4 • Coffee World • C&CI March 2012 India
New business model will require
rigorous application This year has been recognised as International Year of Co-operatives by the United Nations, so it is ironic that this year also sees Fair Trade USA refocusing its coffee business model not on co-ops but on estates. As highlighted in the November 2011 issue of C&CI (see pages 20-21) and elsewhere in this issue in our interview with Fair Trade USA’s President and CEO, Paul Rice, the US organisation has taken the bold step of leav- ing the Fairtrade Labelling Organisation (FLO) and has embarked on a series of pilot projects which it hopes will demonstrate that Fair Trade certification can be applied to a much wider range of organisations than the coffee co-ops certified by FLO. This raises a number of questions, chief among them being, if certification is applied to a much wider range of growers, will the concept of Fair Trade be watered down, and will workers on estates, which Fair Trade USA is targeting, really get the benefits of a Fair Trade premium? Moreover, if Fair Trade certifica- tion is made available to farmers through a much wider range of organisations – such as through mills or other ‘hubs’ as Mr Rice likes to call them – will certifi- cation and verification be applied equally thoroughly in all cases? Co-ops are a scalable – and successful – business model that legitimizes
farmers and empowers them as a major economic force. According to the International Co-operative Alliance’s Global300 report, published in 2011, the world’s largest 300 co-operatives generated revenues of US$1.6 trillion – which is comparable to the GDP of the world’s ninth largest economy. The co-op model is on track to become the fastest growing business model by 2020. This kind of diverse, values-based business provides a sustainable source of revenue for communities and individuals and builds lasting economic strength. Co-operatives employ nearly 100 million people – 20 per cent more than multi- national enterprises. Moreover, as member-controlled businesses, co-operatives employ democratic principles that put people first. They also innovate to meet the needs of their members. As FLO itself put it recently, with the collapse of financial institutions and the uncertain economic climate, more and more people are looking for alternative ways of doing business. The co-operative model offers just that. What is more, co-operatives are an integral part of Fair Trade - a massive 75 per cent of Fair Trade’s producer organizations are small farmer co-ops. The co-operative model is so successful because it brings people together to achieve common needs and aspirations in a democratic way. By joining a co-operative, producers can increase their outputs, diversify produc- tion, and band together to transport goods to market, among many benefits. Co-operation has always been a fundamental principle of the Fair Trade move- ment. The first-ever Fair Trade labelled product – coffee sold in 1988 under the Max Havelaar label in The Netherlands – came from co-ops of Mexican coffee farmers. More than 20 years on, there are over 320 Fair Trade coffee co-ops around the world. Together they received over €17 million in Fairtrade Premium money in 2009-2010. Importantly, Fair Trade producer co-ops are jointly owned and democratically governed by the producers themselves. As FLO says, co- operation and Fair Trade go hand-in-hand and, as Sophi Tranchell, Managing Director of Divine Chocolate in the UK said recently, with accountability in the spotlight as national economies unravel, the concept of shared ownership is ever more important.
In recent months a number of studies have seemed to cast doubt on the ben- efits gained by farmers from Fair Trade certification. Another study is highlighted in Peter Baker’s ‘What the Papers Say’ column in this issue. These have been strongly rebutted, but the last thing the Fair Trade coffee movement needs 2-3 years down the line would be examples of estates or other types of farm with Fair Trade certification being found to be failing to pass on the Fair Trade mark- up to workers. Fair Trade USA’s plan to enfranchise thousands more farmers is commend- able. Everyone in the Fair Trade business has the same goal, and as Paul Rice points out, "there are many ways to the top of the mountain." Selecting well-run, socially-oriented estates for pilot projects will not be a problem for Fair Trade USA. With so many different types of organi- sation also being certified in future, ensuring that poor farmers really benefit from certifi- cation will be very much more difficult.
Nestlé supports coffee farmers as demand for Nescafé grows
Nestlé is setting up its first coffee ‘demonstration’ farm in India to help farmers improve quality, productivity and sustainability. The company is helping coffee farmers in the states of Karnataka,
Kerala and Tamil Nadu to develop their agricultural practices as demand for Nescafé soluble coffee grows in the country. Nestlé aims to provide farmers with high-yielding, disease resist- ant plants developed by its research and development teams. Through the initiative, the company seeks to source coffee sus- tainably by working closely with Indian coffee farmers and ensuring competitive prices, transparency and traceability. Nestlé’s work with Indian farmers is part of the company’s
Nescafé Plan. The plan has already been established in China, Colombia, Côte d’Ivoire, Indonesia, Mexico, Philippines, Thailand and Vietnam. It promotes responsible and sustainable practices across Nestlé’s coffee supply chain. The plan’s objectives include doubling direct coffee purchases by 2015 and delivering 220 million higher quality coffee plants to farmers by 2020.
Néstle is extending its Nescafé Plan to India
BRAZIL
Billionaire could enter the coffee market
Eike Batista, who became Brazil’s richest person by selling shares in commodities and logistic start-ups, is considering entering the coffee market after setting up catering and sports management ventures last year. Bloomberg said EBX Group Co, the holding company for most of Batista’s assets, is studying "business opportunities" in the coffee industry. Mr Batista, 55, is expanding into new segments after setting up energy, mining and logistics companies. In December, EBX entered the catering services market through NRX-Newrest, a joint venture with Newrest Group Holding. EBX also last year started IMX, a part- nership with IMG Worldwide Inc focused on sports and arena management in Brazil.
Batista is said to be buying coffee farms in Brazil’s southeastern state of Minas Gerais and plans to pro- duce and export the beans.
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