This article is part of our Cafe Business Startup Guide—a curated list of articles to help you plan, start, and grow your cafe business!
For many consumers and small business owners in the U.S. and western Europe, the knowledge that the people producing their coffee were usually struggling from poverty, in rural areas, and vulnerable to exploitative practices by powerful middlemen who gave them prices far below market value, is disturbing.
People in the western world wondered, is there a solution? We want this product, and we don’t want it at the expense of some one else. Farm work is hard work, and the people that make it happen should be able to get a fair shake of the booming international coffee business.
Owning and running a coffee shop is hard work too, and if you’re a small conscientious business owner it’s natural that you’ll have questions. We’ve compiled some helpful tips on this subject that you can find here. But what about the coffee itself?
In a global market where the buyers and sellers of coffee are often half a world away from those who grow and maintain the plants themselves, what are the worker’s lives like? Are the working conditions safe, are they getting a wage that reflects their contribution? What about the farms, are they environmentally friendly, and are they using green and sustainable methods?
What is fair trade coffee?
The fair trade movement arose as a possible way to address these concerns. Since its inception, there has been controversy over the efficacy, practices, and costs associated with the fair trade label. Simply put, the term “fair trade” typically refers to the movement or principles of providing fair wages and labor practices in international trade. To better understand the details of many of those principals, you can find an in-depth charter here.
The terms “fair trade certified” or “fair trade certification” are related to a certification by either FLO (Fairtrade Labeling Organization International, also called Fairtrade International) or Fair Trade USA, two nonprofits who impose regulatory requirements related to safe labor practices, wages, and environmental impacts on farms and plantations around the world (specifically Africa, Asia, Latin America, the Caribbean, and Oceania) in exchange for the fair trade label.
Certification began in 1997, as a concrete way to ensure that a fair trade certified (FTC) label on a product meant that a series of milestones had been met, and a socially conscious consumer could rest easy with their purchase.
After having met these requirements, anything labeled fair trade has a “price floor,” meaning that FTC coffee will never fall below a certain price (currently $1.40 USD per pound), despite changes in the market.
Interestingly, these two organizations—FLO and Fair Trade USA—used to work together, but parted ways in 2011. You can read more about the separation here, but the gist is that they had a difference of opinion about which methods would best serve their intended beneficiaries.
The subject of which methods are the most effective and efficient is controversial, and this is a big part of the ongoing conversation about finding ethically sourced coffee and how fair trade certified coffee fits into the larger picture.
Now that you have an overall understanding of what the fair trade movement and fair trade certification are, let’s explore what this means if you are a business owner considering buying and serving fair trade certified coffee, or finding ethically sourced coffee in general.
The pros and cons of fair trade coffee
Keeps grievous violations at bay. Because of the certification process that began in 1997, you can rest assured that some of the worst labor and environmental violations—such as unsafe working conditions—will not be happening. John Hunt of Westrock Coffee notes that while fair trade certification has a multitude of limitations, “there is no doubt that the stamp ensures against gross practices of abuse.”
The label has brand recognition. Fair trade coffee is a popular concept that most people have heard of, and it will send a message that your business cares about the environment and the lives of the people who produce your coffee, helping to shape a positive reputation. This is not the only way to achieve this goal, of course, but a label is clear and eye-catching.
[pullquote]”All fair trade products are certified under the same standards, so you are assured a certain level of quality and social responsibility when you see the label.”-Kate Harrison [/pullquote]Kate Harrison of Green Bride Guide notes that there are differences in the benefits offered from one type of coffee to the next, depending on variations such as region. She points to the example that you could reduce the carbon footprint of long distance shipping by deliberately selecting a coffee that comes from closer to where you are.
Harrison continues, “That said, all fair trade products are certified under the same standards, so you are assured a certain level of quality and social responsibility when you see the label. It is for this reason that I look for double certifications when possible (e.g. organic, as then it is pesticide-free or bird-friendly).” There are a wide swath of certifications available, and fair trade is one of the most well-known.
Meets the demand of the socially-conscious consumer. Fair Trade USA references the concept on their website of the socially-conscious consumer, someone who is aware of certifications like USDA organic and fair trade and will likely be looking for them or asking about them. If you own a coffee shop or restaurant, you’re likely to get questions about the type of coffee you serve and why, and to many customers fair trade certified will be words they’re happy to hear.
Simply put, there is a small pool to choose from. From the Stanford Social Innovation Review: “An estimated 25 million small producers make up 70 percent of worldwide coffee production, but sales of fair trade coffee account for only two percent of total production. Those figures clearly indicate the challenge—as well as the opportunity—that lies ahead for fair trade organizations.”
Some detractors argue that quality problems can arise as a result; a farmer would naturally sell a lower quality product at the higher mandated fair trade price, instead of trying to sell it on the open market.
[pullquote]”The fair trade certification process can be laborious and expensive for small farms.”[/pullquote]
Sometimes, a higher cost. For every pound of fair trade coffee sold in the U.S., retailers pay 10 cents to fair trade USA. In addition, purchasers pay a subsidy of twenty cents per pound that does not go directly to the farms, but is instead retained by the cooperatives the farms are required to belong to, and then the cooperative votes on how that money is used. Prices for products obviously vary, but these costs will be there for fair trade products specifically.
Certification can be prohibitive. FLO and Fair Trade USA regulations can be a hurdle for a variety of reasons, not the least being that the documentation required raises language and literacy challenges for some farmers. Hunt notes that in order to fulfill requirements, farmers can need a fair amount of money in order to garner the distinction of being fair trade. Hunt adds “Sometimes, the process can be so laborious, and expensive that farmers who elect to participate in the program actually do so at a loss.”
Controversial impact. There are critics of the fair trade system itself, who say that it is less impactful than the name would imply. Recent research by the University of London found that “fair trade standards for tea and coffee have always been far more concerned with the incomes of producers than with wage workers’ earnings.” What this means is that while small to medium sized farm owners are getting a more fair shake, less attention is being paid to those the farthest down the food chain, the laborers.
Only growers who belong to cooperatives qualify as fair trade, this means that large companies are essentially excluded from being certified as fair trade by default, regardless of the socially or environmentally responsible practices they may employ. The research from Professor Haight in the Stanford Social Innovation Review also shows that the premiums, which go directly to the cooperatives, are often paying for things like additional office staff and nicer facilities.
How you can find ethically sourced coffee
With so many conflicting perspectives, what’s the take away? If you are a business that wants to be socially and environmentally responsible, or an individual consumer with the same concerns, you can find coffee that is grown sustainably and supports those who work to bring it to you. It takes a bit of digging, but there are many coffee companies out there who have this at the forefront of their missions.
Here are some tips on vetting your coffee provider:
Talk to friends. Tanner Agar, CEO of The Chef Shelf, has the practical suggestion of looking to those who’ve come before. If you’re opening a coffee shop, think of the people you know who are already in the restaurant industry that might either serve FTC coffee, or serve coffee from a company that shares those values, even if their products are not FTC. He points out that they may have an existing personal contact with these providers, paving the way for you to contact or vet them yourself.
Visit the farms first hand. “Going to origin is definitely a good option if it is possible, but with the time and finances necessary it is often not practical,” says John Hunt of Westrock Coffee. Depending on where you are financially, if it’s feasible for you to take a trip and tour first hand the conditions of production, that is a fantastic idea. It’s culturally enriching, could double as a vacation, and any questions will be solidly answered.
Get references. If it’s not possible to visit the area or a friend doesn’t have a solid recommendation, ask the producer for references. This is a nice straightforward method, if they’ve worked with companies similar to yours in the past that are happy to put in a good word on the coffee producer’s behalf, reach out and speak with them.
Thorough internet search. The internet search part is obvious—Google is the low-hanging fruit of vetting, and it’s the “thorough” part that is essential. Keep an eye out for reviews (both positive and negative), and details like past companies they’ve partnered with, any public financial information, and all the details that indicate transparency on their part about the labor and environmental conditions of their production.
Go your own way
When it comes to deciding what kind of coffee to serve in your business, Agar offers this advice: “The decision to seek out and serve these coffees is personal. Many coffee shops are designed for relaxation, and collaboration. They are home to business people, artists, and students. If your customers will value these principles and pay a premium, then do it. Only an owner can know what’s right for them.”
Harrison, who works in the wedding business where coffee is always a factor, says, “Some brides love Starbucks, which works hard to sustainably source and offers organic blends—but only a fraction of their products are fair trade certified.” She also offers the example of a coffee company such as Rohan Marley’s Marley Coffee, which doesn’t offer exclusively fair trade, but every coffee is some combination of fair trade, USDA organic, or Rainforest Alliance certified, so the social mission is clear through each product.
[pullquote]Many companies strive for socially and environmentally conscious practices, without dealing exclusively in fair trade products.[/pullquote]
Hunt confirms that Westrock deals with both fair trade and non fair trade coffees, and says that the company works to embody socially conscious principles. Some of the farms they work with are so small that the fair trade requirements are prohibitively expensive, such as some partners with as little as a dozen coffee trees.
He notes that the company pays their employees 20 percent above the local market, and provides benefits to plant workers such as access to free showers and free hot meals. They also extend a little further out into the surrounding communities by providing free running water and nutritional programs to the farmers they work with in rural areas.
While fair trade certification is one available option, there are many coffee companies that combine multiple missions and strive to have an overall socially and environmentally friendly company without exclusively dealing in fair trade products.
Do you serve coffee that has some kind of certification? Why or why not? I’d love to hear your thoughts and experiences!
More information to help you start and run your coffee shop:
- 13 Tips To Open A Successful Coffee Shop
- Free Cafe and Coffee Shop Business Plan Templates
- Know Your Industry Before Your Start Your Business