ABOUT

Paul Rice is the founding President and CEO of TransFair USA, a Fair Trade certifying non-profit organization in the US. Rice is a USC trained economist who lived and worked in Nicaragua for eleven years before founding TransFair.

INTERVIEW

"Because of Fair Trade the farmers were able to organize their communities, develop business skills and dramatically improve their standard of living."

I got involved in Fair Trade when I lived and worked in Central America. I was in Nicaragua for eleven years and had a chance to work with a Fair Trade co-op that was just getting started. Farmers were getting a $1.26/lb selling in the European Fair Trade market, while the local middle men in the countryside were paying about $0.15/lb. Because of Fair Trade the farmers were able to organize their communities, develop business skills and dramatically improve their standard of living. That was a very, very powerful experience for me.

I had worked in various development projects for a number of years. I had seen the failure of the dominant model for alleviating poverty in the developing world--a model that depends, basically, on charity from the United States and Europe. It is a model that does not help people in rural communities develop their own capacity to solve their own problems. Fair Trade was a dramatically different model. It helped farmers boottrap their way out of poverty. I found that very exciting and inspiring, and in 1994 I moved back to get Fair Trade going here in the U.S.

"The industry has found that it is in its own interest to do Fair Trade and consumers are buying the product."

It has not been easy to grow the Fair Trade market in the U.S. TransFair is a non-profit organization, we are very small and we do not have a lot of funding, so we have really had to rely on consumers and on industry to build this market based on their own interests.

And that is what is happening. The growth that Fair Trade has enjoyed here in the United States over the last five years has primarily been due to the fact that the industry has found that it is in its own interest to do Fair Trade and consumers are buying the product.

What do consumers get out of Fair Trade? They get a chance to feel good about the impact of their purchase. They get a chance, through something as simple and ordinary as a daily cup of coffee, to feel like they can reach halfway around the world and help a family who grew that coffee. They are also able to drink some of the best coffee in the world, because it is the small family farmers, who in most cases are forth, fifth, sixth generation farmers, who produce the highest quality coffee. Coffee is a way of life for them. It's a culture; it's not just a job.

"Consumers in the United States increasingly care about where their products come from."

There is a growing body of market research and sales data to suggest that consumers in the United States increasingly care about where their products come from. They are increasingly thinking about where their coffee comes from, where the different products that they consume are produced, how they are produced, and the impact of those products on the environment and on workers and farmers in countries overseas.

This is not a majority of U.S. consumers yet, but it is a strong and rapidly growing consumer segment. The consumers are saying that they want to reflect their values in the things that they buy. They are going to use their purchases as a way to vote for a better world. We see the rise in organic, natural, and healthier foods and other products. We see the rise in socially responsible and environmentally sustainable products. Fair Trade fits within that broader market trend of consumers increasingly looking for socially and environmentally responsible products.

"The companies that have come to Fair Trade are the high quality companies and they are looking for the very best coffees in the world."

We now work with over three hundred companies here in the United States that have requested certification in order to sell Fair Trade certified coffee and other products. All of these companies are in the specialty or gourmet segment of the market. We are talking about very high quality coffee companies: Starbucks, Seattle's Best Coffee, Peet's, Green Mountain and Equal Exchange.

We do not work with Folgers, Maxwell House or Nestle's. These are not the companies that have come to Fair Trade. The companies that have come to Fair Trade are the high quality companies and they are looking for the very best coffees in the world. They are not going to water down their standards for Fair Trade.

"The fact that Fair Trade grew by ninety-one percent last year is pretty strong testimony to the consumer response to Fair Trade and to the quality of the product as well."

Fair Trade coffees are winning quality contests right and left. The Cup of Excellence competition is one of the industry's premiere quality competitions. It happens every year in a number of different producing countries. The most recent one was in Nicaragua. Of the top one hundred coffees in the country, Fair Trade co-ops took the first five honors.

We are seeing across the board, from Nicaragua to Mexico to Ethiopia to Indonesia, that Fair Trade co-ops are investing in quality. They are getting recognition and winning awards for their quality. And the consumer reaction is very, very positive. In the industry today consumers are determining quality. And the fact that Fair Trade grew by ninety-one percent last year is pretty strong testimony to the consumer response to Fair Trade and to the quality of the product as well.

"We launched the Fair Trade label here in the United States five years ago."

We launched the Fair Trade label here in the United States five years ago, focusing mostly on coffee. Fair Trade coffee now represents twenty five million pounds a year. We are growing at an average annual rate of about fifty percent a year.

This year Fair Trade coffee represents about five to six percent market share in the specialty coffee category, and specialty coffee accounts for about forty percent of all the coffee dollars spent in America. Fair Trade is about five to six percent of that market segment and growing very fast. We are seeing kind of a critical mass moment in which Fair Trade is now expanding into main stream channels.

"Is the market big enough for everyone?"

Most of the small family farmers around the world who are certified for Fair Trade feel a lot of sympathy and concern for the farm workers on the larger plantations. The question is, is the market big enough for everyone?

What we have seen in the past is that supply was greater than demand; we have more small family farmers who are certified and trying to sell their coffee to the Fair Trade market than we actually have demand for. Most Fair Trade farmers are selling only about thirty percent of their total harvest on Fair Trade terms, the rest they are forced to sell on normal market terms.

What the small family farmers are requesting is that, before we expand the model to include plantations, let's build the market so that we can address their needs first. And that is the path that we are on. We are building the market to support small family farmers first and then eventually I believe we will expand the market to include those farm workers that work on the big farms. We already work with large farms in the case of tea, bananas and pineapples.

"Coffee is still the number one Fair Trade product in the U.S., but banana sales, for example, are growing very, very fast. And the cool thing about bananas is ninety-six percent of Americans eat bananas."

Here in the United States we started certifying coffee about five years ago, and then two years ago we broadened the category by certifying Fair Trade tea and chocolate. This year we introduced a whole line of fruit products including bananas, mangoes, and grapes.

We have a rapidly expanding category of Fair Trade certified products, food products that are going into natural food stores, supermarket chains, like Wild Oats, as well as into mainstream supermarkets all over the country.

Coffee is still the number one Fair Trade product in the U.S., but banana sales, for example, are growing very, very fast. And the cool thing about bananas is ninety-six percent of Americans eat bananas. By certifying Fair Trade bananas, we have an opportunity to put that Fair Trade certified label in front of a lot more consumers' awareness and build the market.

"Roughly eighty-five percent of the coffee that we have certified over the last five years as Fair Trade has also been certified organic."

Roughly eighty-five percent of the coffee that we have certified over the last five years as Fair Trade has also been certified organic. So typically, on the package, you see two labels: one is the Fair Trade label and the other is the organic label. In the case of bananas, cocoa, tea, one hundred percent of the Fair Trade products are also certified organic. Those two concepts are very closely aligned in the market.

Most of the Fair Trade organic coffee in the market is also shade-grown. It is not certified as such, but typically organic coffee is grown under the canopy of the forest and it is grown in a very environmentally friendly way, the shade trees and the habitat are protected.

"Middlemen go out into the communities and buy the coffee at the farm gate at extremely, extremely low prices."

Most coffee farmers are very small family growers that grow coffee on one, two or three acres of land. They are very much like Juan Valdez, the TV commercial figure. Historically these small family farmers have grown in the mountains. They are very isolated from roads. They do not have electricity. They do not have Internet access. They do not have real access to the market. And so they sell to local middle men.

Middlemen in Central America are known as coyotes, and that gives you a flavor for the relationship. Typically, middlemen go out into the communities and buy the coffee at the farm gate at extremely, extremely low prices. Farmers historically have gotten around $0.20, $0.30, $0.40 a pound for coffee that you and I pay 8-10 dollars for up here, if we are buying the good stuff!

The farmer sells to the coyote, the coyote sells to the mill, the mill sells to the exporter, so there are two or three different players in the chain before the coffee is actually shipped overseas.

"Fair Trade is direct trade."

One of the most important things to know about Fair Trade is: Fair Trade is direct trade. Direct trade means farmers are getting organized and milling their own coffee; they are jumping over two or three layers in the international supply chain and taking their product directly to market. It is a kind of like an international farmer's market. Direct trade allows those farmers to get a lot more for their coffee.

The Fair Trade minimum price around the world is a $1.26/lb., and that is for coffee that has already been milled and prepared for export. Out of that $1.26 the cooperative typically has to deduct milling and transportation costs. Farmers are getting about $1.00 net back to them in their pocket for Fair Trade coffee, compared with the local coyotes who pay around $0.15, $0.20, $0.30 a lb. The impact of Fair Trade on farmer income is dramatic. We are tripling farmer incomes.

"Farmers are able to make dramatic improvements in their living standards."

Farmers are able to make dramatic improvements in their living standards. They are keeping their kids in school. They are installing electricity and indoor plumbing in their homes for the first time. They are putting in place organic training programs and becoming more environmentally friendly. They are investing in quality. They are developing their communities, at a time when coffee communities around the world are struggling to survive.

Most small farmers in the coffee business produce around 2,000 lbs of coffee per year--that's the total annual harvest. You can do the math. If you are getting $0.30 a lb for 2,000 lbs, that's a total cash income for that family of only 600.00 per year. About two bucks a day. Fair Trade is turning that around, based on simply a fair price for a great product.

"Fair Trade is not just a market, it's also a movement."

Fair Trade is not just a market, it's also a movement. And in the U.S. a lot of the development of the Fair Trade market has been a result of the growing consumer movement around Fair Trade.

There are churches all over the country that are now serving Fair Trade coffee in church. There are people writing about Fair Trade coffee in their local newsletters and going to their local super markets and asking the managers to get Fair Trade coffee into the local supermarket. People are not just consuming Fair Trade coffee, they are also advocating for it.

"Students, churches, environmental groups, consumer advocacy groups, human rights groups, these are the kinds of organizations that have been joining the Fair Trade movement and really spreading the word."

Fair Trade has emerged as the big issue on campuses around the country. We have hundreds and hundreds of university campuses that have switched to serving Fair Trade coffee in the dining halls and in the cafes. It has been an incentive to for coffee companies to get into the market. They realize that if they do not have Fair Trade coffee as part of their lineup, they are going to lose college accounts. Many coffee companies have come to Fair Trade as a result of students on campus.

Similarly environmental organizations around the country are introducing Fair Trade organic coffees as a way to promote environmental sustainability and social responsibility at the same time. Sierra Club, for example, has an organic, shade-grown coffee, that it sells, promotes and uses as an educational tool. National Wildlife Federation has a Fair Trade, organic, shade-grown coffee, which it actively promotes to over 6 million members nationwide.

Students, churches, environmental groups, consumer advocacy groups, human rights groups, these are the kinds of organizations that have been joining the Fair Trade movement and really spreading the word, and helping drive this tremendous growth in the Fair Trade market that we are seeing.

"We often know what is wrong with the world, but so seldom do we have a positive alternative."

We live in a time when people feel uncomfortable with a lot of things that are happening in our world--from global warming to the poverty in so many of the world's developing countries. We often know what is wrong with the world, but so seldom do we have a positive alternative. One of the most powerful things about Fair Trade is that it is a positive alternative. You do not have to go and demonstrate. You do not have to write a letter to the editor. You do not even have to go and vote. With something as simple and ordinary as a daily cup of coffee, you can make a difference.

Fair Trade is an effortless way for people to be involved in a positive alternative and to support farmers around the world and ecosystems around the world. That is one of the broader lessons for social and environmental activists. We need to find ways not only to identify and pose what is wrong, but also to create models for positive action, so the consumers who do not have time to write a letter to the editor or go and demonstrate, can make a difference too. People, whose lives are busy but who want to make a difference, should have more positive alternatives. And Fair Trade is a powerful model.

"Many companies are not yet ready for Fair Trade."

Many companies are not yet ready for Fair Trade. In any market you will find companies that are leaders and others that are followers - companies that have a vision about where the market is going and jump out in front of the curve, versus companies that are waiting to see what happens.

That is certainly the case with Fair Trade coffee. We work now with over 300 coffee companies in the U.S. market, but there are another 800 - 900 small, medium and even larger coffee roasters out there that have not yet gotten involved in Fair Trade, that are waiting to see how the market will unfold, that are waiting to see if this is something for them. And that is OK.

"Fair Trade is the most powerful model for social responsibility in the coffee industry."

The companies that have been the first to move in the Fair Trade category, like Equal Exchange, Green Mountain, Starbucks, and now even Dunkin' Donuts, are mainstream companies that have an analysis and a vision of where the market is going. These are companies that believe that consumers are increasingly going to want socially responsible products. And Fair Trade is the most powerful model for social responsibility in the coffee industry. Their success will pull other coffee companies onboard.

It is very exciting that the companies that have come to Fair Trade in this early period are companies of all sizes. From Cafe Ladro and other small, locally based roasters that are very connected to the local community and really doing a great job of telling the story to larger companies that typically take longer to make big decisions around product choices and product lineups, but that are helping to put Fair Trade in front of the national audience.

"Green Mountain is a great case study of a publicly traded company that now has forty Fair Trade coffees out there."

When you look at national roasters like Starbucks, Dunkin' Donuts, Millstone, Sara Lee, Green Mountain, you find these roasters doing a lot to help raise awareness around Fair Trade just by putting the product out there. And the more these companies do, the better it sells.

Green Mountain is a great case study of a publicly traded company that now has forty Fair Trade coffees out there and those coffees are doing very, very well. Eighty-five percent of Green Mountain's growth of the company last year was from this Fair Trade line. What Green Mountain and other companies are learning is that if you create a whole line of Fair Trade coffees and you give consumers choice, it does better than if you only have one or two Fair Trade coffees. Everyone is watching this experience and learning from it.

"The coffee market has always been very cyclical."

Historically the coffee market has always been very cyclical. There will be a year or two of good prices and then there will be over production that leads to typically long periods, 4-5 years, of very low prices. We are currently in one of those historic troughs. For the past four years, coffee prices have been hovering at the $0.40 - $0.60/lb range. That is the export price, of which farmers typically get half.

And part of this current coffee price crisis is due to the overproduction coming out of two countries: Brazil and Vietnam. The coffee coming out of Brazil and Vietnam tends to be very low quality, so it tends to go into canned coffees. In the last five to seven years, these two countries have ramped up production, which has led to plummeting prices for all growers. Now, even high quality growers are getting hammered by this low price market, and they cannot even meet production costs. Growers in Guatemala, Cost Rica, and Colombia, Nicaragua have higher costs of production because they are producing such high quality, and they are struggling to make ends meet in this current market.

"There is not any immediate threat for Fair Trade from international trade agreements."

There is not any immediate threat for Fair Trade from international trade agreements. At the end of the day, Fair Trade is a model for which its success depends on consumers. If consumers know what Fair Trade is and want it, I think that is the best guarantee that Fair Trade will continue and will not be held back by international trade agreements. Organics could serve as a model for where Fair trade might go.

Over the last thirty years, organics have become so mainstream and such an important part of the food market, that the U.S. government has stepped in to regulate organics, to standardize how organics are labeled. And that is a good thing. We would like to see Fair Trade follow a similar path, where eventually Fair Trade becomes a real standard for industry with government support.

"We have aligned the interests of the farmers with the interests of the companies."

Fair Trade is about farmer empowerment; it's about consumer empowerment; and it's also about putting the power and the tools in the hands of industry to make a difference without sacrificing their business interests. We have aligned the interests of the farmers with the interests of the companies.

Companies are making more profits out of Fair Trade. They are not just doing it out of pity for the farmers. They are doing it because it is good for business. It is a model that is sustainable, that is here for the long term, and that represents a paradigm shift in relation to the kind of traditional models of addressing third world poverty.

"What I envision is a rapidly expanding array of products that give consumers a Fair Trade lifestyle option."

We are already certifying a whole range of products besides coffee. Internationally, Fair Trade certification is available for coffee, tea, chocolate, bananas, and a whole range of other fresh fruits, honey, sugar, orange juice. New products are coming on line every day. Fair Trade has historically been focused on food products, but we are starting to certify manufactured products.

The first Fair Trade soccer balls are now available in Europe. We have Fair Trade garments coming online soon. What I envision is a rapidly expanding array of products that give consumers a Fair Trade lifestyle option. It gives consumers the option of buying Fair Trade products in every product category and expressing their values and their desire for greater cultural responsibility through all their purchasing decisions, not just through coffee.

"Consumers in the United States and in Europe are a sleeping giant. They have tremendous power to effect change, through their purchasing decisions."

Consumers in the United States and in Europe are a sleeping giant. They have tremendous power to effect change, through their purchasing decisions, but they are asleep. They do not think about the farmer when they look down into that cup of coffee every morning.

If we can awaken the sleeping giant, if we can raise consumer awareness around the coffee crisis and the powerful alternative that Fair Trade represents, if we can help consumers see a face in the bottom of that cup when they drink their daily cup of joe, we can truly transform the market. We can transform society. And that is our number one goal today: Awakening the sleeping giant. Awakening the consumers to the power that they have through Fair Trade to make a difference.