Module 3: Case Studies: The Organic and Fair Trade Movement

Kopali Organics, LLC

Company Profile

Founded in 2006 by CEO Zak Zaidman, Kopali Organics markets a variety of organic dried fruits and chocolate-covered fruit snacks whose ingredients are produced by small sustainable farmers in a number of countries. Kopali Organics was created when its founders, working in the Costa Rican rainforest, noticed that although there was widespread use of pesticides, herbicides, and other synthetic chemicals in the region, many local farmers employed organic agricultural practices. Kopali Organics was formed to help the small organic farmers reach a wider consumer base and increase their profits in spite of competition from larger conventional farms. All chocolate marketed by Kopali Organics is USDA certified organic and certified Fair Trade by Fair Trade USA.(1)  

External Evaluation

Kopali Organics received the 2007 Socially Responsible Business Award, which recognizes companies in the natural products market that have shown “exemplary and quantifiable efforts to promote and apply socially responsible business practices”, such as community involvement and employee empowerment.(2) The company employs a staff of three and its annual net sales are approximately $210,000.(3) Kopali Organics received an average rating of 6.70 from GoodGuide, a certified B corporation(4) that evaluates and rates products and companies on their health, environmental, and social performance on a scale of zero (poor) to ten (excellent). Environmental performance reflects a company’s resource use and environmental impact (Kopali Organics scored 7.60), and social performance describes the company’s transparency, management practices, community relationships, and consumer health and safety (Kopali Organics scored 7.50).(5)

Equal Exchange, Inc.

Company Profile

The published mission statement for Equal Exchange, Inc. describes the organization’s efforts “to build long-term trade partnerships that are economically just and environmentally sound, to foster mutually beneficial relationships between farmers and consumers and to demonstrate… the contribution of worker cooperatives and Fair Trade to a more equitable, democratic and sustainable world”.(6) To accomplish this goal, Equal Exchange trades directly with small farmer cooperatives, facilitates small farmers’ access to credit, supports sustainable agriculture and reforestation efforts, and pays producers a guaranteed Fair Trade minimum price. Supporting farmer cooperatives allows smallholding farmers to pool their resources to increase productivity, facilitate global market accessibility, and gain organic certification. Equal Exchange reports that its farming cooperatives have used profits from their fair trade partnerships with Equal Exchange to fund a variety of local development projects, from training doctors in Mexico to building new schools in Peru.(7)

Founded by Rink Dickinson, Jonathan Rosenthal, and Michael Rozyne in 1986, Equal Exchange was a pioneer in the Fair Trade movement.(8) Today, the company is one of the largest worker-owned cooperatives in the United States; the company employs 110 people in the United States and is partnered with more than 40 farmer cooperatives in twenty-three countries in Africa, Asia, Latin America, and the United States.(9) Equal Exchange’s products include organic coffee, tea, chocolate, bananas, olive oil, and sugar.(10) The company sells its products in natural food stores, consumer cooperatives, cafés, restaurants, and at major food retailers, including Price Chopper, Shaw’s, Stop & Shop, and Hannaford supermarkets.(11) In 2002, Equal Exchange hired marketing director Dia Cheney, who helped the company expand its product lines and increase annual sales from $10 million to almost $40 million by 2010.(12) Of the company’s annual net sales, coffee comprises 80%, chocolate 15%, and tea and snacks account for the remaining 5%.(13) The origins of 12 of the company’s 22 products are from female-headed farms in Peru, Nicaragua, Colombia, and Uganda.(14) GoodGuide awarded Equal Exchange products an average score of 6.0 (environmental performance: 6.2; social performance: 6.1).(15)

Recent Developments

Equal Exchange recently partnered with banana farmer cooperatives in South America, where cooperatives have allowed smaller farmers to gain more control of the market after years of dominance by larger multinational corporations. Dole, for instance, controlled 90% of the banana market in 2008, but only 30% of the market by 2011. Peru is “the leading source of smaller farmer, fair trade organic bananas”, and Equal Exchange partnered with Peruvian banana farm cooperatives APOQ (the Association of Small Producers of Querrecotillo) and CEPIBO (the Central Association of Small Producers of Organic Bananas) in 2010. Equal Exchange also partnered with the El Guabo Association of Small Banana Producers, an Ecuadorian cooperative founded in 1998.(16)

Controversy: Fair Trade Certification

Equal Exchange has been a vocal opponent of Fair Trade USA’s decision to split from Fairtrade
International, which coordinates fair trade marketing activities in about two dozen countries. In January 2012, Fair Trade USA (FTUSA) officially split from Fairtrade International, implementing new criteria for fair trade certification that expanded fair trade eligibility to larger plantations and allowed products to be FTUSA certified Fair Trade if 10% of their ingredients were fair trade, compared to the 20% minimum in other countries.(17) FTUSA claims that making the fair trade industry more inclusive will benefit more impoverished farmers and increase global fair trade sales. Responding to criticism of the certification change, FTUSA stated:

“We believe the future of Fair Trade lies in a more inclusive approach that supports everyone in the global coffee supply chain that is willing to commit to a journey of sustainability, responsibility, empowerment and impact”.(18)

FTUSA hopes to double sales in the United States by 2015, up from $1.3 billion in 2010. However, Equal Exchange and many other fair trade organizations oppose FTUSA’s decision, arguing that small farmers will be overwhelmed by the production capabilities of larger plantations and that companies will include “only the minimum amount” of fair trade ingredients in their products. Rink Dickinson, president of Equal Exchange, called FTUSA’s decision “a betrayal”. Green Mountain Coffee Roasters and Starbucks currently plan to continue to work with FTUSA, although Starbucks has not decided whether it will place a fair trade label on coffee from large plantations. Wal-Mart and Whole Foods are still deciding if and how they will adjust their marketing practices in the face of the new certification standards.(19) 

Theo Chocolate, Co.

Theo Chocolate, Co., founded by Joseph Whinney, produces organic and Fair Trade certified specialty chocolates.(20) The company “pioneered the supply of organic cocoa beans” in the United States in 1994 and built an organic and fair trade chocolate factory in 2006, establishing the company as the first roaster of organic and fair trade cacao in the U.S.(21) Theo Chocolate currently has a staff of fifty and annual net sales of $5,000,000.(22) Theo Chocolate’s website describes the company’s “standards for social and environmental responsibility”: establishing long-term partnerships with producers and using sustainably grown ingredients, green energy sources, and sustainable packaging methods. Theo buys cacao beans directly from farmers and grower cooperatives that utilize organic practices such as “integrated pest management” instead of pesticides, and farm shade-grown cacao to promote biodiversity and reforestation. Theo places particular emphasis on the science of chocolate; a laboratory at the Theo factory allows COO Dr. Andy McShea, a Harvard-educated research biochemist, to evaluate Theo’s cacao supply for quality and antioxidant content during the production process.(23)

Theo also offers a variety of “partner chocolate bars” that reflect Theo’s partnerships with a number of organizations promoting environmental sustainability and social responsibility. For instance, Theo reports that proceeds from Theo chocolate bars carrying the Jane Goodall “Good for All” seal will “benefit cocoa farmers, promote conservation in the tropical rainforest and directly contribute to the Jane Goodall Institute’s efforts to save chimpanzees, develop community-centered conservation efforts, and direct youth education programs around the world”. Proceeds from another Theo chocolate bar help support the PCC Farmland Trust’s efforts to preserve organic farmland in the United States, while proceeds from a different product go to the World Bicycle Relief, which strives to increase productivity and provide educational opportunities in rural Africa by providing bicycles to students, health care workers, and entrepreneurs.(24)

External Evaluation

Theo Chocolate was recently recognized by Whole Foods Market as a winner of one of the company’s “Supplier Awards”, awarded to “natural and organic vendors who best embody the grocer’s mission and core values” of selling high-quality organic products, establishing strong relationships with communities, and preserving the environment. Whole Foods Market recognized Theo Chocolate for “supporting ethical sourcing [and] for creating high quality products that are sparking consumer demand for ethically-sourced cocoa”.(25) GoodGuide awarded Theo Chocolate products an average score of 6.90 (environmental performance: 7.20; social performance: 6.60).(26)

eFarm

Company Profile and Goals

eFarm (Enabling Farmers to Reach Markets) is a social enterprise based in Chennai, India that works to streamline India’s agricultural supply chain. The company’s founder, Venkata Subramaniam, holds a degree in architecture from IIT Kharagpur and a Master’s in Computer Science from the State University of New York. After working in IT positions for twelve years, Subramaniam left to lead Matchbox Solutions, a social entrepreneurial firm in Chennai. eFarm, one of Matchbox Solutions’ projects, was founded in 2008 to address the unreliability of India’s agriculture market.(27) The organization’s goal is to communicate with farmers, distributors, and vendors to create a more efficient supply chain that will provide farmers with better prices for their produce, information on market demands, and an expanded consumer base, while offering consumers stable prices and consistent produce quality.(28) In 2009, eFarm won the IIM-Kozhikode White Knight business plan contest, a business school contest designed to “provide a platform to enterprising and ambitious people with ideas for profitable and scalable businesses to make their dreams a reality”.(29)

Currently, the quality and consumer price of Indian agricultural products are highly variable because the produce must pass through many “middlemen” before reaching its final sale destination. Excessive handling contributes to a 300 to 400 % mark-up in price from production to purchase and a 40% waste of food products. Intermediaries often take advantage of farmers by under-reporting product weight and under-valuing product quality. In addition, produce packaging is not standardized (causing more waste), transportation is often conducted by independent trucks, existing storage rooms go under-used, and there is minimal use of technology to coordinate the trading process.(30)

Methodology

eFarm operates by collecting product information from farmers and demanding information from consumers before “matching the demand and supply using a simple IT-driven order matching system and supplying the produce”.(31) By allowing farmers to fulfill customers’ specific requests instead of only supplying in bulk, produce waste is minimized. Furthermore, eFarm employees help farmers achieve fair prices by providing them with weight standards, teaching them how to grade their produce, and explaining how to calculate the minimum price they should demand for their goods. In exchange, eFarm establishes rural collection centers where farmers sell their produce to eFarm, which then oversees the delivery process. Technology also allows eFarm to provide farmers with consumer demand data that can help prevent over-production and poor crop selection for the next planting season, ideally leading to a more productive, fair, and sustainable agricultural model.(32)

Go To Module 4: Food Safety >>

Footnotes

(1)“Kopali Organics”. Retrieved 5 June 2012 from www.kopali.net.

(2)  “Socially Responsible Business Awards”. Retrieved 5 June 2012.

(3)“Kopali Organics: Company Profile”. Global Duns Market Identifiers. 8 March 2012. Dun & Bradstreet, Inc. As cited by Lexis-Nexis Company Profiles.

(4) More information on B Corporations can be found at http://www.bcorporation.net/.

(5) GoodGuide. “Kopali Organics Ratings”. Retrieved 6 June 2012.

(6)“Equal Exchange: Our Co-op”. Retrieved 6 June 2012.

(7)“Equal Exchange”. Retrieved 6 June 2012 from http://www.equalexchange.coop/.

(8)“Kopali Organics: Company Profile”. Global Duns Market Identifiers. 8 March 2012. Dun & Bradstreet, Inc. As cited by Lexis-Nexis Company Profiles.

(9) Hoover’s, Inc. 5 June 2012. “Hoover’s Company Records: In-depth Records”. Retrieved 6 June 2012.

(10)“Equal Exchange”. Retrieved 6 June 2012 from http://www.equalexchange.coop/.

(11) Hoover’s, Inc. “Hoover’s Company Records: In-depth Records”. 5 June 2012. Retrieved 6 June 2012.

(12)“Maintenance software provider smartware group hires marketing director with roots in Silicon Valley”. 10 August 2011. M2 PressWIRE. Retrieved 6 June 2012.

(13) Global Duns Market Identifiers. 8 March 2012. 2011 Dun & Bradstreet, Inc. As cited in Lexis-Nexis Academic: Company Profiles. Retrieved 6 June 2012.

(14)“‘Grown by women’ coffee line launched”. 27 August 2011. The Grocer, p. 24. Retrieved 6 June 2012.

(15) GoodGuide. “Equal Exchange Ratings”. Retrieved 6 June 2012.

(16) Equal Exchange. “Meet Our Banana Farmers”. Retrieved 5 June 2012.

(17) Neuman, W. 24 November 2011. “A Question of Fairness”. New York Times. Retrieved 6 June 2012.

(18) Associated Press. Bloomberg Businessweek. “Too much caffeine? Fair trade coffees fighting”. Retrieved 5 June 2012.

(19) Neuman, W. 24 November 2011. “A Question of Fairness”. New York Times. Retrieved 6 June 2012.

(20)“Theo”. Retrieved 5 June 2012 from http://www.theochocolate.com/.

(21)“The Design 100”. Time Magazine. Retrieved 6 June 2012.

(22) Dun & Bradstreet, Inc. 8 March 2012. “Theo Chocolate, Inc.” Global Duns Market Identifiers. As cited by LexisNexis Academic: Company Profile.

(23)“Theo”. Retrieved 5 June 2012 from http://www.theochocolate.com/.

(24) Ibid.

(25) Whole Foods Market, Inc. 23 May 2012. “Whole Foods Market® honors winners of its first-ever Supplier Awards”. Retrieved 6 June 2012.

(26) GoodGuide. “Theo Chocolate, Co.- Good Guide Ratings”. Retrieved 6 June 2012.

(27) Jagannathan, B. 28 November 2011. “eFarm’s efficient supply chain pays farmers better”. ThinkChangeIndia.org. Retrieved 6 June 2012.

(28)“eFarm”. Retrieved 6 June 2012 from http://www.efarm.in/overview.

(29) Jagannathan, B. 28 November 2011. “eFarm’s efficient supply chain pays farmers better”. ThinkChangeIndia.org. Retrieved 6 June 2012.

(30) Ibid.

(31) Ibid.

(32) Owen, T. 30 December 2011. “eFarm India”. Techfortrade.org. Retrieved 6 June 2012.