This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Fair-Trade Coffee Wins Over Starbucks, Keurig, but Fails Coffee Producers

NEW YORK (TheStreet) -- Back in the 1960s, the concept of fair-trade coffee was confined to do-gooder churches and charity shops, which believed that the poor would benefit from it. Today, fair trade wears the garb of an opportunistic culture that several corporate bellwethers, including Starbucks (SBUX), Whole Foods Market (WFM) and Keurig Green Mountain(GMCR) are embracing.

The strategic positioning of fair-trade-certified products has catalyzed a wave of stupendous marketing success that has big-league retailers jostling one another to get a piece of the pie. There's only one problem. The fair-trade program, originally designed to help 1.24 million farmers around the world, now fails to provide them any deliverance from the shackles of poverty.

For every dollar spent by an American consumer to purchase a fair-trade product, only 3 cents is transferred to the producer in the country it came from. That is the calculation of Senegalese development economist and former Fair Trade International employee Ndongo Samba Sylla, in his book Fair Trade Scandal: Marketing Poverty to Benefit the Rich. The remaining 97 cents either flows into the pockets of the big-brand retailers or ends up in the hands of the wrong country.

Apple Will Murder Microsoft and Bury It With BlackBerry's Corpse

We Could Be Minutes, Hours, Days, Weeks Away From a Huge Pandora Announcement

40% Would Quit Their Jobs for Better Health Care

10 Best Cars for the Great American Road Trip

While fair-trade practices in the U.S. have expanded to accommodate a suite of products, including chocolate, tea, sugar, flowers, spices, mangoes and wine, coffee currently accounts for 80% of all fair-trade premiums, with a sales volume of $30.8 million. These premiums are supposed to be transferred directly to farmers. But that clearly isn't happening.

A groundbreaking body of research evidence from a U.K. government-sponsored study conducted by SOAS, University of London, (formerly known as the School of Oriental and African Studies) found that coffee growers in Ethiopia and Uganda, which are among the world's leading coffee export markets, continued to earn meager wages in spite of fair-trade certified exports. The research also found that these agricultural workers were more impoverished than producers who worked in sites that were not fair-trade certified.

Producers in countries like Mexico are getting record lows of 56 cents for every pound of coffee they export. Jeremy Simer of Fair Trade USA says that these farmers in some cases receive a scanty 20 to 30 cents per pound of coffee.

Given the increased efforts at marketing fair-trade coffee, revenue has escalated significantly in recent years. Sales of products carrying fair-trade labels in key markets across the U.K. and Western Europe rose from $1.1 billion to $6.6 billion.

In the U.S., products that won Fair Trade USA's seal of approval for meeting requisite ethical, environmental and sustainability standards, saw a sales jump of 75% last year over the first quarter of 2011, according to a report by SPINS, a retail research firm based in Illinois. TheStreet's Gregg Greenberg speaks with the CEO of Jammin Java:


WATCH: More feature videos on TheStreet TV

Mary Jo Cook, a chief impact officer at Fair Trade USA, emphasizes that the entry of big brands into the fair-trade market has been attributable to increased consumer interest and the ensuing sales jump.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7870 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs