Fair Trade: The Premiums on Profits

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Has Nestlé finally joined the ranks of the fair trade movement?

Last month Socialist Review reported the widespread criticism of the food multinational for its refusal to do just that. Within a matter of days proposals emerged to produce 'ethically aware' brands by both Nestlé (maker of Nescafé) and fellow coffee roaster Kraft (which makes Maxwell House and Kenco).

But the Fairtrade Foundation is critical. While Nestlé's proposals remain sketchy, its competitor Kraft has bypassed the foundation in favour of certification by a little-known organisation called the Rainforest Alliance. In place of the minimum market price ensured by the foundation, Kraft's Kenco Sustainable Development plans to give farmers a 20 percent premium on the market price.

The current market price for green coffee beans is 80 cents per pound. Based on that, Kenco's premium would pay some of the world's poorest farmers 96 cents per pound, compared to the Fairtrade Foundation's minimum of $1.21 (with an extra five cents for investment in community projects). Unlike Fairtrade, a percentage premium gives no security if the market price slumps - it has gone as low as 45 cents per pound in recent years.

While the general coffee market has shrunk slightly in the last few years, takings from the fair trade niche have almost doubled since 2001. The multinationals are clearly sensitive to the bad light such products cast on their own practices - and the impact this is having on their profits. But their response is entirely in keeping with the market logic that the fair trade movement was intended to challenge.