abuse of human rights etc, respond with well-publicised PR initiatives which
target public opinion, policy makers and the media.
◆ ‘Ethical consumerism’ is a growing market, eg ethical pension funds, eco-tourism, ethical
sourcing. By December 2004, ground coffee sold under the Fairtrade Mark accounted for
18.8% of the UK market volume, compared with 14% in 2002.
◆ The Coffee Cycle (published in 1999) is a response to the implication “that coffees which
do not carry a fair trade mark are in any way unfair”. By explaining the whole production
and marketing process and describing the ‘partnership’ Nestlé has with producers it
provides a very reasonable and convincing case for its claim to give “a good deal to coffee
growers.” The images reinforce the picture of a well ordered mechanism producing our cup
of coffee. Although it is very well produced and informative, the booklet gives a very onesided
picture of the world coffee trade. It ignores the real hardship and insecurity faced by
many small producers. While farmers take the risks, manufacturers like Nestlé always make
a healthy profit from the final product, whatever the fluctuations in world prices.
◆ It suggests that buying direct from growers is automatically ‘fair’. Although the booklet
claims that Nestlé does “usually pay a premium over the market price”, the fact is it does
not meet the Fairtrade standard which gives small producers a guaranteed price which
covers production costs, a living wage and a premium to support community development.
◆ Under the certified Fairtrade Mark scheme, advance payments ensure that farmers have the
security to keep out of debt and free from unscrupulous middlemen. The production chain is
independently monitored to ensure that ethical standards are maintained. Coffee is bought
direct from the farmers’ own democratic organisations which are regularly consulted over
what constitutes a fair price. Farmers do not have to pay to join a fairtrade scheme – costs
are borne by the companies who retail Fairtrade Mark coffee. Nestlé does not subscribe to
this system of safeguards. It does not even have a fairtrade brand for the growing ethical
consumer market.
◆ Nestlé still sources 85% of its coffee on the world market and buys about 12% of the
world’s crop. The market price can drop to less than half the cost of production. When
world prices are low, thousands of small coffee farmers lose their land. Although Nestlé is
not directly to blame, it is the major player in a system where power lies with middlemen,
processors, exporters, dealers and roasters, and where small growers and plantation
workers struggle to make a living. Much of the world’s coffee is grown on plantations where
working conditions are poor and pesticide use is abused.
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