The Wall Street Journal
November 23, 1999
by Jim Carlton
Staff Reporter of The Wall Street Journal

San Francisco -- Nicaraguan coffee farmer Santiago Rivera sat at a patio table outside Caffe Saphore here not long ago, listening to a Latin band and shaking hands with customers.

A glamorous Juan Valdez, he's not. Unlike the fictitious coffee farmer who appears on television commercials for Colombian coffee, the 54-year-old Mr. Rivera is lean and wiry with callused hands and a battered straw hat. He has ventured far beyond his mountain home to publicize what is called the "fair trade" coffee movement. Since signing up to grow beans for fair trade, "my roof doesn't leak anymore," he says with a grin.

Haven't heard of fair-trade coffee? You soon may. Started in Europe 10 years ago and just making its way to the U.S., the aim of the fair-trade coffee movement is to lift the standard of living for poor farmers in developing countries by forming system where the farmers can sell their beans directly to roasters and retailers, bypassing the customary practices of selling to middlemen in their own countries.

This arrangement allows farmers, who farm mainly in the mountainous regions of Latin America and other tropical regions where the high-flavor high-prices beans sold to gourmet stores are grown, to earns as much as $1.26 a pound for their beans, compared with the 40 cents per pound they were getting from middlemen. Farmers who use environmentally friendly practices, such as promising not to clear-cut trees or use pesticides, are paid a premium.

The fair-trade coffee movement is the latest example of how social activists are using free-market economics to implement social change. The idea to import the movement into America came from TransFair USA, the group that launched the campaign five months ago, targeting the politically liberal San Francisco Bay area. Since then, organizers say they have signed up eight gourmet roasters and about 120 stores, including big chains like Safeway Inc. Fair-trade coffee carries a logo identifying it as such.

While the movement has led to incidents of violence in some places in Latin America, mostly involving middlemen who are being bypassed, organizers say they have plans to extend sales of fair-trade coffee to Seattle this month -- to correspond to the meeting of the World Trade Organization -- and plans to target half a dozen U.S. metro areas a year, possibly Boston and Washington, D.C., in 2000. By the year 2005, TransFair hopes to have 5% of the $18 billion U.S. coffee market, the world's largest, and an even larger percentage of the faster-growing specialty coffee market.

"People who hear of our program are very excited to hear about an alternative to getting their products from sweatshop conditions," says Deborah James, fair-trade director for Global Exchange, a humanitarian group based in San Francisco that is working with TransFair to publicize the fair-trade coffee movement in the U.S.

Oakland's Royal Coffee shop, for instance, reports sales of fair-trade coffee have jumped to about 60 pounds a week, or 5% of total sales, in a month. "People here like what this stands for, plus the coffee is great," says Michael Murphy, the shop manager.

At Equator Estate Coffees & Teas, a roaster in upscale San Rafael, officials say the coffee accounts for about 15% of their total, and would be higher if supplies were greater. The company says it weaves the fair-trade coffee into all of its blends. "Once the demand builds, there will be more supply," says Brooke McDonnell, a partner in the company. "I really think it's like a rolling thunder."

Fair Trade made big inroads in Europe, where fair-trade coffee sells in 35,000 stores and has sales of $250 million a year, according to organizers. In some countries, like Switzerland and Holland, fair-trade efforts to include other commodity items, including tea, sugar, bananas, and chocolate.

But fair-trade activists concede that selling Americans on the idea of buying coffee with a social theme will be more difficult than it was in Europe. Americans, they note, tend to be less aware of social problems in the developing world than Europeans. But when unfair business practices are made public, Global Exchange officials say, their surveys show eight out of 10 American consumers would opt for a product that is made under fair practices. "Once you give people the option, they will generally make the right decision," Ms. James says.

In Oakland, Mayor Jerry Brown is even pushing his constituents to give more thought to how they buy coffee. "I would hope that people sipping their cappuccinos would take a moment to reflect on the sweat and labor of those who provided it."

Indeed, coffee farming is grueling. Workers often extract beans by hand from mountaintop groves, and then carry the harvest miles down in 100-pound packs.

The movement has yet to get the support of major U.S. coffee houses such as Philip Morris Cos.' Maxwell House unit and Procter & Gamble Co.'s Folgers unit, which buy their beans in volume. And most coffee sold to big companies comes from lowland coffee farms that consist of vast plantations run by corporations.

"Participating in those kinds of initiatives can be tricky," says Pat Riso, a Maxwell House spokeswoman. Quantities supplied by fair-trade farmers are still limited, while shipping schedules are subject to disruptions such as strikes, organizers say.

Another hindrance is violence against farmers by middlemen. A number of farmers have been injured or murdered, including Mariano Perez, who in 1994 was shot to death in the Mexican state of Chiapas, where he was helping organize a local fair-trade-coffee group.

Farmers generally are organized in cooperatives of as many as 2,500 members, which set prices and arrange for export directly to brokerage firms or other distributors. Middlemen -- known as "coyotes" in Nicaragua -- previously handled this role. So far, 500,000 of the developing world's four million coffee farmers have signed on with TransFair.

TransFair is trying to nudge Seattle's two biggest coffee giants, Starbucks Coffee Co and Seattle Coffee Co., into agreeing to buy some of the fair-trade coffee. Officials at Starbucks says they plan to meet with TransFair to see how to proceed. "We are very supportive of fair-trade coffee," says Starbucks spokesman Alan Gulick.

So, apparently, are some customers. Zachary Smith, a computer architect who turned out to meet Mr. Rivera at Caffe Saphore, says he began buying the fair-trade coffee after learning the proceeds would go to help improve the lives of growers, such as Mr. Rivera. "I really believe that the way to make the world a better place is to give people that are growing things enough money to live on."