Fair Trade Coffee

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Fair Trade Coffee: Ethics, Religion, and Sustainable Production

Global Marketing Management
International Summer University 2010- WU, Wien

Table of Contents

Introduction3
Problem Statement3
The Fair Trade vision3
Background: The Fair Trade Foundation4
Background: Fair Trade Labeling Organization International4
Fair Trade Mark4
Fair Trade Pricing5
The Fair Trade Premium5
Question 1. Why should Starbucks, Kraft, and Nestle create ‘ethical supply chains’?6
Question 2: Do you agree with the finding that few consumers consider the impact of their purchase decisions on anyone or anything but themselves and their family?7
Question 3: What recommendations would you make to help cure the ills of the coffee market?8
Conclusion9
References10
Appendix11

Introduction

Coffee is the world’s seventh largest legal agricultural export by value. Globally, 400 billion cups of coffee are consumed annually. The greatest players in the Coffee market are P&G, Nestlé & Kraft. Approximately 25 million farmers in 50 developing countries produce coffee (Facts & Figures 2010). This case study will look at the Fair Trade Foundation and the Fair Trade Mark’s role in alleviating the current issues in the Coffee Market. It will also aim to make recommendations on how the Fair Trade Brand could be strengthened. Problem Statement

In 1999, the coffee price was $1.42 per pound. Various producers entered the market during the following two years and by 2001, the market had reached saturation. By 2001, 115 million bags of coffee were being produced and yet only 105 million could be sold according to the International Coffee Organization (cited in Keegan & Green 2008). Prices dropped to an all time low of $0.42 per pound. This excess supply and low demand brought devastation to the lives of 25 million coffee farmers in 50 poor developing countries around the world. Various farmers quit the market as the true cost of producing coffee, is around $0.80 to $0.90 which meant there was a major shortfall of around $0.40. After many farmers exited the market, the price recovered slightly to $0.50 by 2003. The biggest source of oversupply is the poor quality Vietnamese Robusta bean which has flooded the world market. This bean is bitter and inferior to the Arabica beans produced elsewhere and makes up a big proportion of the 950,000 tons that Vietnam produces. In essence, the three major issues facing the coffee market are: low prices, oversupply and the poor quality Robusta beans flooding the market (Keegan & Green 2008). The Fair Trade vision

Fairtrade is a strategy for poverty alleviation and sustainable development (Fair Trade Foundation 2010). Its purpose is to create opportunities for producers and workers who have been economically disadvantaged or marginalized by the conventional trading system or free trade system which is driven by demand and supply. Fair access to markets under better trade conditions could help small farmers in isolated areas (Fair Trade Coffee Map 2010) to overcome barriers to development (Fair Trade Foundation 2010). Fair Trade is a tool for development that ensures disadvantaged farmers and workers in developing countries get a better deal through the use of the international Fair Trade Mark (FTM) which signals to the consumer that the product qualifies as a good that is produced in a sustainable manner (Fair Trade Mark 2010). It means farmers get a fair price for their products which covers sustainable costs of production. The Fair Trade premium means producers get an additional amount of money which the farmers can then reinvest in local social, environmental or economic development projects (Fair Trade Foundation 2010). Background: The Fair Trade Foundation

The Fair Trade Foundation is the independent non-profit organization that licenses use of the FTM on its products in accordance with internationally agreed Fair Trade Standards (FTS) (Fair...
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