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Globalizations

ISSN: 1474-7731 (Print) 1474-774X (Online) Journal homepage: http://www.tandfonline.com/loi/rglo20Who Really Benefits from Fairtrade? An Analysis ofValue Distribution in Fairtrade Coffee

Silje Johannessen & Harold Wilhite

To cite this article: Silje Johannessen & Harold Wilhite (2010) Who Really Benefits from

Fairtrade? An Analysis of Value Distribution in Fairtrade Coffee, Globalizations, 7:4, 525-544,DOI: 10.1080/14747731.2010.505018

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Globalizations
December 2010, Vol. 7, No. 4, pp. 525 – 544
Who Really Beneﬁts from Fairtrade? An Analysis of Value
Distribution in Fairtrade Coffee

∗

SILJE JOHANNESSEN
∗
Norwegian University of Life Sciences (UMB), Aas, Norway
∗∗
University of Oslo, Norway

& HAROLD WILHITE

∗∗

ABSTRACT Fairtrade is a market-based approach to social and environmental development
for producers through the use of standards and a price ﬂoor. This article analyzes the
beneﬁts and costs of Fairtrade coffee through an economic value chain approach. The study
determines the economic income from Fairtrade coffee throughout the chain as well as
exploring the beneﬁts and consequences of Fairtrade for local producers in Nicaragua and
Guatemala. Our analysis shows that consumer countries acquire the larger share of
economic income, mainly because Fairtrade is positioned within the conventional market
where large multinationals control the supply chain. The participation of large multinationals
has led to increasing pressure and tough competition for the certiﬁed producer cooperatives
in the Fairtrade market. On the consumer side, while consumer marketing narratives
emphasize producer beneﬁts of Fairtrade, our results demonstrate that its total beneﬁts for
primary producers is modest.
El comercio equitativo es un enfoque con base en el mercado del desarrollo social y ambiental
de los productores estableciendo esta´ndares y un precio base. En este artı´culo se analizan los
costos y los beneﬁcios del comercio equitativo del cafe´ utilizando el enfoque de la cadena de
valor econo´mico. El estudio determina el ingreso econo´mico del comercio equitativo del cafe´
de los diferentes eslabones de la cadena y explora las consecuencias y los beneﬁcios que
afectan los productores locales en Nicaragua y Guatemala. El ana´lisis que realizamos
muestra que los paı´ses consumidores obtienen una mayor proporcio´n del ingreso econo´mico
obtenido, principalmente debido a que el comercio equitativo se encuentra ubicado dentro
del mercado convencional que es controlado por las grandes multinacionales quienes
controlan la cadena de la oferta. La participacio´n de las grandes multinacionales genera una
mayor presio´n y una dura competencia entre las cooperativas de productores certiﬁcados.
Correspondence Address: Silje Johannessen, Department of International Environment and Development Studies –
Noragric, University of Life Sciences, PO Box 5003, 1432 Aas, Norway. Email: s.f.johannessen@gmail.com;
Harold Wilhite, Postboks 1116 Blindern, 0315 Oslo, Norway. Email: h.l.wilhite@sum.uio.no
ISSN 1474-7731 Print/ISSN 1474-774X Online/10/040525– 20 # 2010 Taylor & Francis
DOI: 10.1080/14747731.2010.505018

526 S. Johannessen & H. Wilhite
Aunque a los consumidores de cafe´ de comercio equitativo se les presenta el argumento de
mercadeo de que los pequen˜os productores obtienen un beneﬁcio mayor, en realidad el
resultado del ana´lisis demuestra lo contrario, los productores obtienen un beneﬁcio mo´dico
con respecto al beneﬁcio total obtenido.
Keywords: subject area economic development, globalization, Latin America
Introduction
The Fairtrade network is growing, claiming a large share of the market for a number of different
products. There has also been a rapid growth in the numbers of Fairtrade towns, schools, univer-
sities, and churches (Fairtrade Foundation, n.d.; Krier, 2005). However, an important question is
whether this expansion of Fairtrade in consumer countries has actually led to fairer prices and
production practices. Does Fairtrade have the ability to challenge the exploitative structure of
the international market, with particular reference to the coffee trade?
The study on which this article is based examined these questions using the case of Fairtrade
coffee production and trade in Nicaragua and Guatemala. Coffee is the product that has received
the most attention and has the largest market share within the network of Fairtrade products. We
followed a global value chain (GVC) approach to analyze the distribution in value of Fairtrade
coffee that is sold and consumed in Norway. The beneﬁts of Fairtrade are analyzed according to
the income generated in the chain from production to consumption, as well as accounting for
the consequences of Fairtrade for local producers. The research involved a comparative case
study of two coffee cooperatives that have been certiﬁed Fairtrade. An important contribution
to the analysis is an exploration of the varieties of meaning invested in the global value
chain and how markets and semiotics work together in relation to power structures and
hierarchies.
We begin with important background information on the Fairtrade network and the inter-
national coffee market, as well as providing an overview of the value chain and some back-
ground on the semiotic analysis. We then synthesize results from the global value chain
analysis with a comparative narrative analysis of the two producer cooperatives. Finally, we
reﬂect on why the value distribution in the Fairtrade coffee network is skewed and give some
suggestions for a fairer Fairtrade regime. We argue that in the post International Coffee Agree-
ment (ICA) world, power within coffee value chains is being consolidated among actors in con-
suming countries to the detriment of producers, and that this is the case for both conventional and
Fairtrade coffees. This power consolidation is contributing to an increasing preference within
Fairtrade coffee chains for coffee produced by large, second order cooperatives, to the detriment
of smaller cooperatives and a reduction in Fairtrade beneﬁts in the local areas where the coffee is
produced.

Who Really Beneﬁts from Fairtrade?

Background on Fairtrade and the International Coffee Market
The earliest traces of Fairtrade in Europe date from the late 1950s, but the ﬁrst Fairtrade organ-
ization was not created until 1964 (Fridell, 2004). In the 1980s, a Dutch church-based NGO,
Solidaridad, conceived the idea of a Fairtrade label as a new way of visualizing and communi-
cating the idea of fair practices to the broader public. In 1988, the Max Havelaar label was estab-
lished in the Netherlands, the name being taken from the 1860 novel by Multatuli (Eduard
Douwes Dekker), Max Havelaar: Or the Coffee Auctions of the Dutch Trading Company,
which was written in protest against the abuse of Dutch colonial power in java and Sumatra
(Multatuli, 1901). Conventional importers that met Max Havelaar standards were permitted to
use the label on their products in exchange for a certiﬁcation fee. This arrangement was lucrative
for traders because ‘conventional importers would be encouraged to participate in Fairtrade
because of the “added value” the Fairtrade label—injected with symbolic meaning—would
give them on the market’ (Renard, 1999, cited by Fridell, 2004, p. 419). The Fairtrade
network was signiﬁcantly inﬂuenced by the broader Fairtrade movement, but the intention to
use conventional market actors is an important distinguishing characteristic of the Fairtrade
network (Fridell, 2004; Jaffee, 2007).
The Fairtrade network is currently deﬁned by the informal umbrella network FINE,1 which
includes Fairtrade Labelling Organization International (FLO). FLO International, established
in 1997, is an umbrella group for national Fairtrade initiatives, such as Max Havelaar, Trans
Fair, and the Fairtrade Foundation (Fridell, 2004). FLO International, currently separated into
FLO-International and FLO-Cert GMBH, develop and review the Fairtrade standards and
provide support to Fairtrade certiﬁed producers (FLO-International) (Fridell, 2004). The core
principles of the FLO system for coffee are a price ﬂoor and a social premium. The Fairtrade
minimum price forms part of the product standard and is ‘intended to cover the average produ-
cer’s costs of sustainable production (COSP)’ (FLO International, 2006, p. 1). This Fairtrade
premium is intended for investment in social development in the producer community.
The Fairtrade price ﬂoor was US$1.21 per pound at the time of this research (2007),2 though it
rose to US$1.25 as of 1 June 2008 (FLO International, 2008), which was the ﬁrst adjustment since
1. The social premium was US$0.05 at the time of this study; it rose to US$0.10 on 31 January
2008 (FLO International, 2008). The coffee futures market (New York for arabica and London for
robusta) is used as a reference point for the social premium. If the conventional (‘C’) price exceeds
the FLO price, buyers are required to pay the ‘C’ price plus the social premium. In other words,
under this condition, the Fairtrade price ﬂoor is inactive. The Fairtrade price ﬂoor is the ‘fob’ (free
on board) price for the exporting cooperative, indicating that the seller pays for transportation of
the goods to the port of shipment, as well as loading costs. The buyer pays freight, insurance,
unloading costs and transportation from arrival port to the ﬁnal destination (Talbot, 2004).
The International Coffee Market
The international coffee market is usually described as a vulnerable and inherently cyclical
market, with shifting prices (Lewin et al., 2004). Vulnerability in the coffee market is a conse-
quence of a number of diverse factors, including structural global oversupply, natural disasters
in Brazil, a shift in the bargaining power of agents in the coffee chain, and the failure to renew
the International Coffee Agreement (ICA) (Talbot, 2004). The ICA was one of the independent
commodity agreements developed under the General Agreement on Tariffs and Trade (GATT), in
which governments in both producing and consuming nations sought to agree to predetermined
528 S. Johannessen & H. Wilhite
supply levels through the use of export quotas. The quotas restricted coffee exports, raising world
market prices for green coffee (Bacon, 2005; Muradian and Pelupessy, 2005).
Under the ICA, more than half of the total income from coffee went to producing countries
(Talbot, 2004). The end of quotas and the price crash of 1989, referred to as the ﬁrst coffee
crisis, resulted in a rise in income for consumer countries of about three quarters of the total
retail price, while the income of producer countries fell to about 15% compared to what it
had been under the ICA regulations. The Brazilian frost temporarily shifted the surplus back
to producer countries, but in the build up to the second coffee crisis, almost all surpluses
were retained by consuming countries. Between 2001 and 2004 many producers received far
less than it cost them to produce coffee (Talbot, 2004). The breakdown of the ICA, accelerated
by large TNCs with their powerful lobbying inﬂuence, led to a decrease in the inﬂuence of pro-
ducer countries. This, in addition to liberalization policies by the World Bank (Talbot, 2004),
resulted in an increase in coffee production, followed by rising inventories in consumer
countries, slow-moving demand, and market concentration in the trading and roasting industries
(Bacon, 2005; Ponte, 2002). Large multinational corporations took advantage of their position
by buying larger quantities of low quality robusta coffee from Vietnam and blending this
with higher quality arabica coffee. This lowered demand for arabica coffee, pressing prices
down. Additionally, the changed structure of the coffee chain, along with privatization policies,
has limited the control of producer governments over production and prices. Large TNCs cur-
rently now have control of the entire chain, from producer to consumer (Talbot, 2004).
Increasingly, the value added for all kinds of coffee ends up in consuming countries. In pro-
ducing countries, actors sell green coffee according to the quality evaluated at the export point,
with reference to the futures market. In consuming countries, coffee is increasingly sold with
symbolic and in-person service components; the coffee’s value is strongly inﬂuenced by roast-
ers, retailers, and coffee owners (Daviron & Ponte, 2005). This contributes to what Ponte (2002,
p. 19) refers to as the ‘latte-revolution’. Roasters and retailers capture increasingly more proﬁt
downstream. Expensive non-coffee components, such as wages, packaging, and marketing con-
stitute an increasing share of the total retail price (Lewin et al., 2004). At the same time, produ-
cers at the farm gate have seen their total share of value decline from approximately 30% to
about 5 – 10% over the past two decades (Lewin et al., 2004; Talbot, 2004).
Norway provides an interesting focus for an analysis of coffee consumption and the fair trade
concept. Norwegians are among the highest consumers of coffee in the world, with an annual per
capita consumption of 9.3 kg in 2004 (Giovannucci & Koekoek, 2003). The national initiative of
Fairtrade, Max Havelaar Norway (MHN), was established in 1997. Fairtrade certiﬁed coffee has
a market share of about 1.5% (Hammer, 2008). The responsibility of MHN includes
quarterly control of importing contracts, payments, volume, and references in order to secure
the minimum price paid to producers by the licensees. In return, the licensees must pay a fee
to Max Havelaar (Hammer, 2007), which is Norwegian Krone (NOK) 1.8 per kilogram of
roasted coffee (Hammer, 2008). The license fee amounted to 29% of the total income of the
organization MHN in 2005. The additional funding is covered mainly by the Norwegian devel-
opment aid authority (Norad), and by relatively smaller contributions from other development-
oriented organizations (Anon., 2005).
The Global Value Chain (GVC)
The Global Value Chain (GVC) was developed along the lines of the concept of a global com-
modity chain (GCC) by Hopkins and Wallerstein (1986), who focused on international chains

Who Really Beneﬁts from Fairtrade?

for agricultural products. Such an approach usually involves analysis of price formation at the
different stages of production and processing. The GVC approach seeks to break down the inter-
national structure of production, trade, and consumption of commodities into stages that are
embedded in a linear network of activities (Daviron & Ponte, 2005; Donovan, 2006; Kaplinsky
& Morris, 2000). The approach is explicit in its investigation of power structures and chain
governance in global agro-food networks. However, the approach is limited by its unidirectional
linearity (Hughes, 2000) and by its over-focus on global structure as opposed to place and
locality (Cooke et al., 2008). Furthermore, the approach leaves limited opportunities for incor-
porating social, cultural, and symbolic relations, and it has remained silent on consumption
(Gibbon & Ponte, 2005).
We have employed a complementary narrative analysis3 to investigate the semiotics, or the
meanings of Fairtrade coffee at nodes along the GVC. This is inspired by the commodity cultures
approach4 (Appadurai, 1986; Jackson, 1999, 2002; Kopytoff, 1986), which aims at interpreting
the changing meaning of the commodity within different cultures. The term ‘culture’ is under-
stood here in the widest sense as a collection of cognitive meanings and social practices at nodes
along the GVC. According to Appadurai (1986, p. 17), ‘a commodity is not one kind of thing
rather than another, but one phase in the life of some things’. This conceptualization of commod-
ity opens the way for exploring local conditions and incorporating both production and
consumption-centered approaches in the understanding of Fairtrade.
Many scholars have analyzed Fairtrade commodities in relation to Marxian production cen-
tered theory, in which the Fairtrade certiﬁed product is argued to represent many of the attributes
of a ‘fetishized’ product (Bryant & Goodman, 2004; Fridell, 2007; Goodman, 2004; Goodman &
Cohen, 2004; Hudson & Hudson, 2003; Moberg, 2005).5 The label, and its supporting
narratives, visualizes certain social relations between production and trade on the one hand,
and the consumer on the other (Raynolds, 2000; Whatmore & Thorne, 1997). This perspective
is important, but ignores the importance of marketing and representation strategies. According to
Bryant and Goodman (2004, p. 348), ‘commodities contain a double fetish that both obscures
realities at the site of production and creates cultural and economic surpluses for the consumers’.
Including consumption in the analysis of Fairtrade opens for the perspective that demand and
advertising contributes to the social construction of a new fetish (Baudrillard, 1981).6
We pursue the argument of Goodman and Dupuis (2002), going beyond the production –
consumption dichotomy and following ‘the things themselves’ (Appadurai, 1986, p. 5). By
deconstructing (Derrida, 1966) the idea and practice of the Fairtrade commodity, it is possible
to interpret the economic income and the semiotic value of Fairtrade coffee for the different
commodity cultures involved in the network. Our research seeks to analyze the power structure
within the Fairtrade global network and discuss how signs and images have the power to create
particular representations of people and objects. We examine the patterns of income generated
in the Fairtrade coffee chain from producer to consumer, as well as the subjective meaning
of Fairtrade. During ﬁeldwork we have given special attention to narratives in two producer
cooperatives in Central America.
Research Methods
The research activities consisted of reviewing the literature and reports on Fair Trade and coffee
production, attending conferences (Ramacafe 2007 in Managua and the Second International
Symposium on multi-strata agro forestry systems with perennial crops: making ecosystem
530 S. Johannessen & H. Wilhite
services count for farmers, consumers and the environment in Turrialba, Costa Rica, 2007) and
conducting semi-structured interviews with key actors in the Fairtrade coffee network, including
producers and the management boards of producer cooperatives. The ﬁeldwork took place from
July 2007 through February 2008 in Costa Rica, Nicaragua, and Guatemala. Empirical data was
collected at the local cooperative El Polo in Nicaragua and in six local cooperatives under the
national consortium of cooperatives Fedecocagua in Guatemala. Interviews were conducted at
the managerial level in Fedecocagua. The choice of these two producers provided the opportu-
nity to make a comparative analysis between a small cooperative and a large consortium of coop-
eratives (certiﬁed by Fairtrade as a secondary cooperative).
The main questions put to producers and producer cooperative board members concerned
their income from coffee, how they perceived their situation as coffee producers,

their

general knowledge of the available certiﬁcations, and whether these created some direct or
indirect beneﬁts for them. Sample selection was based on convenience sampling and snowball
sampling, using CATIE (Centro Agrono´mico Tropical de Investigacio´n y Ensen˜anza) in Costa
Rica and the above-mentioned conferences as a starting point for building a network
of informants. Semi-structured interviews conducted in Nicaragua included primary producers
(n ¼ 25), technical advisors, secretary, staff, and managers (n ¼ 5). Field work in Guatemala
included semi-structured interviews with managers in Guatemala City (n ¼ 3), focus groups
conducted with six different local cooperatives including cooperative managers and primary
producers (n ¼ 6), with the number of participants ranging from three to seven. In Norway,
interviews were conducted with traders and managers of Max Havelaar (n ¼ 4).
Background on the Producer Cooperatives
The local cooperative El Polo is located in San Sebastian de Yali, Jinotega department in the
central-north region of Nicaragua. The cooperative was founded in 1996 and currently has
275 members. El Polo initiated the Fairtrade certiﬁcation with assistance from FondeAgro.7
The cooperation with FondeAgro assisted the cooperative in receiving an export license and
establishing direct contact with an importer in Sweden. The possession of an export license
and an agreement with an importer are prerequisites for Fairtrade certiﬁcation. The cooperation
with FondeAgro proved to be very important for the local cooperative, since it had only one
buyer in the period from 1997 to 2003, Atlantic-ECOM, an exporting company operating
throughout Latin America. Consequently, Atlantic-ECOM had a signiﬁcant amount of negotiat-
ing power over the cooperative during that period. The cooperation with FondeAgro was essen-
tial to El Polo’s efforts to export its coffee to a differentiated market, including the Fairtrade
market (Solorzano, 2007). Currently, about 20% of the cooperative’s exports are to the Fairtrade
market and about 40% to Starbucks C.A.F.E. practices. In addition, the cooperative exports
about 10% of its production to the specialty or gourmet market, which yields prices far above
the Fairtrade minimum price.
The national consortium of cooperatives Fedecocagua (Federacion de Cooperativas Agricolas
de Productores de Cafe´ de Guatemala R.L.) was founded in 1969 by 19 local cooperatives. Their
intention was to improve the position of small-scale coffee growers in Guatemala. Currently,
Fedecocagua consists of more than 148 cooperatives and is the umbrella organization of
20,000 farmers. About 70% of its producers are indigenous people, the majority Mayan, and
more than 100,000 people that are involved with Fedecocagua. In 1973 Fedecocagua started
selling to the alternative market, which evolved into FLO in 1997. Fedecocagua is certiﬁed as
a second level cooperative, indicating that it is certiﬁed on behalf of all the local cooperatives

Who Really Beneﬁts from Fairtrade?

Table 1. Comparative analysis of production and organization

Cooperative

El Polo

Fedecocagua

Nationality
Location
Founded
Initiated Fairtrade
Type
Members
Certiﬁed Fairtrade
Export Fairtrade,
percentage of total

Nicaragua

San Sebastian de

Yali, Jinotega

Local 1st level

100%

20%

Guatemala

National basis with 148 local cooperatives

Alternative market: 1973 (FLO: 1997)

National 2nd level

Almost 20,000

100%

30 – 40%

Export Fairtrade,

7 containers

630 containers

volumes
Other certiﬁcations

Starbucks C.A.F.E.

practices

Utz Certify, Rainforest Alliance, Starbucks C.A.F.E. practices,

Nescafe´ from Nestle´, program AAA from Nespresso and 4C

Percentage certiﬁed

40%

70 – 75%

other initiatives
supplying coffee to the national consortium of cooperatives. According to a capacity study from
CecoEco and CATIE in Costa Rica in cooperation with the World Bank, Fedecocagua performs
the function of an external commercial entity, or exporting ﬁrm, for its member cooperatives.
The consortium of cooperatives is experienced in dealing with international markets due to its
professional structure and its technical and production capacity (Junkins & Yaniris, 2005). Fede-
cocagua sells 30 – 40% of its coffee under Fairtrade, and has the capacity to deliver more depend-
ing on consumer demand (Personal

interview, Marketing Manager, Fedecocagua, 2007,

Guatemala City).
The Economic Value Chain from Central America to Norway
The coffee commodity chain is relatively straightforward in that few other inputs are used in the
process from growing and processing green coffee, to its manufacture and ﬁnal consumption
(Talbot, 1997). The chain has very few side branches, which makes it feasible to estimate dis-
tribution of income along the chain.
The analysis of income generated along the chain is divided into four main stages, with sub-
stages. The ﬁrst stage is the income generated by the producer, which is the income at farm gate.
The second stage is the income generated in the producer cooperative. In Guatemala this stage is
divided into a sub-stage by level of cooperative (ﬁrst or second level). The third stage is the
income generated by the importer/roaster; in Norway the majority of large importers are also
roasters. The fourth stage is the income of wholesalers, retail trade, cafe´s, and the state
through taxation. The total income along the chain is calculated according to retail prices, or
the amount a Norwegian consumer pays for the product. The economic value chain is calculated
from the agricultural cycle 2006/2007, a year when higher coffee prices prevailed.
First, we estimated the difference between gross income of producers and producer organiz-
ations in Nicaragua and Guatemala (Table 2).
532 S. Johannessen & H. Wilhite
Table 2. Estimated income from coffee in Roasted Coffee Equivalents. Agricultural cycle 2006/
Actors

Average price roasted coffee NOK/kg Percentage of total price

Producers Nicaragua, farm gate
Producers Guatemala, farm gate
Total value producer cooperative; Nicaragua
Total value producer cooperative; Guatemala

11.7

9.7

18.0

18.9

Notes:
a Method of calculating income from coffee in Guatemala (a 1 – 17).

16%

13%

24%

26%

1. Price given by producer per quintal pergamino.
1. Multiplied by 1.25 to obtain the price per quintal green coffee (where 1 qq green coffee is 1.25 qq pergamino)

(excludes price of processing and transportation).

1. Price is converted to US dollars per pound of green coffee, based on an exchange rate of 7.6 Guatemalan Quetzal to

the dollar (average for the period Nov to Feb 2006/2007 from el Banco de Guatemala); and where 1 qq green

coffee is 100 pounds of green coffee or 45 kg) (Ex: (842.81/7.6)/100 ¼ 1.11).

1. Price US/lb green coffee is converted to Toasted Coffee Equivalents (TCE) by multiplying by 1.19, where 1.19 kg

of green coffee corresponds to 1 kg of toasted coffee (International Coffee Organization).

1. This is then converted to NOK per lb TCE based on the exchange rate of 5.39 to the US dollar.
1. This is then converted to NOK per kg by multiplying by 2.2 (1 kg ¼ 2.2 pounds).
1. Calculation of interest of pre-ﬁnance paid by the producers: 25% (focus group, Guatemala).
1. Calculation of transportation and processing fee to Fedecocagua from 1st level cooperative liquidated price: 15%

(focus group, Guatemala).

1. Subtract step 7 and 8 from price in step 5 to obtain the direct income to producers.
1. The price received by the producer cooperative is the producer price adding the 25% pre-ﬁnance and transportation

and processing fee to Fedecocagua.

1. The calculated value to Fedecocagua.
1. Fairtrade price ﬂoor in US/lb green beans.
1. Multiply by 1.19 to obtain the value to Fedecocagua in TCE, where 1.19 kg green coffee corresponds to 1 kg of
1. Converted to NOK per kg TCE based on the exchange rate of 5.39 to the US dollar and by multiplying by 2.2 (1 kg

toasted coffee (International Coffee Organization).

¼ 2.2 pounds).

1. The assumed income of Fedecocagua is calculated by subtracting the income for producers and the producer 1st

level cooperative.

1. The assumed income of the 1st level cooperative is calculated by subtracting producer income and the income of

Fedecocagua.

1. Total income producer country equals the assumed price paid to Fedecocagua.
b Method of calculating income from coffee in Nicaragua (b 1 – 11).
1. Price given by producer per quintal pergamino coffee.
1. Multiplied by 1.25 to obtain the price per quintal green coffee (where 1 qq green coffee is 1.25 qq pergamino)

(excludes price of processing and transportation).

1. Price is converted to US$ per quintal green coffee, based on an exchange rate of 18 Nicaraguan Co´rdoba to the

dollar (average for the period Nov to Feb 2006/2007 from el Banco Nacional de Nicaragua).

1. Converted to US$/lb by dividing by 100 (where 1 qq green coffee is 100 pounds of green coffee).
1. Price US/lb green coffee is converted to Toasted Coffee Equivalents (TCE) by multiplying by 1.19 (where 1.19kg

green coffee corresponds to 1kg of toasted coffee, International Coffee Organization).

1. This is then converted to NOK per lb TCE based on the exchange rate of 5.39 to the US dollar.
1. This is then converted to NOK per kg by multiplying by 2.2 (1 14;kg ¼ 2.2 pounds).
1. Calculation of interest of pre-ﬁnance paid by the producers: 25% (interview, Nicaragua).
1. The price paid to producers is calculated by subtracting interest of pre-ﬁnance.
1. The total price received by the cooperative is calculated according to price liquidation as shown below (Solorzano,

2007) from the agricultural cycle 2006/2007, subtracting the price paid to producers.

1. Total income for producer country is calculated by adding the income of producers and the income of the producer

cooperative.

Who Really Beneﬁts from Fairtrade?

The ﬁrst thing to note is that the second level producer cooperative in Guatemala receives a
larger share as percentage of total retail value than the producer cooperative in Nicaragua. On the
other hand, at the farm gate, the producers in Guatemala receive a smaller share of total retail
value than the producers in Nicaragua. The implication is that more beneﬁts reach the producers
in cases in which ﬁrst level cooperatives are certiﬁed. This may be assumed due to the additional
link in the value chain for the second level cooperative due to transportation and security fees.
However, it is also important to note that the Guatemalan consortium of cooperatives has a stron-
ger bargaining power over the trader and the potential to arrive at a better price. In both cases the
social premium from Fairtrade consists mainly of income at the producer cooperative level,
where both certiﬁed cooperatives indicated that the social premium was spent on increasing
the technical competence of the cooperative (see next section).
All the producers interviewed in both Nicaragua and Guatemala use a system of liquidation of
price; thus the price given is the average of the liquidated price for the agricultural cycle 2006/
1. The system of liquidation of price is based on the futures market where prices ﬂuctuate on
a daily basis. The producer at farm gate level and the cooperative sell at certain points during the
agricultural cycle and at certain prices, which is also the basis of contract bargaining with inter-
national traders.
The second level cooperative in Guatemala is able to supply a large amount of coffee and
capture more value in the chain, but the creation of a second link in the supply chain seems to
decrease the direct economic beneﬁts to producers at farm gate level. This is due to increased
transportation costs and a security fee of 15% (30% for certiﬁed coffee) to the national consortium
of cooperatives. Additionally, the marketing manager of Fedecocagua (Personal interview, Mar-
keting Manager, Fedecocagua, 2007, Guatemala City) claimed that farmers receive 88% of the
Fairtrade income, or the price ﬂoor for green beans, which at the time of the research corresponded
to US$1.21. Fedecocagua thus keeps 12% of total income.8 The average price received directly by
producers was actually US$1.15 per pound of green coffee. The average ‘C’ price for the corre-
sponding period was US$1.286 (International Coffee Organization, n.d.; indicator prices). It may
also be assumed that the second level cooperative receives a higher price for their coffee, as Gua-
temala is recognized for a price bonus according to the quality of its products (Personal interview,
Purchasing Manager, Coop Norway Kaffebrenneri, 2007). As a result, the income of the second
level cooperative is slightly higher than indicated in Table 2. Accordingly, it is possible to assume
a difference in income between the national consortium of cooperatives and the local coopera-
tives. As the indicator prices listed in Table 2 were calculated when higher prices prevailed,
the income to producers at farm gate will be lower when the fair trade price ﬂoor is active.
The income generated by one brand of Fairtrade coffee, from producers in Guatemala to retail
stores in Norway, is portrayed in Table 3. As the table shows, the income for the producer at the
farm gate of one package of Farmers coffee is 13.1% of the retail value, whereas the importer/
roaster has an income of almost 60% of the retail value.
From the distribution in Table 3, the income generated by Norway, representing a consumer
country, is about 74% of the total retail price. The income generated by retail is extremely low if
one takes the VAT into account. However, this is a general characteristic for products such as
coffee, which are sold at a low surplus value in order to attract customers (Ponte, 2001). Accord-
ing to Talbot (1997, 2004), the income to producers of conventional coffee decreased from
22.7% to 11.3%9 over a ﬁve year period (1985 – 1990). Furthermore, the quota suspensions
destabilized the ordered market, and TNCs used their market power to increase their share of
income. Income to producers increased to 14.6% in the conventional coffee market in 1998/
1999, and then decreased to 10% in 2000/2001 during the second coffee crisis (Talbot, 2004,
534 S. Johannessen & H. Wilhite

Table 3. Distribution of value, Guatemalan producers. Agricultural cycle 2006/2007

Actors

Value added (% of total) Value added per package (NOK/250 gr.)

Retail
Max Havelaar Norway, certiﬁer
Joh Johannson AS, importer and roaster
Agent (n.a.)
2nd level cooperative, exporter
1st level cooperative
Producer at farm gate
Total

13.8

2.4

58.2

VERDI!

7.0

5.5

13.1

2.75

0.48

11.87

1.38

1.09

2.61

19.90

p. 169). Currently, the prices of green coffee are back to 1999 levels, but the distribution of
beneﬁts to producers is expected to be lower due to an additional shift in surplus to consumer
country (Talbot, 2004). Talbot (2004) estimates that in 1987, green coffee accounted for 80%
of material input costs in consumer countries, with only minor additional increased costs. The
substantial increase in the value of coffee suggests signiﬁcant increases in the amount of
surplus in consumer countries. The ﬁgures given in Table 3 for the Fairtrade market correspond
to the income at producer level in the conventional market, which is predictable due to the inac-
tive price ﬂoor of the Fairtrade system. However, the amount of surplus to producers is currently
expected to be very low due to inﬂation and increased costs of fertilizer.
The distribution of income by sector for Fairtrade coffee from Guatemala, sold in the cafeteria
on the campus at the Norwegian University of Life Sciences (UMB) is shown in Table 4. The
estimation is made for Fairtrade coffee consumed by students, who are exempt from VAT
when using their student cards.10 Producers’ gross income in Guatemala from one cup of
coffee bought at the university campus of UMB is 2% of the total retail value (Table 4). The
ﬁgure reﬂects the value received by producers when the Fairtrade price ﬂoor was inactive
because the ‘C’ price was higher than the Fairtrade price ﬂoor. The total value for the producer
country, Guatemala, is 3.9%. Given that prices are higher than the price ﬂoor set by FLO, an
indicated fair price to the producer country is less than 3.9% of the total retail value.
Table 4. Distributed value of one cup of brewed Fairtrade coffee, UMB. Agricultural cycle
2006/2007
Actors

Percentage of total price

Total price

Sia˚s cantine
Max Havelaar
Friele AS
2nd level cooperative
1st level cooperative
Producer
Total
Total consumer country
Total producer country

79.17

0.38

16.52

1.07

0.84

2.02

96.07

3.93

4.75

0.02

0.99

0.06

0.05

0.12

6.00

5.76

0.24

Who Really Beneﬁts from Fairtrade?

The university cafeteria receives about 79% of the total retail value, whereas the importer and
roaster, Friele AS, receives about 16%. Thus, from the direct sale of a cup of Fairtrade coffee,
96.07% of total retail value remains in the consumer country.
The direct beneﬁts from Fairtrade to producers are at their lowest when the price ﬂoor is inac-
tive, which was the case in this analysis, since the conventional price was higher than the Fair-
trade price ﬂoor. The ﬁgures above are comparable to the conventional market because the main
difference in producer income between a conventional coffee chain and the one described above,
given that producers are organized in cooperatives, is the social premium. The social premium is
a required payment which augments the conventional price. It is earmarked for local develop-
ment activities. In both of the cooperatives studied, we found that the social premium was
used to increase the organizational capacity of the certiﬁed cooperative, in addition to providing
technical support at farm levels. Converting the social premium based on the same calculations
as above,11 the social premium of US$0.05 per pound of green coffee beans is equivalent to 0.70
NOK/kg Roasted Coffee Equivalents (RCE), or 0.01% of the total retail price per package of
Fairtrade coffee (250 grams). In comparison, the income from the license fee of Fairtrade
coffee in Norway of NOK 1.8 per kg (Hammer, 2008) is about 0.02% of the total retail price
of Fairtrade coffee. The social premium has currently increased to US$0.10 per pound Green
Bean (GB), thus equivalent to 1.4 NOK/kg RCE, or 0.02% of the total retail price per
package of Fairtrade coffee (250g). These calculations highlight the fact that the Fairtrade cer-
tiﬁcation increased the income of the producer cooperative in Guatemala by 0.14%, from 3.79 to
3.93%, in the distribution of value from brewed coffee.
In summary, the distribution of value in the coffee chain from Central America to Norway is
skewed dramatically in favor of the consumer country. During the period of this study, the
increased value to producer cooperatives from the Fairtrade certiﬁcation was 0.01% of the
total retail price per package (250g) of Fairtrade coffee. In the distribution of value from
brewed coffee, the Fairtrade certiﬁcation increased the income of producer cooperatives from
3.79% to 3.93%. The fair price to producers was about 16% and 13%, respectively, of the
total retail price calculated when the price ﬂoor was inactive. Consequently, an even lower
income than that calculated above is indicated as a fair price to producer cooperatives. The
large consortium of cooperatives, Fedecocagua, captures a higher percentage of value in the
chain and a larger market share compared to the local cooperative El Polo. However, the produ-
cers organized under Fedecocagua receive a smaller percentage of retail value at farm gate, most
likely due to the higher operational costs of Fedecocagua and to the contributions El Polo has
received from FondeAgro in the certiﬁcation process.
Producer Experiences of Fairtrade
The label of Max Havelaar signiﬁes a relationship between producers and consumers, whereby
consumers are made aware of beneﬁcial conditions for the producer. The following section gives
attention to the meaning of Fairtrade for producers and compares perceptions and beneﬁts of
Fairtrade between the two selected cooperatives.
A representative response of Guatemalan members of local cooperative boards is given below,
when they were asked for their opinions about Fairtrade:
We have Utz (Certify) and Starbucks (C.A.F.E. practices), they are the certiﬁcations. We sell to
Fedecocagua which sells to a fair market.12 (Focus group participant, local cooperative board,
Guatemala)
536 S. Johannessen & H. Wilhite
The local cooperatives in Guatemala have a very limited knowledge of Fairtrade. The produ-
cers have been told by Anacafe, the National Coffee Association in Guatemala that in the future
all coffee will have to be certiﬁed if producers are to ﬁnd a buyer. Fairtrade, however, is viewed
as a market operationalized through Fedecocagua and none of the respondents in local coopera-
tive boards had initiated Fairtrade. During focus group discussions with local cooperatives
under Fedecocagua, 16% of the participants replied that they do not sell to the fair market
and about 33% replied they have been told, but were unsure whether Fedecocagua sells to the
fair market.
Members of the local cooperative board in Nicaragua were more knowledgeable about
Fairtrade, as this quote indicates:
I am in agreement with the fair market, it is a good market. The difference to the conventional market
is that we sell a bit more. But the problem we have here is perhaps the country we have. Our govern-
ment, there are no incentives for the producers like in Costa Rica . . . 13 (Personal interview, local
cooperative board member, Nicaragua)
In Nicaragua, all the members of the local cooperative board demonstrated knowledge of
Fairtrade. They also expressed a greater sense of ownership of the certiﬁcation, which they
themselves had initiated with the assistance of FondeAgro. However, at the primary producer
level in Nicaragua, only 39% of participants (n ¼ 26) replied that they participate in Fairtrade.
When inquiring about the beneﬁts of the certiﬁcations and the social premium from Fairtrade,
the respondents in Guatemala highlighted that they are still waiting for the beneﬁts from the
certiﬁcations.
We sent a letter as well, where we demanded explanations of why we they did not give us a
surcharge. They did not respond. This was for CAFE´ practices and Utz. We did not demand to
FLO because this started many years ago. . . . I think that FLO works well, it is good what they
do, but here—in theory—well, in practice it is nothing.14 (Focus group, Fairtrade producers,
Guatemala)
Their responses indicate that the members of the local cooperative boards in Guatemala have
not seen any direct economic beneﬁts from Fairtrade. More importantly, in many cases they do
not claim economic beneﬁts of Fairtrade because they do not understand the system and their
rights to claim. The members of the local cooperative boards highlighted how they could
achieve some local beneﬁts from Fairtrade. ‘Put in your papers that the cooperatives would
like to receive the social premium directly’15 (Focus group, local cooperative board members,
Guatemala).
The social premium derived from Fairtrade in Guatemala is spent on increasing the technical
and organizational efﬁciency of Fedecocagua at a centralized level, in addition to improving
quality and increasing competitiveness with coyotes.16 The social premium has also been
used to construct a new processing mill for the separation of certiﬁed coffee from conventional
coffee. Thus, the Fairtrade certiﬁcation has in many ways subsidized new and additional certi-
ﬁcations and increased the capacity of the cooperative.
In Nicaragua, producers responded that the social premium is used for improving the tech-
nical efﬁciency of production and the quality of their coffee, and that in the future they plan to
build latrines on farms without latrine facilities. The manager of the local cooperative in
Nicaragua is very satisﬁed with Fairtrade but he pointed to problems with Fairtrade such
as the lack of robust demand; the lack of economic incentives for quality; the inﬂexible
nature of the system regarding price; the evolution of stricter obligations in production;
and the low minimum price. He also mentioned the enormous amount of paperwork required

Who Really Beneﬁts from Fairtrade?

of producers, including the ﬁlling out of many forms and registers. This task is difﬁcult for
people with low levels of education and impossible for those who are illiterate unless they
seek assistance.
The producers in both Nicaragua and Guatemala were preoccupied with the current high cost
of living and inﬂation, and compared this to the very low ‘fair price’ from FLO. A Guatemalan
producer told us that ‘FLO is really low, . . . here we are waiting for a price more fair, right.
Against what are they setting the price?’17 A Nicaraguan producer put it this way: ‘. . . we are
hoping that maybe the politics of fair market will increase the price. In our country now, every-
thing is very expensive’18 (Personal interview, coffee producer, Nicaragua).
The main difference in the experience of Fairtrade between the two cooperatives is in the dis-
tribution of local beneﬁts and information. The local cooperative in Nicaragua regards the Fair-
trade certiﬁcation as providing clear beneﬁts, whereas the local cooperatives in Guatemala do
not. The national consortium of cooperatives in Guatemala, on the other hand, believes that Fair-
trade is the only certiﬁcation in which the beneﬁts are greater than the costs. However, the local
cooperatives in Guatemala express a lack of sense of ownership of the Fairtrade certiﬁcation
compared to their Nicaraguan counterparts. The lack of ownership is due to six main factors.
First, all local producer cooperatives are ‘certiﬁed’ Fairtrade, which is not the case for the
other certiﬁcations. Second, there has not been any speciﬁed difference in income from Fairtrade
coffee compared to conventional coffee. Third, there are no clear obligations in production.
Fourth, a fee of 15% on income received is paid by the local cooperative to Fedecocagua for
transportation and security for all conventional coffee and Fairtrade coffee. However, the fee
is 30% for certiﬁed coffee (Utz Certify, Rainforest Alliance, and Starbucks CAFE´ practices).
Fifth, the certiﬁed coffee is sold in sacks with different colors, in order for easy separation at
the processing station. Fairtrade coffee on the other hand is not put into colored sacks or separ-
ated at the processing mill. Sixth, the local producer cooperatives have a right to claim economic
beneﬁts from the other certiﬁcations, but not from Fairtrade.
The main perception of Fairtrade is that it does not make much of an impact. However, it is
evident that the producers in Nicaragua have a more positive view of the Fairtrade system in
those cases in which the social premium was spent on real social improvements, such as
improvements to the local ofﬁce building and the promise to use beneﬁts to improve latrines
on selected farms. Both cooperatives offered technical assistance to producers, but all of the
informants from ﬁrst level cooperatives in Guatemala underlined the need to receive more
direct economic beneﬁts from certiﬁcations and Fairtrade.
Why Value Distribution is Skewed
The Workings of the Market
The most obvious reason for the skewed distribution of value is the position of the Fairtrade
market in the conventional market after the label was mainstreamed in 1989. The idea of the
Fairtrade label was to reach a broad public by piggybacking on existing brands. The use of
existing market actors avoided the development of a new infrastructure and reduced the costs
associated with penetrating the market (Renard, 1999, p. 496).
According to the coffee multinational Starbucks, Starbucks and Fairtrade share the common
goal ‘. . . to help ensure that farmers receive an equitable price for their coffee and strengthen
their farms for the future’ (Starbucks homepage, n.d.). This is enabled since ‘. . . Starbucks
works with several organizations to make credit available to coffee growers, which enables
538 S. Johannessen & H. Wilhite
them to postpone selling their crops until the price is favorable’ (Starbucks homepage, n.d.).
Starbucks does not indicate for which particular partner the price is favorable. According to
the manager of El Polo, the favorable partner becomes very clear: ‘I believe, for what concerns
Starbucks, Starbucks always sends contracts when the New York “C” price is at the ground,
when the prices have fallen. When the New York “C” price is high, Starbucks never sends con-
tracts. . . . It is the tricks of the market. They (Starbucks) are specialists on the market’ (Personal
interview, manager of El Polo, 2007, Nicaragua).
The specialists in the coffee market are powerful and receive the major share of the income,
both in the conventional market as well as in the Fairtrade market. The gaming of the Fairtrade
price became evident when the large transnational discount store Lidl (the Schwarz Group)
started selling Fairtrade products in 2006 (Network on European Worldshops, 2006). This
was a highly controversial issue, partly because Lidl started selling Fairtrade products shortly
after criticism that it was violating basic labor and trade union rights (Harmann & Giese,
2005; Union Network Commerce, Global Union, 2007). However, since Lidl is a transnational
company with a large demand for its products, the price differential for the consumers between
Fairtrade and conventional coffee was negligible. Consequently, Fairtrade in Germany had to
negotiate a price differential between Fairtrade and conventional products in order to justify
fair trade for the consumer19 (Hammer, personal interview, 2008).
One of the primary reasons for the growth of Fairtrade is its mainstreaming in the market.
Large importers who control the majority of the conventional coffee supply chain respond to
consumer demand by distributing Fairtrade certiﬁed coffee. On the other hand, large distributors
are interested in buying large quantities of coffee. For this reason, it is the second level coopera-
tives, with their record of achieving good quality which tend to supply the majority of the Fair-
trade market. Smaller ﬁrst level cooperatives ﬁnd it difﬁcult to compete with these large actors
and to capture market share. Other empirical studies (Fridell, 2007; Smith, 2007) have conﬁrmed
that the more experienced and larger producer cooperatives dominate the Fairtrade market.
Another important factor is that the position of large second level cooperatives is strengthened
because they use the Fairtrade social premium to increase competitiveness both in the conven-
tional market and in the Fairtrade market. This was evident in our case study. The social
premium was used to subsidize new certiﬁcations through the construction of a new processing
plant for certiﬁed coffee. Fairtrade subsidization of other certiﬁcations has been detected in other
empirical analyses (Calo & Wise, 2005).
However, Fairtrade will not likely take a signiﬁcant market share from conventional trade due
to the increasing power gap between producers in the South and Northern ﬁliere actors (impor-
ters, roasters, and retailers). Fairtrade will only lead to short-term ﬁnancial gains during periods
of really low conventional coffee prices due to the mechanism of the price ﬂoor. This is also
conﬁrmed by a number of other empirical studies (Giovannuci & Ponte, 2005; Killian et al.,
2006; Raynolds et al., 2004; Zehner, 2002). Moreover, this and other empirical studies show
that given the low volumes of coffee sold through Fairtrade channels, these short-term ﬁnancial
gains are not signiﬁcant enough to encourage further development (Bacon, 2005; Fisher, 2007;
Ponte, 2002; Slob, 2006; Smith, 2007). Our ﬁndings on market share are supported by other
empirical studies (Fisher, 2007; Hira & Ferrie, 2006; Lyon, 2006; Ponte, 2002; Smith, 2007;
Zehner, 2002).
Our analysis highlights a number of difﬁculties with the system of Fairtrade and its position
within the market. First, the Fairtrade criteria are intended to guarantee a minimum price and
social bonus to certiﬁed producers; the criteria are not aimed at ensuring a fair supply chain.
Second, the interest in buying large quantities of coffee leads to gambling with the Fairtrade

Who Really Beneﬁts from Fairtrade?

price, with resultant downward pressure on prices. The Fairtrade price ﬂoor acts as a starting
point for bargaining in terms of price; however, with the ‘C’ price higher than the Fairtrade
price ﬂoor, this becomes a bargaining issue related to volume. This leads to the third difﬁculty,
the preference for large quantities of Fairtrade coffee with good quality and trace records inhibits
small cooperatives from reaping the beneﬁts of Fairtrade. Fourth, the price of Fairtrade coffee
needs to be higher than that of conventional coffee, in order for the consumer to believe the
extra amount paid for the coffee reaches the producer. However, other empirical studies have
pointed out that the price must remain close enough to conventional prices, so as not to discou-
rage ethical consumers; thus the price ﬂoor may also indicate consumer willingness to pay
(Fridell, 2007, p. 192; Renard, 1999, p. 497). If the Fairtrade price is higher than the convention-
al price then demand will fall. This is an inherent contradiction (fairness versus proﬁt) of the
Fairtrade system. A ﬁnal point is that the producer and the consumer are in the foreground of
the Fairtrade chain, with the intermediate actors in the background. Thus a company such as
Lidl can distribute Fairtrade products regardless of its unfair trade relations.
Consumers and consumption narratives
The symbolic value of Fairtrade can be important for importers and roasters. Selling Fairtrade
coffee gives large companies, such as Lidl and Starbucks, the image of more socially concerned
companies. However, consumers need to feel assured that the Fairtrade price difference actually
does lead to beneﬁts for producers. The Fairtrade network has played to this belief through mar-
keting producer ‘success stories’. According to Lamb, the Director of the Fairtrade Foundation:
In all these differing activities and promotions, the Foundation has sought to emphasize the
individual stories of farmers and workers . . . The message has focused on the most tangible beneﬁts
of Fairtrade. (Lamb, 2007, p. 73)
He also says that it is the:
. . . marketing methods which are unique to Fairtrade and which seek to realize the core objective of
bringing the organized consumer closer together with disadvantaged, organized producers. . . . these
techniques have helped make Fairtrade fashionable.20 (2007, p. 55)
Based on our analysis of producer cooperatives in Central America, these success stories do
not reﬂect the concerns and misunderstandings we observed. Fairtrade has repressed problems
in production and obscured the power differential within the chain from production to consump-
tion, and Fairtrade marketing has exaggerated its beneﬁts. The disconnection between the expec-
tations raised by the label and the realities for producers is also highlighted in other case studies
(Getz & Shreck, 2006; Jaffee, 2007; Lyon, 2006, 2007). Transparency will be necessary in order
to eliminate ‘fairwashing’ by multinationals and other traders who are not living up to their social
responsibilities. Consumers and producer organizations must engaged in pressing Fairtrade
producers and distributors into making their policies conform to the promise of Fairtrade.
Towards a Fairer Fairtrade Regime
The results of this study are consistent with other studies that conclude that Fairtrade does not
directly beneﬁt the producer, but rather the producer cooperative, or in many cases the national
consortium of cooperatives (see Fisher, 2007; Giovannucci & Ponte, 2005; Lyon, 2007; Milford,
2004; Murray et al., 2006; Slob, 2006; Smith, 2007).
540 S. Johannessen & H. Wilhite
To improve the Fairtrade system it is important that the incentive system be organized such
that small cooperatives get a share of the social premium from Fairtrade coffee. In the case where
certiﬁed producer cooperatives are on a secondary or national level, the social premium should
go directly to the ﬁrst level cooperative. Then it would be possible to achieve social and econ-
omic development objectives on a local and rural scale. It should be possible to ensure a larger
social premium without increasing the cost of the product, if traders are required to bear some
portion of the cost of a system in which they receive a large market advantage.
An important ﬁnding from our study is that increased market access is the key producer beneﬁt
from Fairtrade. This is consistent with ﬁndings from other studies (Lyon, 2006; Raynolds, 2002;
Renard, 1999). However, in order for local cooperatives to reap signiﬁcant beneﬁts of Fairtrade it
will be necessary to reduce the entry barriers for small actors into the Fairtrade market, such as
the requirement that they have an export license. An emphasis on assisting local producer
cooperatives to enter Fairtrade markets and on increasing their institutional capacities may be
the most effective way to improve the Fairtrade distribution of beneﬁts.
Conclusion
In the post ICA market, large multinationals control most of the supply chain in coffee. Both
value and surplus has increasingly been transferred to consumer countries. The Fairtrade
coffee chain is no exception, despite its symbolic message to consumers that it provides an
alternative to the conventional market. The main direct additional economic beneﬁt from
Fairtrade during the period of this study resulted from the social premium, which provided
the producer cooperative with 0.01% of the retail price. The distribution of value to the consumer
country from the sale of brewed Fairtrade coffee was 96.3% of the retail value. Fairtrade
provides producers with market access, underlining how markets and semiotics work together
in the creation of niche markets. However, these ethically attractive products do not deliver
what they promise in terms of social and economic beneﬁts for farmers. The bottom line is
that large multinationals are using the Fairtrade system to ‘fairwash’ their brands.
Notes

FINE consists of FLO (Fairtrade Labelling International), IFAT (International Federation of Alternative Trade),

NEWS! (Network of European World Shops), and EFTA (European Fairtrade Association).

Prices are given for washed arabica from Central America.

3 We deﬁne ‘narrative analysis’ as an analysis of the general perception of the population of the workings and

meanings of Fairtrade coffee in each context.

This commodity cultures approach derives from Jackson (1999, 2002), is inspired by the work of Appadurai (1986)

and Kopytoff (1986), and involves rethinking the linear GCC approach to incorporate networks and variations in

narratives along the commodity chain (Bakker & Bridge, 2006; Cook & Crang, 1996; Hughes, 2000, 2006).

To Marx (1971), the economic value of exchange does not reﬂect the use value of a commodity; it is a direct

reﬂection of the demand for the product. His notion of commodity fetishism is based on the perspective that

through international trade, producers and consumers have no direct contact, therefore have no conscious

agreement to provide for one another. Thus, the value added by laborers and their social relations appear as

objective properties of the commodities. Marx (1971) typically referred to this objective property as a ‘fetish’

which masks the commodity’s true worth.

6 Baudrillard (1996) further included two dimensions of value of the object. The symbolic value of an object is the

value that a subject assigns to an object in relation to another subject, thus the social construction of value relative to

other subjects. The sign value of an object is the value of the object within a system of objects, thus the personal

construction of value relative to other objects.

Who Really Beneﬁts from Fairtrade?

FondeAgro is a part of MAGFOR (Ministerio Agropecuario y Forestal del Gobierno de Nicaragua), ﬁnanced by the

Swedish aid agency (Asdi; Agencia Sueca de Cooperacion Internacional para el Desarollo).

This is correct according to the FLO system because the Fairtrade price is given as the FOB price.

9 Calculated as the weighted average of prices paid to growers in International Coffee Organization (ICO) member

countries.

It is important to note that if one buys regular coffee including VAT, 33% has been added to the total product costs,

whereas the rates in Norway are 25% of the ‘added value’ of the product, excluding the value of the raw product.

11 Given US$1 is equal to NOK 5.39; 1 pound is 2.2 kg; 1 kg green coffee is 1.19 kg toasted.

‘Tenemos utz y Starbucks, son las certiﬁcaciones. Nosotros vendemos por Fedecocagua que venden por una

Mercado Justo [We have Utz (Certify) and Starbucks (CAFE practices), they are the certiﬁcations. We sell to

Fedecocagua which sells to a fair market]’ (Focus group participant, local cooperative board, Guatemala).

‘Yo estoy en de acuerdo con mercado justo, es un buen Mercado. Porque la diferencia de mercado convencional es

que andamos un poco ma´s. El problema de nosotros es tal vez el paı´s que nos tenemos. El gobierno de nosotros, no

hay incentivos por los productores como en Costa Rica.’

Enviamos una carta tambie´n, una carta donde exigı´amos explicar, de que porque no damos un sobreprecio. Y no han

respuesta. Eso es lo que es CAFE´ practices y Utz. Ya lo que es FLO no reclamado de nada porque eso ha venido

desde muchos an˜os. . . . Lo que parece yo es que FLO trabaja bien, es bien lo que hacen, pero aquı´,—Pues en la

teorı´a pues—En pra´ctica no es nada.

‘Ponga ahı´ que las cooperativas les gustarı´a que el premio social venga directamente.’

Independent buyers of coffee.

‘FLO se queda abajo. . . . Pero ahı´ nos esperamos un precio ma´s justo, verdad. ¿Sobre que´ se marquen el precio?’

‘ . . . esperamos que tal vez las polı´ticas de comercio justo se suba. Porque aquı´ en nuestro paı´s ahora, todos los cosas

son carı´simo.’

19 Hammer expressed that she does not know how Fairtrade Germany and Lidl resolved this particular case. However,

such an increase in price leads to increased proﬁt somewhere in the supply chain and is a thought to be considered

when discussing the impasse between large actors and Fairtrade certiﬁcations.

In September 2005, the Fairtrade Foundation’s achievements in building consumer awareness of the Fairtrade Mark

were recognized by the Superbrands panel of brand experts. The Fairtrade Mark was named the winner of the

Superbrands Special Recognition Prize in the Media and Service Category (Lamb, 2007, pp. 64, 65).

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Silje Johannessen MSc, Department of International Environment and Development Studies –
Noragric, the Norwegian University of Life Sciences.
Harold Wilhite is Associate Professor and Research Director at the Centre for Development and
the Environment, University of Oslo.

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