There are common terms you will hear or use when you enter the coffee market. Today we are going to narrow down to two common sustainability terms thrown a lot in just about every coffee circle: fair trade and direct trade. Let’s find what they mean to roasters, farmers, and your coffee.
Fairtrade started as a reaction to the coffee crisis in 1988. At that time, there was no price quotas in place, and as a result, the supply of coffee by far exceeded the demand. This fueled the Netherlands to start fair trade certification. It increased the prices of coffee with the aim of providing better pay to producers.
A few years down the line, some organizations popped up and did a good job of stabilizing the coffee market. Eventually, these organizations came together to form what is now Fairtrade International.
Goals and requirements
Fair Trade exists to mitigate the inequalities between large farmers in industrialized countries and small farmers in developing countries. Its primary goal is to foster equality as well as the growth for international trade.
Basically, fair trade practices support struggling small farmers so that they can continue to provide more and better products. These practices also shield children from forced labor and make sure coffee is ethically sourced.
Who is involved?
Several entities are involved.
Fairtrade International is in control of regulating policies that affect everyone in the chain, and it does execute its mandate through various sub-organizations such as FLO-CERT. FLO-CERT is responsible for standards and certification enforcement.
Fairtrade International does also supports farmers financially.
Producers get fair trade labels after applying for the fair trade certification. Only after completing the mandatory steps (for acquiring the certification), a farmer is introduced and marketed to a large customer base.
Note that you have to pay a fee to get certified.
All fair trade importers must register with Fairtrade International and pay a fee. Additionally, they are required to pay a minimum price to the exporting company. That price is not fixed. It is often reviewed to ensure producers are getting a fair share for their goods.
Of all the entities in the fair trade systems, exporters are the most affected as they incur more losses than profits. This is always as a result of low demand, applicable fees, and extra costs popping up in dealing with fair trade coffee. These losses also affect the profits of producers. However, when exporters make profits, the surplus is used to help the communities in which they are based. For example, they can build classrooms.
While there are concerns that fair trade is hurting the advancement of the coffee industry, the presence of this movement has really contributed to the production of better coffee for consumers.
Direct trade is more of an ideology or method than an organization. It is a type of trade where roasters buy directly from producers (farmers). It was established to address some of the pitfalls of fair trade practices. This includes:
- Ensuring farmers and producers are happy
- Advocating for higher premiums for coffee
Goals and requirements
As aforementioned, direct trade was created to address some pitfalls of the fair trade system. The focus was to help direct traders operate in a more open and mutually beneficial form of trade. The primary emphasis was to foster transparency in discussions, information sharing, negotiation, and interpersonal relationships.
Who is involved?
Producers engage with distributors directly and often to discuss prices for their goods as well as the production of quality products.
In direct trade, distributors buy straight from the producers instead of buying from importers who bought from exporters, who bought from cooperatives. This way, producers get top dollar for their products, and distributors get quality products. Overall, this results in increased sustainability on both sides of the equation.
Middle man out
Through direct trade, middlemen are cut out of the equation. This helps eliminate fair trade up-charges and various fees incurred.
Concerns with direct trade
The major concern with direct trade is on the honesty of distributors. Some may conceal key direct trade practices purposively to take advantage of the system. Luckily, some entities like Counter Culture Coffee, Intelligentsia Coffee & Tea, and Stumptown Coffee Roasters are working extra hard to combat transparency issues.
As you can see, both trades exist for a reason, primarily to provide sustainable incomes for coffee farmers in developing countries. However, it is good to note that neither system is perfect. So, it is always a good idea to research companies and brands online before buying their coffee.