christina renard ft coffee and power jrs 05

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Journal of Rural Studies 21 (2005) 419431

Quality certification, regulation and power in fair trade$

Marie-Christine Renard

Universidad Autonoma Chapingo, Carretera Mexico-Texcoco, Km 38,5 CP 56230 Edo de Mexico, Mexico

Abstract

This article examines governance changes and shifting power relations within the fair-labelling network. These shifts are framed

analytically by reference to broader changes in the agrofoods sector tied to the increasingly key role played by quality relations and

standards in the production and marketing of food. The author argues that evident trends such as a growing complexity of fair-labellingmarkets, the centralization of its regulating bodies, and the normalization of certification processes have altered power relations to the

detriment of small producers. In addition, and at the same time, this fair market niche has become more desirable to dominant market

actors leading to a combination of factors that has triggered a broad debate within fair trade with respect to the definition and mission of

the fair-trade network.

r 2005 Elsevier Ltd. All rights reserved.

Keywords: Certification of quality; Fair trade; Fair labelling; Regulation; Power in agrofood

1. Introduction

This article examines power shifts and changes to

governance forms within the fair-trade label network,and situates these changes with respect to processes of

market growth and diversification, institutional centraliza-

tion, and the normalization of certification norms in

accordance with transnational standards. By examining

these shifts, I hope to extend my previous analysis (Renard,

2003) addressing key fair-trade issues including the

legitimacy of quality definitions and control over market

access.

This work is based on a general analysis of new

organizational forms within the agrofoods sector, where

quality and standards are key elements. As agricultural

production has become subject to economic liberalization,

new regulatory forms have appeared with a focus on

health, food, and environment (Watts and Goodman,

1997). As shown by researchers working from diverse

perspectives such as conventions theory and neoinstitu-

tional economics, these new regulatory models turn on

diverse notions of quality and practices through which said

qualities become qualified, standardized and certified.

These practices constitute, in effect, mechanisms of market

entry and exclusion, converting them into a source of

power for those who control them. This emphasis onquality within the agrofoods sphere comes also in response

to evolving forms of consumption, in which product

demand is tied to shared, socially construed values (such

as environmental conservation, food safety, or regional

character). This diversification of quality products

opens the door to new quality-based niche market

strategies, mounted by producers in cooperation with

social activists, that offer an alternative to the domination

of the market by large agrofoods industrialists (Renard,

1999a, b) and also require recognized labels and certifica-

tion frameworks.

Another key element contributing to this dynamic may

be found in the state of anxiety triggered by recurring food

crises in societies of the global North (Friedberg, 2004).

The most important response to these food scandals has

been the construction of norms and standards (Guthman,

2004) and institutions for applying and verifying these

standards.1

ARTICLE IN PRESS

www.elsevier.com/locate/jrurstud

0743-0167/$ - see front matter r 2005 Elsevier Ltd. All rights reserved.

doi:10.1016/j.jrurstud.2005.09.002

$The author would like to thank Tad Mutersbaugh, Dan Klooster and

Pete Taylor for their excellent translation.

E-mail address: [email protected].

1As in the Belgian case where a new food agency, AFSCA, was created

after an instance in which chicken was found contaminated with dioxins.
http://www.elsevier.com/locate/jrurstudhttp://www.elsevier.com/locate/jrurstud


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For some authors (Mutersbaugh, this issue), the states

retreat from many economic spheres provides one of the

reasons for the rise of these new regulatory forms,

sometimes private, sometimes public, which may also be

viewed as neoliberal since they owe their existence to

consumer preference rather than public intervention

(Guthman, 2004). In either case these quality controlframeworks constitute a space in which connections

between state and economy are becoming reconfigured as

the former has been pressured to intervene in the super-

vision and regulation of agrofood supply chains. Debate

generated by food scandals and biotechnical manipulation

in the form of genetically modified organisms (GMOs)

have reached every social sphere, and consumer concern

with respect to food origin and quality has become an

inescapable political and social fact. As rule-making over

GMOs in various countries shows, consumers and NGOs

have aligned to press governments to legislate new food

protections against the wishes of powerful actors such as

biotechnology transnational corporations (Wilkinson,

2002).2 New regulation protocols have been extended to

cover entire food sectors such as organic products,

denomination of origin, and GMOs, to cite the best-

known, particularly in EU countries and the EU economic

zone. In a separate regulatory development, a series of

transnational agencies and norms (such as ISO) govern

organizations that certify these qualities in a profusion of

certification of certification (or accreditation) in accor-

dance with global standards (Mutersbaugh, this issue).

Quality-based production strategies have been taken up

by hegemons in the food sector, with large distributors in

the lead. Seeking a connection with consumers, andchampioning themselves as consumer protectors (Val-

ceschini and Nicolas, 1995; Busch, 2004), these lead

corporations have looked to establish a quality image

by setting a series of (internal) norms covering aspects from

packaging to product content. Conscious of the need to

maintain a positive image or at least avoid negative

publicity, and confronted by the success of quality-specific

niche-market products, large corporations have, as we will

see below, integrated entire quality-product lines and

developed their own quality labels or attempted to

appropriate existing labels. In many EU countries, trace-

ability protocols are being developed in conjunction with

NGOs to gain information about foodstuff movement and

thereby regenerate consumer confidence in the agrofood

system. Within this traceability context, private, third-

party-certified standards weigh heavily upon providers who

must comply or forfeit market access. Such is the case of

large corporate programs such as the Starbucks cafe s

privileged provider program in which providers must

meet a series of Starbucks internal norms.

This article takes as a starting point the supposition that

the distribution of power in the agrofoods chain is

increasingly associated with definitions of what constitutes

a good quality product or good production and/or

marketing practice. The assignation of quality in product,

production and/or marketing terms implies by extension a

setting up of rules of market-access and, also, of marketexclusion (Valceschini and Nicolas, 1995). As quality

definitions increasingly shape market access, the quality

economy likewise becomes a site of negotiation and power

(Sylvander, 1997; Renard, 1999a, p. 75). Following this logic,

an ability to assign value (and valorize) via the legitimization

of particular quality definitions necessarily requires processes

of certification. Herein arises the importance of studying the

mechanisms, social relations, and institutions that organize

and control both quality criteria and certification mechan-

isms associated with multiple dimensions of quality.

In the second and third sections, I will make use of a

principally Frenchquality-economy literature3 to review

the implications of firm and producer strategies centered

on certification of agrofood quality labels. Here my interest

is to indicate how these strategies are supported by

economic and juridical aspects of standards and certifica-

tion institutions and highlight the power that they exert

over the development of niche markets.

Then, in the forth section, I will apply this framework to

fair-labelling networks. Beginning in a civic initiative that

was self-governing and self-certifying, this network subse-

quently centralized these functions in an institution

accredited under international norms, obligating it to

make use of third-party certification. The growing sophis-

tication of fair-trade networks and the reorganization of itsquality-management institutions also altered its relation-

ship to fair-labelling producers (that are its reason for

existence), opening the current debate over the definition

and mission of fair-trade networks. This present conjunc-

ture coincides with new firm strategies of dominant

agrofood companies that, attracted by the success of the

fair-trade concept, are attempting to capitalize on fair trade

by multiplying quality labels and exploiting producers

needs for increased sales. Through these means these firms

hope to establish a direct relation with consumers, evade

recognized fair-trade certifying institutions and impose

their own versions of fair trade. I will illustrate these

policies through an analysis of three cases; the French

distributor Carrefours marketing practices, UtzKapehs

new responsible quality label, and Starbucks standards

dilution strategy (Mutersbaugh, this issue).

This analysis will focus on fair-trade coffee, which

continues to be the most important fair-labeled product

both in terms of sales volume (80%) and number of

countries involved. The case study material is based upon

interviews with members of national fair-trade organiza-

tions in Europe, the US and Mexico, with administrators

ARTICLE IN PRESS

2This statement may not be over-generalized. In other countries, such as

Mexico, the legislation has been criticized for failing to include norms with

respect to labelling and for overly favoring transnational agrofoods

corporations.

3Its founding text, Agro-alimentaire: une economie de la qualite, edited

by Valceshini and Nicolas, appeared in 1995.

M.-C. Renard / Journal of Rural Studies 21 (2005) 419431420


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of the Fair Trade Labelling Organization (FLO) and with

advisors to Mexican fair-trade coffee producer organizations.

2. Quality takes center in the agrofood scene

In a context of agrofood market saturation, marketing

strategies centered on quality, product differentiation, andmarket segmentation allow firms to evade price-based

competition between identical products while also respond-

ing to the increasingly differentiated demand structure

associated with a postFordist global economy (Valceschini

and Nicolas, 1995). These strategies consist in adding value

to products to achieve an above-market price that econo-

mists refer to as a differential rent. Market segmentation

and product differentiation mobilize varied and interlaced

forms of quality such as service quality, nutritional quality,

sanitation, and others to coordinate the efforts of producers,

agroindustries, distributors, and consumers (Marsden, 1992;

Sylvander, 1995; The venot, 1992; Renard, 1999a, b). New

consumption models arise with respect to socially con-

structed and shared values (such as environmental conserv-

ation and social justice to name but two) and, in response,

firms develop product differentiation strategies in response

to these new quality concerns.

In the context of global markets, large firms and

corporations enjoy a clear comparative advantage as a

result of their scale economies, capacity to innovate and

develop new products, and millions in advertising budgets.

By contrast, these respective strategies are relatively

inaccessible to small and medium-sized agrofoods compa-

nies and agricultural cooperatives. The latter must, as a

result, seek alternative strategies and market niches forproducts whose qualities are appropriate to these smaller

firms and cooperative institutions (Sanz and Macas, this

issue).

Quality, in this sense, does not refer only to intrinsic

food characteristics such as physical qualities including

nutritional content, hygiene, and organoleptic taste

qualities, but also to cultural and ethical qualities (Renard,

1999a, pp. 7172; Carimentrand and Ballet, 2004). In this

sense, quality may also be enhanced through the incor-

poration of social values into products, which also adds to

their economic value. Quality may, in this sense, be defined

as a products capacity to satisfy explicit or potential

consumer needs, a definition that places greater emphasis

on the demand than the product per se (Valceschini and

Nicolas, 1995).

Initially this social-quality strategy was limited to small

and cooperative producers who used it as a strategy of

resistance to the efforts of large agroindustiral players

against whom they could not compete directly. Through

the creation of market niches (such as organic agriculture,

protected geographic indicators, fair trade), these small

producers were able to earn rents. This value-added

strategy, based on notions of environmental value and

local identity, was successful in its bid to reinsert these

values into global markets. Gaining a foothold in these

social-quality market niches provided small producers with

the possibility of challenging dynamics of market access

and exclusion that worked to their disadvantage (Renard,

1999a, pp. 4445). At present, however, firm strategies

based on addition of social values has tended to become

mainstream for two interconnected reasons. On the one

hand, consumers have become increasingly wary of foodsproduced under the reigning agronomic model based upon

intensive production due to multiple agrofoods scandals in

recent years.4 On the other, public policies pushed by

consumers and NGOs in response to food scares have

created new demands for social-value products (Wilkinson,

2002), for example in the case of organic agriculture. Food

crises have in this manner driven establishment of new

norms and standards, and mechanisms through which to

certify these standards, in a bid to reestablish consumer

confidence with respect to the agrofood chain (Sylvander,

1995; Friedberg, 2004; Guthman, 2004).

Quality, then, is not a condition inherent in a product. It

must be constructed and then promoted in order to become

a collective comparative advantage. A particular quality

has to achieve market recognition, which in turn requires

an organization to champion it. In sum, the construction of

market niches revolving around specific quality definitions

is a collective process that seeks consumer recognition

through quality labels and (public and/or private) certifica-

tion practices: the valorization of quality within a market is

produced via certification processes.

3. Certification: a space of negotiation and power

When quality rests on intangible elements that con-sumers cannot verify themselves, such as respect for the

environment or equity in transactions, then the valoriza-

tion of quality depends on the confidence consumers give

to it and, therefore, on the information that reaches them

and the confidence they have in the truth of that

information (Carimentrand and Ballet, 2004). Elements

such as information, legitimacy, and confidence therefore

are tied to the use of distinctive quality signs. Quality

becomes objectified and symbolized by various signs

(quality seals and labels), which form the basis of both

consumer recognition and market valorization (Valceschini

and Nicolas, 1995). Labels synthesize information for theconsumer who has neither time nor knowledge to study the

characteristics of every article offered on big retailer

shelves, permitting her to reduce time allocated to

distinguishing between products (Carimentrand and Ballet,

2004). For consumers, such signs and seals establish the

reputation of the product and guarantee the incorporation

of social values. These signs, therefore, have to be clear,

intelligible, believable, and carry an unequivocal signifi-

cance shared between the diverse actors that integrate the

agrofood chain. For these reasons, quality seals represent a

ARTICLE IN PRESS

4Standout incidents include mad cow disease (bovine spongiform

encephalopathy), dioxin-contaminated chicken, and adulterated olive oil.

M.-C. Renard / Journal of Rural Studies 21 (2005) 419431 421


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key economic and political element due to the importance

of social relations in play.

Understood in this way, quality signs may be understood

as constituted in collective action and as products of

negotiation over conditions under which they may be

granted and used, subject to requirements of clarity,

intelligibility and reliability mentioned above. At the sametime, a quality sign requires the production of norms and

standards that define its legitimacy, on the one hand, and

the control over its use, on the other hand. In other words,

it implies acting at two levels. On the first level, it acts upon

the market offer through the construction of quality, which

requires the instrumentation of the necessary coordination

between the actors involved. On the second level, it acts on

demand through the creation of signs of recognition and

information necessary to the consumer (Valceschini and

Nicolas, 1995). This implies a process of normalization,

that is to say, an elaboration of criteria (standards) and

certification mechanisms sufficient to guarantee that the

product complies with announced characteristics.

These diverse functions associated with labels require a

public or private regulatory organization that produces

legitimate quality criteria (Watts and Goodman, 1997),

guarantees the coordination between actors in the network

(Sylvander, 1995), functions as a referee in cases of conflict

over uses of the quality signs, establishes control mechan-

isms and applies positive or negative sanctions to diverse

actors in the chain depending upon their compliance with

norms. This organization fulfills economic functions by

establishing barriers to entry to the market niche and by

establishing processes of economic cooperation between

actors around quality. It fulfills legal functions byprotecting the rent from differentiation by impeding the

undue use of the distinctive quality sign and by acting as a

referee between the agents involved in the agrofood chain.

It also fulfills institutional functions by being the quality

guarantor and, when it is a private entity, serving as an

intermediary with public powers (Sanz and Macas, this

issue). In sum, the regulating organization manages access

to the market and the distribution of differentiation rents,

thereby undoubtedly providing a source of power for

whoever undertakes those functions.

In this way we arrive at the question of who defines

quality and how it is defined, how norms and criteria are

set, and who assesses whether products conform to these

norms. Many of these functions fall under the perview of

certification systems, which may be private, semi-public, or

public, voluntary or obligatory (Sanz and Macas, this

issue; Mutersbaugh, this issue). In the case of strategies to

achieve collective comparative advantages via market

niches, certification systems were initially established by

and for producers and/or activists in order to gain access to

the market, to guarantee product quality to consumers

through symbolic seals of quality, and to protect the seals

from fraud.

This is what happened in the case of organic agriculture,

whose principal certifying organs, OCIA and Naturland

emerged from the organization of organic farmers in

Northern countries (Gonza lez and Nigh, this issue; Guth-

man, 2004). It is also the case with fair trade, created by

activists, nongovernmental organizations, and coffee-farm-

er cooperatives with the aim of providing cooperatives with

better prices (Renard, 1999a, b, 2003), as well as with the

Denominations of Origin movement, whose regulatingcouncils grew out of cooperation between public agencies

and local promoters of traditional qualities of products

related to a specific region (e.g., terroir or local products).5

These organizations were self-regulated because they

established their own norms and criteria and they were

self-certified because they had control over the processes

of inspection (Carimentrand and Ballet, 2004). Inspections

were performed by peers, accompanied by technical

advisors and volunteers or activists (Gonza lez and Nigh,

this issue). The founders of these networks integrated

ideological principles such as the relationship with nature

or the ethical issues of market exchange, together with

common interests such as the protection of local produc-

tion systems or of specific groups of producers.

The definition of rules and norms and the establishment

of controls and penalties (including exclusion from the

network) for those who have not complied has encouraged

the organization producer groups (and sometimes inter-

mediaries as well) and promoted the creation of the

necessary institutions for the process of assigning quality

(Muchnik, 2004). In other words, by standardizing the

conditions of quality and by putting rules on access to the

market niche, certification modifies the filiere,6 one of its

first effects being that producers organize in order to be

able to comply with the quality criteria.However, the success of quality-centered market niches

in terms of growth in size and volume, consequent

complexity, and multiplication of products needing stan-

dards and certification has led to an institutionalization

that includes professionalization of inspections and certi-

fications and establishment of specialized bureaucratic

institutions. This institutionalization has also been

prompted by the appearance of parallel seals and the

danger of fraud, which has attracted the attention of those

public agencies that provide legal coverage for quality

definitions and guarantee their veracity to consumers. This,

for example, has been the case for EU regulations and

codes written for organic agriculture and Protected

Denominations of Origin. In some countries, food product

certification is shaped by public policy.7 Norms have been

ARTICLE IN PRESS

5For a non-foodstuffs case, see pieces by Taylor (this issue) and

Klooster (this issue).6The term filiere (Malassis, 1979) is used in the same sense as

commodity-chain.7For example, in France the French standardization agency (ANFOR)

was charged with standardization prior to certification. Under ANFOR

norms, certification requires third-party intervention. In addition, an EU

norm, EN 45011, sets four criteria for third-party certification including

professional independence, competence, efficiency, and confidentiality

(Carimentrand and Ballet, 2004), which make private certification subject



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established to guarantee the independence of certifiers from

certified parties, such as use of third-party, professional

inspections instead of peer inspections. At the same time,

certifying organizations have become themselves subject to

certification, that is to say their accreditation depends on

compliance with regulatory frameworks and international

agencies that ensure that their inspectors are trained andskilled (Mutersbaugh, this issue). All of this subjects

certified-product producers to a proliferation of rules and

verification procedures, which represents a considerable

administrative and financial burden.

As producers seek recognition from public agencies

either to protect distinctive quality labels or in compliance

with obligatory state regulations, new rules norms, and

conditions are introduced to comply with official demands,

and these in turn lead to additional modifications of the

filiere. Public agencies, as a result, may take a role in

supervising and controlling the legitimacy of quality

criteria. For example, the 1993 French establishment of

an obligatory government-supervised organic certification

scheme contributed to the wholesale restructuring of the

sector, causing the collapse of networks that revolved

around private qualifying organizations in order to give

way to the coordination around a seal owned by the

ministry of agriculture (Sylvander, 1997).

In the private sphere, retail chains have begun to adopt

quality- and certification-based strategies previously devel-

oped by alternative agrofood networks. This is of concern

to small producers, for a notable structural tendency of

agrofood chains has been the growth and concentration of

big distributors (supermarkets and hypermarkets) such

that they become a chains dominant pole. Their size andconcentration gives them so much negotiating power that

they can impose their purchase conditions on producers

and manufacturers (Busch, 2004). The proliferation of

quality seals and certifying organizations has coincided

with big retailers appropriation of the quality-label

strategy, and self-presentation to consumers as protectors

food quality (Valceschini and Nicolas, 1995). The standar-

dization of quality represents several other advantages for

large distributors. It assures better management of their

supply through imposition of norms on suppliers. In

addition, it gives them an aura of responsibility in the eyes

of their clients even though the costs of certification

generally fall on their suppliers (Busch, 2004). Even though

the retailers have often defined quality standards, they

prefer that a different organization take the role as certifier

of those standards, which absolves them of responsibility in

case of a problem.

For producers and their intermediaries, placing products

on the shelves of super- and hypermarket chains becomes

very attractive due to the high sales volume. Nevertheless,

this entails risks for producer groups. It subjects them to

the quality demands of these corporations at the same time

that they risk losing control over their own definitions of

quality. It can also weaken producers organizations and

affect coordination between actors in the quality network.

The unequal power relationships may favor a dynamic in

which increased sales volume translates into loweredproduct prices, thereby eliminating the benefits of the

strategy of quality construction from a producer-group

standpoint.

Multiple factors, then, are at play in the processes of

qualifying and certifying agrofood. In the next section, we

will analyze these elements in the case of fair trade.

4. Fair-trade labelling: from Max Havelaar to FLO

In its early years, alternative trade represented an

integrated commodity chain parallel to conventionalmarket channels. Products from Southern countries,

mainly artisanry and coffee, products with little industrial

content, were sold in Northern cities in special stores

managed by non-governmental organizations and staffed

by volunteers. Products were sold at prices above those of

commercial brands. The consumers who patronized these

stores were convinced of the markets inequities and viewed

their support as a political gesture (Renard, 1999a,b,

2003). In order to increase sales volumes and in response to

a request from a coffee growers association in Mexico, the

members of a Dutch association sought to introduce coffee

from Southern cooperatives into their countrys markets(Roozen and VanderHoff, 2002, p. 79; Renard, 1999a).

Thus emerged the fair-trade model or quality label.8 This

label appeared on packages of existing coffee brands

owned by established industries which understood the

subtleties of local markets and were already well known.

The label guaranteed to consumers that the product was

sold under equitable conditions. It guaranteed a quality

having to do with ethical values: justice, exchange equity,

solidarity and opposition to the dominant relations within

the conventional market (Renard, 1999a). This quality is a

social construction, oriented toward a sector of conscien-

tious consumers willing to pay more if they are guaranteed

that a price premium will actually reach producers.Humanitarian motivations prevail over political motiva-

tions in the act of consuming fair products. What is ethical

is an argument about commercialization. The label

contains information on producers,9 establishing a sym-

bolic relationship between Northern consumers and South-

ern producers who are usually invisible in the market

(Whatmore and Thorne, 1997; Raynolds, 2002). This is a

type of relational ethics (Carimentrand and Ballet, 2004).

ARTICLE IN PRESS

(footnote continued)

to state regulation. However, in many countries there are no regulations

concerning certification and, as a result, any company may take up

unregulated certification activities (Busch, 2004).

8Fair labelling in English; commerce e quitable o labellise in French,

comercio justo in Spanish.9Some authors see the label as a commodity in itself. See Goodman

(2004).



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Fair trade grew and diversified. It exists today in 14

countries of Europe, the United States, Canada and Japan,

principally under the names and labels of Max Havelaar,

TransFair and Fairtrade. After the experience with coffee,

the model was extended to other products.10 There are

some one hundred different products with the fair-trade

quality label, derived from imported raw materialsuch as instant or decaffeinated coffee or made up of

products such as chocolate and jams. In 2002, 58,800

metric tons of products with the fair-trade quality label

were sold, with an approximate value of $US 300 million

(FLO, 2003).

The decision to fully enter conventional market channels

required dealing with market actors such as industrialists,

traders and distributors, in a network where these actors

diverse interests coincided. Common interests in fair

labelling included rents from diversification into new

market niches and the benefits from positive images

associated with the fair-trade label. Producer interests

included selling more at a better price. Consumer interests

included the opportunity to engage in solidarity and

ethical action.11 The distribution of the product is carried

out through this network of actors, and implies a particular

set of negotiation arrangements (Eymard-Duvernay, 1995).

It is in this sense that we speak of a convergence of

diverse interests among the actors that make up the Fair-

Labelling network. The network is not built on a

general agreement among promoters on ideological or

ethical principles (Renard, 1999a, b, p. 251), but rather on a

contractual relationship between these actors and the

regulatory institution (Carimentrand and Ballet, 2004). In

effect, the organization that developed the fair-labellingnorms and certifies their fulfillment, did not emerge

out of collective action on the part of the members

of the network. Rather, the origin of both the rules and the

idea itself of fair labelling emerged from an attempt to

respond to producers needs. In the words of one of fair

labellings founders, it is acknowledged that in general,

the system has not been very democratic (VanderHoff,

2002, p. 12).

From the beginning, fair labelling defined organized

small producers as the privileged subject of its activities.

Nevertheless, later, it would include plantation workers

when, and only when, cooperative production is not

relevant, as in the cases of bananas and tea. Most recently,

workers of soccer ball factories have been incorporated.

In the case of coffee, the label guarantees that the

product has been purchased directly from small producers

at a fair price, that is, that it directly remunerates the

work of small producrs. The fair price ensures that

cooperatives receive a guaranteed minimum price12 plus a

price premium to be dedicated to social and community

projects. The guaranteed minimum price protects produ-

cers share of the rent from differentiation. Buyers, in

addition, are obligated to pre-finance harvests and estab-lish long-term commercial relationships. Producers are

expected to have democratic organizations, engage in

responsible management and administration and comply

with commercial commitments. FLO encourages producer

organizations to invest the social premium paid by buyers

in development programs that benefit the community.

In the case of plantations, fair labelling requires that

workers have decent salaries and the right to participate in

unions and it prohibits child labor. It also includes

environmental criteria such as avoidance of pesticide and

herbicide use that affects the health of workers.13 Generally

speaking, fair labelling increasingly supports organic

production, which carries a greater price premium and is

subject to other certification processes. This leads producer

organizations to propose certification processes be simpli-

fied and unified.

The application of certifications norms, controls, pre-

miums and penalties has the power to modify the

organization of the commodity chain and its production

processes. Coffee growers organizations report that one of

the positive benefits of belonging to the fair-labelling

registry has been that it strengthens the quality of the

cultivation and processing of their coffee beans. This has

led to a better acceptance in the market and the

consolidation of commercial relations with buyers. At thesame time, they report making improvements in adminis-

trative processes and their commercialization skills (Van-

derHoff, 2002, p. 19; Aranda and Morales, 2002, p. 16;

Pe rez-Grovas and Cervantes, 2002, p. 14; Martnez, 2002,

p. 15).14 Some coffee cooperatives have been removed from

the fair-labelling producer registry because of serious

defects in these processes and failure to fulfill sales

contracts. Although this situation has been the object of

criticism, it has led these cooperatives to take mitigating

measures aimed at reinstatement to the registry (Murray et

al., 2003, p. 20). Buyers have also had to modify their

traditional forms of operation, as they are obligated to

establish direct relations with the cooperatives (importers

are the only intermediaries permitted), to give advances

ARTICLE IN PRESS

10These products include coffee, tea, cacao, honey, sugar, rice, bananas,

pineapples, mangos, citrus, apples and oranges, fresh juices, nuts, cotton,

roses, vanilla and soccer balls (FLO, 2003). The most highly developed

products are coffee and bananas. Quinoa, avocados and wine are in the

process of incorporation into the model.11Carimentrand and Ballet (2004) add that the relational ethic makes

sense within this network and that a short market chain is more efficient

than a longer one in which intermediaries abound between producers and

consumers.

12The minimum price was initially established with an UNCTAD study

as the basis of calculation. Later, a price premium was added for organic

coffee. The minimum price in Mexico and Central America for coffee is

US$1.26 per pound of washed arabica coffee and US$1.41 per pound of

organic washed arabica coffee. In recent years, the market price of this

coffee on conventional markets has been around US$0.60, having reached

an historic low of US$0.40. This low price fell far short of covering small

producer production costs, estimated at US$0.90.13FLO: www.fairtrade.net/sites/.14These works are case studies from the One Cup at a Time: Poverty

Alleviation and Fair Trade in Latin America project, carried out by the

Fair Trade Research Group at Colorado State University.

http://www.fairtrade.net/sites/http://www.fairtrade.net/sites/


7/13

and to pay a price above that determined by the market.

The specific conditions established for plantations are

radically modifying their production processes (Roozen

and VanderHoff, 2002, p. 121 and sig.).

The quality of fair trade is given value in the market

through a process of certification. This requires an

institution to (1) produce legitimate norms and criteria ofthis quality, that is, to decide when coffee can be defined as

fair and granted the label. The institution must (2)

coordinate the actors involved in the network and must (3)

certify the fulfillment of norms by producers on the one

hand, and by importers and industrialists, on the other. It

must also (4), promote the label and thereby promote

consumer demand. This role initially fell to foundations

(such as Max Havelaar, the first label) created ad hoc by

the models promoters. The role was later taken on by the

so-called national initiatives emerging in the countries

where the model originated (Max Havelaar, TransFair,

Fairtrade among others). The members of these founda-

tions included, in each country, members of NGO and

alternative trade sectors, consumer organizations, roasters

and representatives of coffee grower cooperatives. The

executive role was assumed by a Secretary. International

coordination first occurred among diverse initiatives such

as Max Havelaar and Transfair in 1993 when an

International Registry Commission was created. This

Commission defined buying conditions and criteria for

fair coffee and administered the registry of producer

organizations (Renard, 1999a, p. 208). The growth of fair

labelling, in both sales volume and number of imported

products, occurred simultaneously with the development of

national initiative offices and a certain professionalspecialization among the persons in charge.

In order to deal with the sophistication of the market, its

products and its criteria, in 1977 fair trade entered a higher

stage of institutionalization. The various national initia-

tives formed FLO, the Fair Labelling Organization,

headquartered in Germany. FLO is the coordinating

institution charged with making criteria uniform and

improving the organization of inspection and certification

processes. It also administers the registry of cooperatives

belonging to fair labelling. This organization, then, has in

its hands the mechanisms of producers access to and

exclusion from the fair-trade market. It also manages the

use of the quality label, of which it is owner, by

industrialists. According to its own documentation, the

principal functions of FLO are: (1) to guarantee obser-

vance of the criteria of fair labelling by all actors in the

network; (2) to administer supply in relation to demand,

and to advise producer organizations on development

projects. A team of marketing experts is responsible for this

task; (3) to give support to producer organizations in order

to strengthen their organization and production.

The national initiatives (generally based in consumer

countries) are members of FLO and are in charge of

relations with buyers, industrialists and distributors, in

addition to developing internal markets. Decisions within

FLO are taken by a Board of Administration, which

delegates its functions to an Executive Board headed by a

director. A specific committee is charged with developing

standards for different products. Regional assemblies of

producers play only a consultative role. As it evolved from

an alternative organization to an institutionalized certifica-

tion system, FLO concentrated spatially and in its decisionmaking. As generations of leadership of the national

initiatives changed, to a certain degree it lost its persona-

lized contact with members of the national initiatives and

producer cooperatives. These latter have complained about

the lack of clarity in the structure of FLO, the manner in

which decisions are made, the loss of communication with

FLO members and the lack of influence of the members

within the organizational structure (Pe rez-Grovas and

Cervantes, 2002, p. 22; Murray et al., 2003, pp. 2021).

In 2003, FLO carried out a restructuring to respond to

these complaints. Four representatives of producer orga-

nizations now sit on the Board of Administration. More-

over, there are now seven liaison officials based producer

countries to support the cooperatives (FLO, 2003). Never-

theless, the difficulties persist: producer organizations have

the impression that fair trades regulatory organization is

guided more by commercial considerations than by

solidarity, and acts more against them than in support of

them.15

Faced with the multiplication of brands of all types and

to avoid competition among diverse fair trade labels and

resulting consumer confusion, FLO took another step in

the institutionalization of fair labelling. It developed a

uniform international label for all the initiatives, the

Fairtrade Certification Mark (CM). To protect the fairtrade label from possible fraud and to obtain official

recognition, FLO is looking for accreditation as an

independent certification organization under international

norms (ISO 65 and EN 45011). Until now, the recognition

of the label was produced by the certifying organization;

that is, fair labelling self-certified itself. The attempt to

obtain official approval is contradictory if we take into

account that surveys done in some European countries

(Belgium and France) show that consumers have more

confidence in NGO certified quality labels than in those

guaranteed by state agencies or private firms (Carimen-

trand and Ballet, 2004). Indeed, the progress of fair trade in

all markets where it has been launched demonstrates the

confidence consumers have in the national initiatives.

As a result of the international accreditation process, it

was necessary to establish a certification unit independent

of FLOs administration in order to comply with a third

party verification requirement. Verification processes have

ARTICLE IN PRESS

15One example of these controversies is the case of the banana producer

cooperative, Banelino from Dominican Republic, which once sold 100%

of its production in the fair trade market. After Hurricane Mitch, when

small producers could not satisfy demand it was displaced by an importer

with fruit plantations included by FLO in the registry of accredited

producers. Documentary Le Commerce Equitable, series La Plane` te en

Question. RTBF, Belgium, 2005.



8/13

become more strict, as opposed to fair trades previous

nature, characterized by personal relations and shared

values.16 A secondary effect has been the need to charge

producers for the certification process. Unlike organic

products, fair trade certifications costs have been covered

by industrialists through payment for the right to use the

quality label. The national initiatives also helped financethe process. Producer organizations do not question the

principle of paying the costs of third party certification, if

this enhances the credibility of the label. But they do

question the lack of transparency with which FLO and

FLO-Certification have determined the rates charged.17

5. Fair trade at the crossroads

Through the application of rewards and sanctions, the

principal labelling institutions control access to the filiere,

or the ability to market a certified product, such that

quality indicators act as a barrier to entry ( Valceschini andNicolas, 1995, p. 30). Any market niche strategy attempts

to adjust production to concord with demand to preserve a

premium price. This logic, for example, underlies geo-

graphic indicator labels (apelaciones de origen) and other

specified quality labels. However, fair trade has not

provided a policy of production reduction, which would

run counter to its core politics of providing support to the

greatest possible number of producers (Renard, 1999b, p.

498). In fact, the original project was far more ambitious

than simple market niche formation: it proposed to use the

power of consumers to exert pressure on the dominant

market players (in this case giant corporations in the

(coffee) agrofoods sector) to obligate them to improveprices and conditions of coffee purchases (Roozen and

VanderHoff, 2002, p. 158). Consumer action was thought

to constitute a signal, political as well as commercial,

favoring a new form of relationship between peoples

(Renard, 1999a, p. 191). This new relationship, however,

relied on earning and maintaining a market volume that

was sufficiently high to enable this pressure.18

Simply put, fair-labelling policy does not seek to reduce

the amount offered by producers but the opposite. Current

niche market mechanisms may have the effect of limiting

access to cooperatives with sufficient organizational

capacity to maintain consistent quality, to meet the

demands of international trade, and to conform to

democratic administrative principles. Nevertheless, the

philosophic stance of fair trade is to offer aid to newly

formed producer cooperatives so that they may meet

democratic and economic principles and open (new)

opportunities for more producers. In the long run, FLO

intends that fair trade emerge from the status of an NGOalternative to become an instrument to encourage devel-

opment-through-commerce. In the next 25 years, their

vision is to transform global production and marketing to

conform to fair trade principles (FLO, 2003).

This contradiction between philosophy and practice,

between principles and political economy, has led the fair

trade commercial model to a crossroads. Fair trade market

expansion, rapid at first, has become relatively stagnant

and, at present, represents an average of 1.2% of national

sales in European countries (3% in Holand, 8% in

Switzerland). Sales are increasing in a more dynamic

manner in the US and Canada where fair trade products

are of more recent introduction. Nevertheless, an eventual

ceiling similar to that in the EU is anticipated (Murray

et al., 2003, p. 15). In short, production is outstripping the

growth of demand. Fair trade organizations are unable to

adopt control mechanisms appropriate to a niche strategy

due to the character and philosophy of the initiative.

Without doubt, producers are attracted to the fair trade

market by the advantages it offers. Producer cooperatives

concur in saying that the major advantage in fair trade is

the price offered for their product (at times double market

price). In the epoch of the coffee sector crisis,19 this

premium price makes the difference between the collapse of

the cooperative or its survival. Higher fair trade pricesinsure the loyalty of producer associates and, as such,

organizational integrity (Renard, 1999a, p. 309). Earnings

are reinvested in the creation of training initiatives,

programs for credit and collective infrastructure develop-

ment (transport, coffee processing mills) (VanderHoff,

2002; Aranda and Morales, 2002; Pe rez-Grovas and

Cervantes, 2002; Murray et al., 2003, pp. 613). In

addition, fair trade network participation brings other

important advantages: co-ops develop long-term relation-

ships with importers and roasters, receive pre-financing to

pay their producers up front for coffee (an appreciable

advantage in a smallholder sector without access to credit),

and acquire market knowledge (Renard, 1999a, p. 274).

For these reasons, many producer co-ops wish to sell under

fair trade conditions and sell the greatest possible quanitity

of coffee.20

ARTICLE IN PRESS

16Personal communication with producer cooperatives.17Document from the Latin-American and Caribbean Coordinator of

Small Fair Trade Producers (CLAC), prepared for its Regional Assembly,

August of 2004. After negotiation with FLO, a rate of 0.45% of the FOB

final value of the product will be charged for two years. After this period,

an evaluation of the real cost of certification will be carried out (personal

communication with Majomut Cooperative, Chiapas).18As explained in their book, they obtained this result more in the case

of fair trade bananas, which brought up to 14% of the Swiss market, in

part because, not being inside the European Union, imports of this fruit

were not subject to the rules of the common market, and may be profitably

resold in other countries. Transnational companies Chiquita and Dole are

reacting and applying certain labor and ecological norms in their

plantations (Roozen and VanderHoff, 2002, p. 157).

19For more on the coffee crisis, see Renard (1999a, pp. 118126, 2003, p.

93). It is calculated that less than 5% of the final price of the largest brands

of coffee go to the producer, while 33% of the price of fair trade coffee

goes to the producer (Roozen and VanderHoff, 2002, p. 99).20Other advantages mentioned are the acquisition of knowledge about

improving the intrinsic quality of coffee, the development of contacts

between participating organizations in the fair trade market, a higher rate

of self-confidence in achieving good economic results, and the protection



9/13

Unfortunately, the fair trade market is unable to sell all

of the coffee that producers offer. Co-ops on the fair-trade

register fail to sell, on average, more than 20% of their

production to fair trade importers. This unsold coffee must

be sold at market price, sometimes as low as one half the

fair trade price. Only some of the earliest co-ops to adopt

fair trade practices, the best organized, and those that havedeveloped strong trust relations with toasters and impor-

ters manage to sell more than half of their harvest to fair

trade markets, thereby achieving some protection from

market fluctuations (Renard, 1999a; VanderHoff, 2002;

Pe rez-Grovas and Cervantes, 2002; Aranda and Morales,

2002). Co-ops that have only recently registered as fair

trade producers struggle to sell their coffee in this market

niche.

Herein arise new proposals and paths that, in exchange

for market growth, may risk the benefits achieved in terms

of higher prices and consumer confidence in the fair-trade

model, and more profoundly, have led participants to

debate the core mission of fair trade.

Under conditions of oversupply, one may address the

question of sales, looking to increase them, or to supply,

seeking reductions. The former may be accomplished by

attracting a greater number of consumers through lower

prices, advertising campaigns, new products (differentia-

tion), or opening new market areas. Demand reduction

may be obtained by increasing barriers to market entry

which impedes the entry of new producers into the market

niche, an approach that runs counter to the philosophic

principles of the fair-trade movement.

The governing board of FLO has proposed to increase

sales by decreasing the minimum guaranteed price paid toproducers, and additionally by differentiating this price by

country. This proposal has been rejected by the majority

of cooperatives, who have criticized the FLO leadership

for an excessive orientation toward marketing in detri-

ment to the central role of producers in the fair-trade

project. Toasters in the US and EU have also joined this

critique, with an eye to protecting the differentiation

rent and argue that lower prices may damage the

reputation of fair labelling insofar as it would be difficult

to explain why fair prices are lower.21 Producers, from

their side, struggle to protect their market access and avoid

application of the in and out principle which would

reduce their market share as other producers enter as first-

time sellers, and are again aided by toasters that have

established long-term commercial relations with producer

groups, as required by fair-trade principles. Another point

of disagreement revolves around a possible broadening of

the fair-trade concept to include plantation agriculture,

particularly in coffee where most fair-trade production

originates in small-producer groups. This last discussion is

directly tied to the problematic entry of transnational

corporations into fair-labeled markets. The effect of this

transnational entry would be felt in a strong growth in fair-

labeled markets and increased licensing revenues for

national fair-labelling initiatives. This is in fact the route

presently pursued by TransFair USA which has offeredfair-trade licensing to Starbucks and Folgers Coffee (see

below). However, in order to meet the supply needs of the

large corporations, these fair-trade groups propose to

include coffee plantations on the all-important fair-label-

ling registry. This proposal has encountered strong

opposition from co-ops worried that this initiative would

lead to (downward) price pressures and reduced market

access. What is at stake is the very definition of fair trade:

many question the narrowness of its present definition and

defend a revaluation to include more workers and

producers under a social-justice rubric (Goodman, 2004),

while others argue that if these new participants are not

admitted then they will simply join up with competing

initiatives (see below). To the contrary, other groups

criticize the notion of placing market expansion above the

ideals on which the initiative was founded, the dilution of

the fair-trade message and the possibility that large

corporations will appropriate the language and label of

fair trade.

Meanwhile, some co-ops, in search of markets, and have

already reached agreements to sell their coffee via alliances

with large distributors. Some co-op leaders suggest that fair

trade is at the beginning of a third stage (post-alternative

trade and certified label) in which organizations will

deal directly with large corporations or supermarkets(VanderHoff, 2002, p. 11). This argument parallels the

adoption, by a few large players in the agrofood chain,

of a new political stance with respect to fair trade.

Although consumer purchases of Max Havelaar or

TransFair products are insufficient to create a parallel

alternative market, the market niche is large enough to be

economically attractive and also provides an opportunity

to enter the fair-trade scene while retaining corporate

criteria, at times with the help of national fair-trade

initiatives. In the following case studies, we will ex-

amine three examples showing how the search for greater

market volume, when combined with this corporate

politics, substantially modifies the politics of the fair-trade

network.

5.1. Carrefour: a third phase of fair trade or its recapture

by the market?

Carrefour, the second largest international distributor, is

attempting to orient itself with respect to fair trade through

various means. On the one hand, it established a 10-year

relationship with the Mexican UCIRI cooperative (Union

of Istmen o Indigenous Communities) who pioneered the

seal of guarantee model, agreeing to purchase organic

coffee at a higher price than paid by FLO. This coffee is

ARTICLE IN PRESS

(footnote continued)

of the environment in the case of organic coffee, strongly promoted by

FLO (Murray et al., 2003, p. 6 and following).21Discussion document for the Regional Assembly of the Latin

American and Caribbean Coordinator of Small Fair Trade Producers

(CLAC), August 2004.



10/13

sold in its French stores under the Bio-Mexique label out

without the fair trade seal (Renard, 2003, p. 93). Through

this agreement, some of the Mexican cooperatives that

consolidated their fame through their involvement with fair

trade are able to sell a portion of their product that is not

absorbed by the fair trade market. Carrefour also sells

another UCIRI coffee, processed by the Malongo toaster,that does show the fair trade seal (VanderHoff, 2002,

p. 12). Carrefour also has its own brand and organic

certification, with a social justice component, which has

allowed it to launch its own social label in France. In

Belgium, Carrefour follows a different strategy. It has

signed an agreement with the alternative trade organiza-

tion (ATO) Oxfam to sell Oxfam products, some of

which are certified fair trade by Max Havelaar (such as

coffee) while other products are not. In this manner

Carrefour benefits from contacts, infrastructure (such as

communication, import processing, and product proces-

sing) and from the NGO reputation which, in fact,

transforms Oxfam into a commodity-chain supplier in

exchange for an increase in sales volume (and by extension

of its associated producers). Carrefour does not have to

reorder logistical arrangements in response to fair trade,

only to stock Oxfam products while Oxfam becomes the

institution responsible for social-justice quality. The ATO

also serves as a channel for a corporation whose

commercial practices are far from always ethical and serves

also to greenwash Carrefours corporate image. If UCIRI

and Oxfam note that Carrefour has not driven down

prices,22 the consortium is nonetheless able to expand its

market share relative to those of fair trade initiatives (Max

Havelaar in this case), showing that it does not need themand can sell social-label coffee without them. In this

instance, the danger is that this increased market power

will ultimately enable Carrefour to impose its own

conditions (Renard, 2003, p. 92).

Even if this new structural relation were considered, on

balance, a fair trade success story, it is illustrative of the

disagreement that exists between FLO and its associated

producers. It may also endanger the viability of the

initiative by introducing parallel seals that create confusion

among consumers (Renard, 2003, p. 94; Carimentrand and

Ballet, 2004), by diluting minimum social-justice standards,

and above all by leaving the institutions that create and

certify legitimate, socially recognized norms external to the

product chain. In effect, the fair trade mark protects the

integrity of affiliated social-justice producers but fails to

impede the creation of similar, parallel labels. In fact, FLO

has criticized Carrefour-type agreements between coopera-

tives and distribution consortiums at the margin of fair

trade networks, given their recognition that these sorts of

direct agreements can undermine the vitality of the fair-

labelling certification model (VanderHoff, 2002, p. 12;

Murray et al., 2003, p. 23).

5.2. UtzKapeh: the responsible coffee?

Four years ago, after the agrofoods scandals that shook

the continent in the preceding years, the largest European

distributors, among them the Dutch corporation Ahold,

Third World group, and their filial Albert Hein, decided to

develop a traceability protocol that would provide aproduct trail and guarantee of origin. This would assure

clients of the purity of their products in social and

environmental terms. This protocol, named EUREPGAP,

began with criteria for fresh fruit and vegetables. The

founders of Max Havelaar, disillusioned by the slow pace

of advances in the fair trade market and having arrived at

the conclusion that the consumer power was not of

sufficient force to achieve the changes that they hoped

for and that other approaches were necessary (Roozen and

VanderHoff, 2002, p. 201), teamed with Ahold to apply

this new traceability model in coffee markets. As we have

seen, the idea behind this transition from alternative trade

to fair labelling was the attempt to increase the volume of

coffee sold at the fair trade premium price (Roozen and

VanderHoff, 2002, p. 79). Confronted by the reality of co-

ops that sell only 1020% of their product at the fair trade

price and must slash prices on the other 8090%, they

launched a new label backed by a new institution named

UtzKapeh. Its code of conduct for coffee is an adaptation

of the EUREPGAP for fruits and vegetables, developed by

the Ahold coffee company and a consortium of Guatema-

lan producers and exporters that is reviewed every two

years by the UtzKapeh foundation. Among the share-

holders of this group one finds producers, toasters, NGOs,

independent certification bodies and others.23

The conductcode includes labor norms (salaries and workplace condi-

tions), environmental conditions, administrative relations,

and courts recognition as the EUREPGAP reference code

for coffee. Nevertheless, its requirements do not include an

obligatory minimum guaranteed price under the argument

that these stand in opposition to free market principles.24

Coffee purchase prices are negotiated directly between

producers and toasters. This approach has allowed them to

link up with Douwe Egberts, the coffee arm of the Sara Lee

corporation, that holds close to 70% of the Dutch market

and has always opposed Max Havelaar and the principle of

a minimum guaranteed price. Other clients include the

Atlantic Coffee importing house. On the producer side,

they work with Peruvian and Central American coopera-

tives, also on the registry of FLO producers. These

producer groups justify their participation on the grounds

that they need greater sales, although the price may be only

ARTICLE IN PRESS

22Personal communication.

23http://www.utzkapeh.org.24Paying more than the market value is a short-term solution that

keeps the situation of oversupply and inefficiencies intact, which will in the

long term further pressurize coffee prices. [y] We believe that the

principle of supply and demand is the best way to provide a better price

for a better product for the farmer. http://www.utzkapeh.org (FAQ).

UtzKapeh coffee sold at $0.77 per pound when the market price hovered

around $0.70.

http://www.utzkapeh.org/http://www.utzkapeh.org/http://www.utzkapeh.org/http://www.utzkapeh.org/


11/13

one half of the fair trade price and only slightly higher than

the commodity market price. UtzKapeh guarantees a

certified responsible coffee.25 This coffee is marketed by

a chain of supermarkets that participated in writing the

code of conduct, even though they are third parties that

must be certified by this same code. In the Low Countries,

the renoun of their backers, or the group of NGOs thatcreated Max Havelaar, provides cover for this arrange-

ment. This new seal, sold on the cheap, competes directly

with fair labelling although Albert Hein continues to sell

Max Havelaar coffee, which has a well-established reputa-

tion because it provides a higher profit margin. However,

this situation might not be reproduced in the US: surveys

show that consumers spend 18 s in front of supermarket

coffee racks.26 This does not provide time enough to

analyze and compare contents of many different labels,

with the result that a social-justice labeled coffee that

costs a dollar less may be quite competitive.

This initiative represents a real risk to the achievements

of fair trade insomuch as it holds a possibility of displacing

it with another seal whose code of conduct does not include

a minimum guaranteed price. It provides the opportunity

for dominant market players to greenwash their image at

quite a low cost.

5.3. Starbucks: the total quality concept

In the US, TransFair, a FLO member, is betting on

growth in the dynamic, fast-growing specialty coffees

market segment that includes organic and gourmet coffee.

It has honed in on a strategy oriented towards satisfying aconsumer demand that combines intrinsic and social

qualities.27 Within this sector, thousands of small toasters

coexist with a few giants such as the transnational

Starbucks company, which has found itself obliged to

participate in fair trade as a consequence of NGO pressure

(Renard, 2003). In its beginnings, fair trade in the US, as in

the EU, was based on small and medium toasters who had

contacts with cooperatives on one side and with consumers

on the other, like the ATO Equal Exchange (Taylor, 2003,

p. 43). In recent years, however, the entry of Starbucks has

provided a strong lift to fair-trade sales even though this

company buys only 1% of its coffee from fair trade

certified producers. Starbucks sells fair-trade coffee once a

month, under its promotional rubric coffee of the day in

its 7834 sales establishments located around the globe.

Critics argue that this minimal percentage allows a

greenwashing of the entire supply chain and corporate

image as socially responsible (Raynolds, 2002). Starbucks

responds that although all of its coffee is not fair-trade

certified, it offers all of its suppliers a fair price (US$1.20/

lb. on average), which may be explained by the fact that it

buys exclusively from a gourmet coffee market segmentwith high intrinsic quality. More recently, TransFair USA

has signed similar agreements with others giants such as

Procter and Gamble, Green Mountain and Dunkin

Donuts, leading to a doubling of fair-trade coffee sales in

2003 (to 8.6 million tons). Finding their market niche

invaded, the small mills that buy 100% fair-trade coffee are

abandoning the TransFair seal, arguing that large corpo-

rate buyers purchase a minimum amount of fair-trade

coffee with the sole intention of increasing market power

and not to help small producers. They presently seek to

create another model and seal that will permit them to

continue as the legitimate practitioners of fair trade.28

TransFair defends itself by arguing that, to the contrary,

Starbucks does not promote fair trade in sufficient measure

and that this corporate participation has resulted in

increased recognition for the fair-trade label.29

To improve their sales of fair-trade coffee beyond the

1% that Starbucks allows, TransFair plans to enter into

the preferred producer program, a combination of

Starbucks company and fair trade norms. The experience

of Mexican (Chiapas) cooperatives is illustrative of

Starbucks practices and its strategy of appropriation of

seals and certifications. Starbucks has launched a new seal

called shade grown (coffee produced under a canopy of

shade trees) with an intense public relations campaign inwhich it announces that consumers who purchase this

mark of coffee improve the livelihoods of Mexican and

Central American producers (Renard, 2003, p. 93).

Starbucks has signed agreements with producer organiza-

tions in the region of the Triunfo biological reserve to

purchase their coffee via contracts specifying quality norms

and, most importantly, which institution will certify the

coffee, train the producers and organize them so that they

can comply with stated quality norms. This social value is

only one of the qualities that interests Starbucks, and not

the most important: Starbucks total quality30 puts

intrinsic, taste qualities first and then adds in a bit of

ecology and social justice. In comparison with organic or

fair trade certifications, this Starbucks version constitutes

a code of conduct-lite. The certifying organization

is an entity called Conservation International (CI)

whose sources of financing include the US Agency for

ARTICLE IN PRESS

25In reality, UtzKapeh had to change the label of quality on two

occasions, because of the same principle of tranparency included in

Euregap: they could not label coffee fair since the price paid did not meet

the requirement of covering the production cost plus a profit; later they

called sustainable, a quality which they were also unable to demonstrate.

It remains responsible coffee. Communication from Frans VanderHoff.26Data from TransFair, USA.27This strategy has been criticized for leaving out producers of non-

organic and inferior quality, lower elevation coffees. The response has

been that this is what the market demands. Once again, a focus on

producers is dropped in favor of a market orientation.

28Courier International Magazine No. 705, May 6, 2004, reprinted

article of Rogers, Tim in the Christian Science Monitor.29Communication in the Regional Assembly of the Latin American and

Caribbean Coordinator of Small Fair Trade Producers (CLAC), August

2004.30Presentation of Cafe de Conservacio n Me xico in the First

International Congress on the Development of Coffee Producing Zones,

Tapachula, Me xico, October 2004.



12/13

International Development (USAID) and companies Ci-

tygroup, Exxon Mobil, ICBG, McDonalds and the same

Starbucks. CI provides technical extension to producers,

working with professionals from the producing region, to

introduce them to coffee organic production, processing

and commercialization. Coffee producers receive a good

price for the coffee, but in exchange lose control over theirinternal organizational resources and come under the

corporate control of CI. Furthermore, Starbucks obligates

producers to sell their coffee through Starbucks-affiliated

importers which, in this case, turns out to be the largest

Mexican coffee marketing corporation, AMSA (of the

Omnicafe-Atlantic Coffee group), which engages in decid-

edly non-equitable commercial practices. A few coopera-

tives have broken off from Starbucks, denouncing the

AMSA practice of misusing the registry of certified-organic

producers for AMSAs benefit.31

Would TransFair USA be capable, at this point, of

stripping Starbucks of its seal if in fact Starbucks practices

were shown not to comply with fair trade norms or

generally unethical, despite the importance of Starbucks

fair trade sales in the US?

From the producer cooperative perspective, they do not

have confidence in the network of commercial organiza-

tions with which they have been placed, yet find it difficult

if not impossible to let go of the additional higher-priced

coffee sales (VanderHoff, 2002, p. 11; Pe rez-Grovas and

Cervantes, 2002, p. 23; Aranda and Morales, 2002, p. 20).

6. Conclusion

Fair trade emerged from an initiative which had South-ern producers at its center; it aimed to help them sell

directly to Northern markets at prices considered fair. As it

grew and became more complex, requiring greater inter-

national coordination, the institution responsible for

certifying and guaranteeing the label became more

centralized and professionalized. Fair-trades success has

also created the need to protect the quality label against

fraud, guaranteeing conformity to official norms. This

process of reorganizing the regulatory organization has

been accompanied by changes within the commodity chain,

one element of which is that producers have lost power and

their place at the center of fair trade. In similar fashion tothe organic commodity chain, a contradiction arises when

an initiative created to benefit producers comes to require

them to assume the costs of certification. On the other

hand, the need to increase sales to respond to constantly

growing supply, and the interests of some dominant market

actors in the fair concept and its products, have led to a

growing orientation for and toward the market. These

factors have led to a certain distance between the

institution and the producers as the institution strives to

achieve a higher volume of sales. It leads to the questioning

of the basic pillar of the initiative, the guaranteed minimum

price, currently under discussion within FLO.

The interest of the large distributors and some roasters in

fair trade opens up new opportunities but brings with it

risks. It permits increasing the volume of sales but risks

eroding the labels identity. It risks reduction of prices in

the medium and long term, when these actors come tocontrol this market niche. Risk also lies in these actors

interest in being viewed by consumers as defenders of

justice in market exchange (in addition to their defense of

the environment, the well being of animals, etc.). There is

also risk in the intent to replace FLO and its norms with

their own criteria certified by other parties. In the three

cases studied here, distributors and industrialists seek the

advantages of fair trade without taking on all its costs and

obligations, and they attempt to avoid supervision by and

negotiation with FLO. Parallel labels are gaining ground,

with prices and criteria inferior to those of FLO (and of

organic products). The multiplication of quality labels

creates confusion among consumers, who lack the time to

understand and compare labels in a context of too much

information. The seal no longer fulfills its goal of being

clear, united and reliable.

In conclusion, certain questions emerge which are related

to the role of new forms of regulation through agrofood

certification. If fair trade intends for its concept to be

universalized, is it the role of a private organization,

although officially accredited, to achieve this objective? Is

equity in market exchange something to be decided by

consumers? Is it incumbent upon fair trade to evaluate and

certify production, labor and environmental practices?

Does that not imply assuming regulatory functions nowexercised by states or labor organizations? We hope these

will be topics of future research.

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Further reading

Courrier International Magazine No. 705, May 6, 2004. Reprinted articleof Rogers, Tim in the Christian Science Monitor.

Discussion document for the Regional Assembly of the Latin American

and Caribbean Coordinator of Small Fair Trade Producers (CLAC),

August 2004.

Documentary Le Commerce Equitable. Series La Plane` te en Question,

RTBF, Belgium, 2005.

http://www.utzkapeh.org.

Newspaper La Jornada, April 26 and 27, 2004.

Paper of Cafe de Conservacio n Me xico at the I International Congress

on Coffee Producing Regions, Tapachula, Mexico, October 2004.

ARTICLE IN PRESS

http://www.utzkapeh.org/http://www.utzkapeh.org/

christina renard ft coffee and power jrs 05

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