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Originally published Thursday, September 2, 2010 at 7:49 PM

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Retail Report

Direct trade growing among coffee bean buyers

A growing group of coffee roasters have become disenchanted with the Fair Trade model and think they can do better. Known as direct trade, their movement is small and does not have uniform definitions or guidelines. Customers often have to take the roaster's word for it that growers were paid fairly.

Seattle Times business reporters

About half of the green coffee that spins and pops in Mark Barany's roaster in Bellevue comes from farms he knows.

Barany has not visited them yet. His roastery and Seattle cafe, Kuma Coffee, are just a few years old and do not throw off lots of cash and free time for trips abroad.

He meets farmers online, and if their coffee sounds like a fit, they send samples. Then he draws up contracts to pay them and finds an importer who charges another 30 to 50 cents a pound to move the beans from Central America to the Puget Sound area.

It takes time and work, but Barany considers the effort worthwhile, because he is paying farmers what their coffee is worth and cutting out the middlemen.

If that sounds like Fair Trade, think again.

Barany and a growing group of coffee roasters have become disenchanted with the Fair Trade model and think they can do better.

Known as direct trade, their movement is small and does not have uniform definitions or guidelines. Customers often have to take the roaster's word for it that growers were paid fairly.

They crave greater legitimacy, and for that reason a handful — including Barany — have publicly disclosed the prices they pay for coffee.

"The whole reason Fair Trade started in the first place — farmers getting paid a fair price for their product — fell by the wayside," said Barany, who thinks Fair Trade should raise its minimum prices above current, sky-high commodity prices for coffee.

He blames Fair Trade's relationship with major corporations.

"They would have raised Fair Trade prices if it weren't for the fact that Walmart and Target and all those companies are paying their bills," he said.

Fair Trade has become enormously popular. Walmart offers a Sam's Choice Fair Trade coffee, Dunkin' Donuts serves only Fair Trade espresso, and Starbucks serves only Fair Trade espresso in its United Kingdom cafes.

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The main U.S. certifier, TransFair, certified 110 million pounds of Fair Trade coffee last year, more than in its first seven years combined.

TransFair's founder, Paul Rice, bristles at criticisms by direct-trade enthusiasts. He views Starbucks' CAFE Practices program, which deals directly with growers and self-certifies that it is looking after farmers' economic and environmental needs, as more responsible.

Last year, 81 percent of the coffee Starbucks bought — 299 of its total 367 million pounds — came through the CAFE Practices program.

About 40 million pounds were Fair Trade certified, making it the largest buyer of Fair Trade coffee in the world.

"Starbucks put a stake in the ground, developed a standard and put it out for public comment before it started throwing slogans around," Rice said. "It's got way more integrity than direct trade."

Fair Trade raised its minimum price for coffee in 2008 to $1.25 — more for organic coffee. It charges an additional 10 cents a pound that goes directly to coffee cooperatives for community projects.

That's below record prices being set on the commodities market, which recently topped $1.60 a pound. When the market is that high, Fair Trade farmers receive the commodity price — or more, if they negotiate with buyers for more.

They also receive the 10-cent social premium and the benefits of working in a cooperative.

"The minimum price is a safety net for when times are hard," Rice said. "Not long ago, world coffee prices were 50 and 60 cents a pound, which mean in the field farmers were getting 10 to 15 cents. It keeps farmers from starving, literally, at times."

Direct-trade roasters think the minimum rate keeps farmers from trying to earn more at a time when the specialty coffee industry is exploding and willing to pay handsomely for excellent coffee.

"Fair Trade is an antiquated system in that they're not creating an incentive for farmers to do a good job with quality," said Aleco Chigounis, a green coffee buyer for Portland-based Stumptown Coffee Roasters who travels seven to nine months a year visiting coffee farms around the world.

"We were a company that believed very much in the virtues of Fair Trade for years," Chigounis said. "About three years ago, we decided to put all our eggs in the direct-trade basket, because we were having a much greater impact at the farm level."

Stumptown does not disclose publicly how much it pays for coffee, although Chigounis said he e-mails copies of contracts to those who ask. He said last year the lowest price Stumptown paid was $2.15 a pound for a coffee in Nicaragua.

Counter Culture Coffee, a roaster in North Carolina that sells to cafes mostly in the eastern U.S., used to have that policy but became frustrated that no one asked how much it paid.

This past spring, it posted its prices and practices online. They are audited by a third party, which lends integrity.

"There are Internet conversations speculating about what people pay for coffee and what's fair, and we wanted to inject reality into those discussions," said Peter Giuliano, Counter Cultures' co-owner and director of coffee.

"I'm excited to think other roasters may follow suit. It would be great if we could have an open conversation about what people actually pay," he said.

Barany is among the roasters following Counter Culture's example.

This winter, he plans to visit farms in Guatemala and El Salvador, meeting people he already does business with and meeting new ones.

Although Rice, of TransFair, thinks direct trade is "doomed to be small" because, he says, it cherry picks farms within cooperatives and does not have a verified standard, he acknowledges that its goal is the same as Fair Trade.

"If they prove themselves better at helping farmers than we are, then more power to them," Rice said. "I hope they beat us."

— Melissa Allison

Tidbits

Seattle-based clothier Tommy Bahama has added two people to its senior management team. Stephen Cirona, who's credited with helping to develop women's sportswear at Tommy Hilfiger and formerly was VP of design and product development at Eddie Bauer, now oversees women's sportswear. Rob Goldberg, whose previous stints include executive-level positions at Hard Rock and Moana Hotel & Restaurant Group, becomes senior VP of its restaurant division. Tommy Bahama has 12 restaurants in six states and will soon open a 13th in Laguna Beach, Calif.

Also, the company announced a new licensing agreement with Pedego to make a new Tommy Bahama electric bike. It's expected to go on sale this fall at www.tommybahama.com and some bike shops nationwide, for a suggested retail price of $2,575. — AM

Alaska Distillery's Smoked Salmon Vodka will debut in Washington liquor stores this month, the Palmer, Alaska-based distillery said. Alaska Distillery is known for Permafrost Vodka and a vodka called Frostbite. — MA

The Bellevue Collection's fall fashion show, which was presented last weekend by Vogue magazine, raised $47,000 for The Moyer Foundation, a nonprofit that helps children in distress. — MA

Zero One Vintners in Redmond said it is the first winery to use Microsoft's "Tag" technology in its wine labels. Like a barcode, the "Tag" reveals more information about a product. For Zero One's wines, it can be used by customers with mobile PDA phones to find out more about the wine they are buying. MA

Retail Report appears Fridays. Amy Martinez covers goods, services and online retail. She can be reached at 206-464-2923 or amartinez@seattletimes.com. Melissa Allison covers the food and beverage industry. She can be reached at 206-464-3312 or mallison@seattletimes.com.

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Retail Report is a look at the trends, issues and people who makeup the dynamic and versatile retail sector throughout the Puget Sound region. Every Friday with Melissa Allison and Amy Martinez. Send tips or comments to mallison@seattletimes.com or amartinez@seattletimes.com.

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