Are Farmers Getting a Fair Price for Fair Trade Labeled Products?

How Fair Is Fair Trade? That's Tough to Figure

Confusing Labels, Claims Make It Hard for Shoppers
To Know Where Money Goes

By STEVE STECKLOW and ERIN WHITE
WALL STREET JOURNAL
June 8, 2004

Pricing isn't the only murky area surrounding the fair-trade phenomenon.
Confusing terminology, labels, logos and claims sometimes make it hard for
consumers to figure out who these programs are helping, or how. Some
companies use terms like "fairly traded" on products and Web sites although
the claims haven't been independently verified. (See
<http://online.wsj.com/article_print//article/0,,SB108664921254731069,00.htm
l?mod=article-outset-box>related
article1.)

"We cannot prevent people from using the term 'fair trade,' " says Rudiger
Meyer, managing director of FLO-Cert Ltd., a Bonn, Germany, spinoff of the
Fairtrade Labelling Organizations International federation that verifies
whether farmers are benefiting from the sale of certified fair-trade goods.

FLO says that until a few years ago its different affiliates around the
world used at least seven different fair-trade labels on products. In the
past two years, 14 of the 18 affiliates have agreed to adopt a universal
label. The U.S. remains one of the holdouts. FLO also says it has
trademarked the term "fair trade" in about 44 countries and has contacted
several companies that were using the term on noncertified goods to "try to
reason with them," says Managing Director Luuk Laurens Zonneveld. "Until
now it's worked fairly well."

FLO's certification system is voluntary, and not all companies participate.
Some companies complain about certification and licensing costs. Some
companies also say it isn't fair that some of their suppliers, such as
individual family farms, aren't certified by FLO because they're too small.
"We feel that there are other alternatives" to FLO certification, says Kate
Lowery, spokeswoman for Whole Foods Market, a 158-store chain based in
Austin, Texas.

Allegro, Whole Foods' coffee unit, last year launched a program called High
Five for Farmers that, according to promotional material, "will donate 5%
of the sales from select coffees directly back to the farms where they are
produced." But, according to Tara Cross, Allegro's marketing manager, the
donation isn't 5% of the retail price, but 5% of a lower price at which
Allegro sells the coffee to Whole Foods, a figure Allegro won't disclose.
And the program only applies to one variety of coffee -- out of more than
two dozen -- for a two- or three-month period.

The program, in place at about 150 stores, has raised between $4,000 and
$8,600 for each promotion, which has gone for such things as water wells
and school improvements, according to Allegro's Web site.

Royal Ahold NV, the Netherlands-based owner of supermarkets, sells
fair-trade-certified coffee. But it also helped create the now-independent
Utz Kapeh Foundation, which offers its own "certified responsible coffee"
label. "If you are a large supermarket brand or a large roaster, to buy all
your products under the fair-trade conditions is just not economically
possible," says David Rosenberg, director of Utz Kapeh.

The Netherlands-based foundation sets no minimum price for growers, nor
does it impose a set development-project premium as does
fair-trade-certified coffee. Instead, it lays down strict production
standards for growers. The idea: Buyers will pay more because they see
greater value in the coffee, not because there's a minimum price. Utz
Kapeh's Web site says this model offers growers "a better price for a
better product."

Until recently, Mr. Rosenberg couldn't document that its growers were
getting more money. "The information is anecdotal," he said in April. Now
Utz Kapeh has begun asking producers to report how much more money the
coffee brings them. Mr. Rosenberg says the reports show producers are
getting more but he hasn't calculated how much.

To make its own certification system "more transparent," FLO says it
recently spun off its certification unit into a separate for-profit
company. But it's no easy task for a consumer to figure out how much
farmers are earning from fair-trade products. When this newspaper asked a
FLO affiliate in London how much of the retail price of bananas sold by a
British supermarket chain was going to the farmer, a spokeswoman said the
information was "easy to find" on FLO's Web site.

The information is there. But it involves locating a section intended for
"small producer" organizations, downloading a 29-page document, then doing
calculations based on prices in a chart on page 16 for boxes of bananas
weighing 18.14 kilos. It also requires deciphering terms like "Farm-gate"
and "FOB." Says FLO's Mr. Zonneveld, "I'm sure in terms of transparency we
can improve."

Write to Steve Stecklow at
<mailto:steve.stecklow@wsj.com>steve.stecklow@wsj.com and Erin White at
<mailto:erin.white@wsj.com>erin.white@wsj.com

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