Business; Global Issues Flow Into America’s Coffee

The New York Times | November 3, 2002

A BUZZ in California has caught the attention of the world’s biggest coffee companies.

In a growing movement reminiscent of the grape boycott in the 1970’s, antiglobalization and human rights advocates in California have been promoting the purchase of Fair Trade certified coffee — coffee that guarantees a so-called living wage to poor coffee farmers in developing countries. An estimated 25 million of these farmers have suffered because raw coffee prices have fallen below the cost of production.

Students in California have helped to pressure the Sara Lee Corporation, the maker of the Hills Bros. and Chock Full O’ Nuts brands, to start buying small amounts of Fair Trade coffee. On Tuesday, voters in Berkeley, Calif., a longtime redoubt of student activism, will vote on a measure that would require the city’s restaurants and supermarket cafes to restrict sales of brewed coffee to blends that are Fair Trade, organic or shade grown, which are considered more environmentally friendly than conventional, mass-produced varieties. Violators could face $100 fines and six-month jail terms.

Major coffee companies have denounced the Berkeley measure. But at least one, Procter & Gamble, which sells the Folger’s brand, said it would work with beverage servers to comply if the measure passed.

Fair Trade coffee, a pet project of the antiglobalization movement, has become a growing segment of the $55 billion coffee industry. Although Fair Trade coffee is only about 2 percent of the global supply, sales rose 36 percent last year in the United States, the biggest single market for coffee. About 7,000 retail outlets across the country sell Fair Trade coffee, according to TransFair USA, a nonprofit group in Oakland, Calif., that monitors food company compliance with Fair Trade standards.

Last week, Green Mountain Coffee, a wholesaler in Waterbury, Vt., signed an agreement to sell Fair Trade coffee under the Newman’s Own Organics label, the food company owned by Paul Newman, next year in supermarkets nationwide.

The economic argument for Fair Trade coffee got a lift in September when Oxfam, the British charity, released a report saying that a global oversupply of coffee had pushed prices to their lowest levels in 100 years, adjusted for inflation, impoverishing millions of coffee farmers in developing countries. In Latin America, Africa and Asia, the report said, farmers are paid roughly 24 cents a pound for beans, while the four multinational companies that buy nearly half of the world’s coffee — Sara Lee, Kraft, Procter & Gamble and Nestlé — sell those beans at an average price of $3.60 a pound and ”are laughing all the way to the bank.”

Fair Trade coffee, which can cost more than double the price of conventional blends at the checkout counter, is comparable in quality and price to premium blends. Small farmer cooperatives are guaranteed to receive about $1.25 a pound for Fair Trade coffee.

To help these farmers, Oxfam proposed to the International Coffee Organization, a group of 40 major importers and exporters, that it cut the oversupply, and help raise prices, by destroying stockpiles of the lowest-quality beans.

Organization members generally oppose that approach, arguing that stimulating demand is a better way to raise price than reducing supply. Many also reject the Fair Trade approach, saying it supports prices artificially and could worsen the glut.

”Fair Trade isn’t a viable solution,” said Gordon Gillet, Nestlé’s senior vice president for purchasing and exports. ”First, it favors the few and, secondly, it provides an incentive to farmers to increase coffee production at a time when they should perhaps be seriously considering alternative crops.”

Anneke Theunissen, a spokeswoman for Fairtrade Labelling Organizations International, the group that oversees Fair Trade certification, disagreed. ”At this moment, Fair Trade labeling is the only way for the disadvantaged small farmers to survive in the market,” she said.

As for the Berkeley initiative, the industry has largely dismissed it as a quirky extreme, saying customers should decide what coffee they want.

”Berkeley has always distinguished itself, to put it politely, by a surprising originality,” said François-Xavier Perroud, a Nestlé spokesman.

BERKELEY, though, may be a natural place for the coffee controversy to percolate. The city is known as a coffee Mecca where couples go to coffee houses on dates rather than to bars, and where drinkers debate the merits of one roast over another the way the French debate the merits of wines. Peet’s Coffee and Tea, a famous Berkeley roaster, was the training ground for the founders of Starbucks, the biggest and most successful coffee bar chain in the world. Both were early sellers of Fair Trade beans, along with other coffees.

The Fair Trade movement began in 1997 with the establishment of the Fair Trade Labeling Organizations International in Bonn. Its founders hoped to offset the effects of global economic forces on poor countries by establishing a set price for certain commodities like coffee and cocoa.

The value of global coffee exports has fallen by an estimated $8 billion since the 1997-98 crop year because of a glut in a market that was once regulated but is now mostly free. The biggest increase in supply came from Brazil and Vietnam, low-cost producers.

Robert Nelson, president of the National Coffee Association, a trade group that represents the coffee industry in this country, called Fair Trade certification one small answer to the oversupply issue.

”We need broader-based initiatives to really make a difference in the crisis,” he said. ”There is no one magic bullet.”

A version of this article appears in print on Nov. 3, 2002, Section 3, Page 6 of the National edition with the headline: Business; Global Issues Flow Into America’s Coffee.