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Coffee…Part 2

May 5, 2009

First off….before you go any further, check out yesterday’s post titled ‘Coffee, Coffee, Coffee’….but you already did that, right? Good…let’s move on to the next certification program: Rainforest Alliance (or ‘The Frog’ torainforest-alliance those in the coffee world). RA has a long history and a very well-known name as a credible program for environmental good.

Rainforest Alliance partners with the Sustainable Agriculture Network to certify farmers under the RA system. RA also works with several other crops, and is the largest certifier of FSC (Forest Stewardship Council) lumber in the world. Unlike Fair Trade, Rainforest Alliance does not set minimum price requirements for purchasers, though it does require that a small amount be paid over and above the regular purchase price for being RA certified. This fee is paid in the supply chain, and is not an added to the consumer price. Currently, the fee is averaging approximately $0.10 per pound of green coffee (green means un-roasted…note that coffee loses approximately 20-25% of it’s weight in the roasting process), though this information is not readily available anywhere publicly that I could find….and I looked HARD. RA’s primary value proposition is that it is an environmental steward, though it does have secondary messaging about improving productivity and social programs, it is an expensive program for producers to implement.

Key Points on Rainforest Alliance:

1. Like Fair Trade, RA does not require 100% content to use their label, instead, they require just 30%. Though in my opinion, this may open some market access to companies that can not feasibly convert all of their coffee to a more sustainable option, I just can’t help but wonder about the 70% of coffee in that Yuban can that was grown in a clear cut forest and picked by small children who were sold as day labor by their parents. And no, that is not an exaggeration.

2. RA is HUGE. They have a giant budget and several hundred people telling you how great they are.

3. RA, like Fair Trade, flat out refuses to work with other certifiers at origin (origin is the generic term the coffee business uses to describe anywhere coffee is grown). Their stock answer as to why they refuse is, “Well, not everyone buys a Volkswagon.” I kid you not. I have heard that at several conferences direct from their high-ups.

Overall RA is is a program thatyuban-ra has brought tremendous attention to sustainability, just like Fair Trade. Unfortunately, it is also not a market-based program, meaning prices are set by buyers that understand the western market, and sold by farmers that generally don’t, and they do not have mechanisms in their system to change this. There is also no facet of either model that incorporates quality as an indicator of what the price should be into the scheme’s framework.

Fundamentally, one of the largest problems in the coffee industry is that prices are controlled by the very complicated and convoluted commodity market. This means that the crappiest, most undrinkable coffee is all lumped together in the pricing structure with the finest, most exotic and rare varieties. It would be like if we charged the same price for Miller High Life (the undisputed Champagne of Beers) as we did for Dom Perignon….even beyond that, it would be like pouring them together in a big vat, splitting it in half, and selling half as High Life and half as Dom. Does that make sense to you?

Farmers need education, financial help, and environmental support, but much more than that, they need western buyers to be willing to pay what coffee is really worth, and the knowledge to then improve their quality accordingly.

We have to stop throwing money at the problem. Here’s an idea I actually got from a republican: Pay what something is worth. Better quality should get better prices. …….Oh, and crappy quality is destroying the world (I added that last bit myself).

I will cover price in another post very soon. Tomorrow’s coffee topic will be about UTZ CERTIFED, one of my current clients. I will also be talking about why a latte costs $4.00 now, and why you should pay that much (at least sometimes), and whay all those financial planners telling you to stop with the cappuccinos are dead wrong.

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