Anyone for ethical coffee?

Starbucks, the world's biggest coffee retail chain, buys 40% of its coffee beans through fair trade, a practice where it pays a price well above the market rate to poor and small growers in Colombia and elsewhere as its commitment to CSR (corporate social responsibilities).

Fair trade is also an assurance to its consumers that the beverage they drink was purchased under fair conditions. Indian coffee retailers are getting ready to follow suit to bail out the small-time growers who constitute about 70% of the coffee growing community in the country. But as the old adage goes, there may be many a slip between cup and the lip, with only a few takers for the concept in India.

R Shivshankar CEO, Fresh and Honest, part of the Italian coffee chain Lavazza, that also owns Barista India said, "We may get into fair trade. But the government should also ensure that minimum prices are given to the small growers."

India's largest modern retail coffee chain, Café Coffee Day too is exploring the possibility. "We see a demand for such coffee in India and we are looking to move into buying fair trade coffee," said Alok Gupta, director, CCD.

However, according to C.P. Chandan Cothas, partner in South India's largest traditional coffee retailer, Cothas Coffee, conscientious customers are already demanding such coffee and actually their numbers are rising. Cothas too is looking to get fair trade certification.

MH Ashraff, MD, Tata Coffee said, "If the Fair Trade Labeling Organisation (FLO) starts certifying large companies then we will definitely go in for such certification." Tata Coffee already has similar certifications like the Rainforest Alliance certification and the Utz Kapeh certifications for the coffee it exports labeling its compliant with practices to protect rainforests and other ecosystems.

Fair trade itself is not new. While it has been in prevalence for many years with NGOs demanding better prices for small growers of coffee, tea, fruits and other agri-produce, Starbucks started buying fair trade coffee in 2000 bringing into focus of small growers in Colombia and Argentina.

Fair trade certification to small growers and traders also comes with an undertaking to stringent criteria like paying a minimum price per kg, providing much needed credit and technical assistance to farmers, apart from a commitment to community development, health, education and adhering to environmental safeguards.

In India small coffee growers like Rajendra Parkash, CEO of Girijan Grama Swaraj Coffee Growers' Society in Andhra Pradesh, are rallying support for it seeking to put an end to intermediaries who eat into their margins.

But there are strong views as to why small growers will not benefit from fair trade. One argument is that fair trade price does not fluctuate according to market movements and the small growers could actually loose out when the price shoots up as in the present case.
Moreover, many like GV Krishna Rau, chairman, Coffee Board of India, feel fair trade certification alone may not help the plight of the small growers. "One should position coffee on the strength of quality and differentiation into the niche market. Ultimately it is a strong local market that provides greater support to the growers, than any other strategy, he said.

A trader in Kerala, who refused to be named, said growers would get better prices when they sell at prevailing market rates compared to those sold under the fair trade label.
Moreover the costs for certification are as high as 1,100 euros.

Another feature is that fair trade encourages organic farming practices which reduce the production level further lowering the profits, he pointed out indicating small growers may not necessarily be interested in it.

Moreover, internationally doubts prevail on how much the small growers actually get from that large procures and retail chains charge customers for the final coffee under the guise fair trade.

However, there could much play for fair trade coffee in India which consumed 94,400 tonnes of the bean in 2008 with a per capita consumption of just 82 grams. Encouragingly however coffee consumption is growing at 6% per annum compared to the global 2% plus.