March 28, 2004

How Fair is Fair Trade?
That's Tough to Figure: Confusing Labels, Claims Make It Hard for Shoppers To Know Where Money Goes

June 8, 2004; Page A10

Pricing isn't the only murky area surrounding the fair-trade phenomenon. Confusing terminology, labels, logos and claims sometimes make it hard for consumers to figure out who these programs are helping, or how. Some companies use terms like "fairly traded" on products and Web sites although the claims haven't been independently verified. (See related article.)

"We cannot prevent people from using the term 'fair trade,' " says Rudiger Meyer, managing director of FLO-Cert Ltd., a Bonn, Germany, spinoff of the Fairtrade Labelling Organizations International federation that verifies whether farmers are benefiting from the sale of certified fair-trade goods.

FLO says that until a few years ago its different affiliates around the world used at least seven different fair-trade labels on products. In the past two years, 14 of the 18 affiliates have agreed to adopt a universal label. The U.S. remains one of the holdouts. FLO also says it has trademarked the term "fair trade" in about 44 countries and has contacted several companies that were using the term on noncertified goods to "try to reason with them," says Managing Director Luuk Laurens Zonneveld. "Until now it's worked fairly well."

FLO's certification system is voluntary, and not all companies participate. Some companies complain about certification and licensing costs. Some companies also say it isn't fair that some of their suppliers, such as individual family farms, aren't certified by FLO because they're too small. "We feel that there are other alternatives" to FLO certification, says Kate Lowery, spokeswoman for Whole Foods Market, a 158-store chain based in Austin, Texas.

Allegro, Whole Foods' coffee unit, last year launched a program called High Five for Farmers that, according to promotional material, "will donate 5% of the sales from select coffees directly back to the farms where they are produced." But, according to Tara Cross, Allegro's marketing manager, the donation isn't 5% of the retail price, but 5% of a lower price at which Allegro sells the coffee to Whole Foods, a figure Allegro won't disclose. And the program only applies to one variety of coffee -- out of more than two dozen -- for a two- or three-month period.

The program, in place at about 150 stores, has raised between $4,000 and $8,600 for each promotion, which has gone for such things as water wells and school improvements, according to Allegro's Web site.

Royal Ahold NV, the Netherlands-based owner of supermarkets, sells fair-trade-certified coffee. But it also helped create the now-independent Utz Kapeh Foundation, which offers its own "certified responsible coffee" label. "If you are a large supermarket brand or a large roaster, to buy all your products under the fair-trade conditions is just not economically possible," says David Rosenberg, director of Utz Kapeh.

The Netherlands-based foundation sets no minimum price for growers, nor does it impose a set development-project premium as does fair-trade-certified coffee. Instead, it lays down strict production standards for growers. The idea: Buyers will pay more because they see greater value in the coffee, not because there's a minimum price. Utz Kapeh's Web site says this model offers growers "a better price for a better product."

Until recently, Mr. Rosenberg couldn't document that its growers were getting more money. "The information is anecdotal," he said in April. Now Utz Kapeh has begun asking producers to report how much more money the coffee brings them. Mr. Rosenberg says the reports show producers are getting more but he hasn't calculated how much.

To make its own certification system "more transparent," FLO says it recently spun off its certification unit into a separate for-profit company. But it's no easy task for a consumer to figure out how much farmers are earning from fair-trade products. When this newspaper asked a FLO affiliate in London how much of the retail price of bananas sold by a British supermarket chain was going to the farmer, a spokeswoman said the information was "easy to find" on FLO's Web site.

The information is there. But it involves locating a section intended for "small producer" organizations, downloading a 29-page document, then doing calculations based on prices in a chart on page 16 for boxes of bananas weighing 18.14 kilos. It also requires deciphering terms like "Farm-gate" and "FOB." Says FLO's Mr. Zonneveld, "I'm sure in terms of transparency we can improve."

Copyright 2004, The Wall Street Journal

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