Fairtrade

This report comprises of an in depth discussion about fair-trade coffee and addresses the more important issues of the unsatisfactory conditions of coffee growers, and the excess supply of coffee that has hit the industry.

According to a World Bank report, in Central America alone, some 600,000 coffee workers have been left unemployed in the past two years. The plantations are being shut down as prices have plummeted to their lowest levels in a century. In Nicaragua, thousands of coffee farm workers are without food, land or hope. Now in a situation as this what can one do to overcome the coffee crisis?

We will progress further by taking a look at what big corporations like Nestle or P&G are doing and can do for the betterment of the livelihoods of coffee farmers. Moreover, of how an ethical supply chain or ethical buying behavior can impact and boost the sale of fair-trade coffee.

Lastly, we conclude through enumerating and justifying ways to improve the fair-trade crisis through direct relationships with suppliers, increasing demand through awareness building and taking steps to reduce supply.

2. LIST OF ILLUSTRATIONS

Figure 1.A Indifference curves and budget constraintsвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦..11

Figure 1.B Price effectвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦12

Figure 1.C Price change and demandвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦.....13

Figure 2.A Influence on consumer purchasing behaviourвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦..14

Figure 3.A Illustration of price difference through supply chainвЂ¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦Ð²Ð‚¦...17

II.MAIN BODY

1. INTRODUCTION

The Case study Fair Trade Coffee revolves around the global coffee industry. It begins with an introduction of the two situations that have wracked it: Over supply and the accompanying low prices that follow. It then goes on to speak of the actions taken by different profit and not-for-profit organizations in the form of the start up of a Fair Trade movement. These efforts are due because whilst excess supply’s reduction in price is an advantage to customers worldwide, it is detrimental to the livelihoods of the millions of coffee farmers in developing and under developed countries that comprise the major growers of coffee in the world.

Oversupply has forced the sale of coffee at low prices despite the costs of producing and processing coffee beans being much higher. Firms like Kraft and Starbucks have taken to purchasing certified coffee and integrating them into their mass marketed brands as a means of building an awareness amongst their consumers and contributing towards the betterment of working conditions of their suppliers. Others like the Fair trade labeling organization and the Interfaith Coffee Program do their part through promoting the purchase and sale of certified coffee (at equal prices) to religious groups in the U.S.A and abroad. Albeit these developments certainly assist in making a difference, they aren’t sufficient enough.

Now whilst the above is reflective of one side of the campaign, on the other side disagreements have arisen against some of the Fair Trade �crusaders’ attempts to forcibly convert coffee consumers to purchasing high priced certified coffee through actions that aim at drastically eliminating the supply of cheaper priced coffee. The argument given - these actions overlook the primary concerns and consequences to growers, ignore the limitations that diverse cultures impose on firm’s modification of strategies in this light and blatantly disregard a consumers right to freedom of variety and of those who do favor low quality coffee sold at low prices purely since it is what their incomes allow them to afford!

The objective of this report is to analyze both sides of the situation facing the Coffee

Industry and we shall proceed by undertaking this evaluation through the answering of three questions.

2. ANALYSIS

Question 1: Is it important for coffee marketers such as Starbucks, Kraft, and Nestle to create “ethical supply chains”? Why?

Answer 1:

Yes, it is important for coffee marketer’s to create ethical supply chains.

Kraft Foods, Nestle and Starbucks are amongst the world’s best coffee brands.

NestlÐ"©Ð²Ð‚™s most celebrated brand Nescafe is commonly used to refer to any instant coffee through brand genericization. Kraft Foods Inc. is the third largest in the world after NestlÐ"© SA and Pepsi Co. (Wikipedia, 2008). Kraft boasts a wide range of worldwide and regionally marketed brands of coffee, of which the most popular include - Maxwell House, which is its leading coffee brand in the USA; Kenco coffee range, wherein the firm launched a brand called the вЂ?Kenco sustainable development’ in 2005 and which is made entirely from beans from Certified farming sources; and Carte Noir, a popular and tasty coffee.

Starbucks on the other hand, is yet another popular and well known global brand that has stemmed primarily from the global consumer culture that is characteristic of the twenty-first century. They are the largest coffeehouse company worldwide and have been lauded as the company that perhaps iniated the �coffee culture’ that has engulfed the world. In addition, Starbucks subsidiary business, the Seattle’s Best Coffee is another firm favorite amongst consumers.

The above mentioned facts stand testament to the power and favorable position of sorts possessed by these firms, in terms of the relative ease with which they may decide on which suppliers they must