Ethics & Quality

Presentation to the FDIN by Chris Styles

20th February 2008

Cafédirect – Our Story

• Cafédirect was founded nearly 17 years ago at the height of the coffee crisis (sparked by the collapse of the International Coffee Agreement) by Oxfam, Traidcraft, Equal Exchange and Twin Trading

• This was at a time when the cost of production was higher than the market value of coffee, so smallholder, marginalised growers were struggling to make a living.

• 3 grower-owned cooperatives in Mexico, Costa Rica and Peru sent over 3 containers of coffee – these were then roasted, packaged and sold through a network of Oxfam and Traidcraft stores.

• Cafédirect was born!

Cafédirect Today

• Number 1 Fairtrade Brand for sales in Freeze-dried, Roast and Ground and Tea

• 35% of UK’s Fairtrade retail hot beverages sales

• 4th largest Roast & Ground Coffee brand in the UK

• 6th largest Freeze-Dried Coffee brand in the UK

• 7th largest Tea brand in the UK

• 4th largest ‘add milk’ Drinking Chocolate brand in the UK

Walking the talk: The Cafédirect difference

• Growers are at the heart of our business

• Going beyond Fairtrade, we pay our growers more; rewarding quality and creating reliable incomes.

• Giving growers the tools to earn a sustainable living, we invest the majority of our profits in tailor-made business programmes.

• Working together, we’ve created the best tasting hot drinks.

Growers are at the heart of our business

• We work in direct, long-term relationships with our grower partners through the good and bad times

• Growers represent 20% of our board and own shares in our company

• We’ve been working with some of our growers for 15 years, supporting them in times of disaster. For example, when Hurricane Stan struck Mexico in 2005 and last summer’s drought in East Africa.

• We spend up to three years training and supporting new grower organisations before we start trading with them

Bertha Fanueli Matowo, Kilimanjaro, TanzaniaBertha Fanueli Matowo, Kilimanjaro, Tanzania Coffee growers from Recocarno, HaitiCoffee growers from Recocarno, Haiti

Tea pluckers, Michimikuru, KenyaTea pluckers, Michimikuru, KenyaBeatrice and Molly, Kayonza tea farmers, UgandaBeatrice and Molly, Kayonza tea farmers, Uganda

Growers are at the heart of our business

Paying Fairer Prices

• We pay fairer prices - going beyond Fairtrade minimum prices, we pay growers extra for their organic and gourmet coffee beans and tea.

• Over the past five years, we've paid more than £10 million above the market price to the growers we work with.

• We have pioneered a minimum price for Tea providing a more secure, reliable income for tea growers

Creating lasting change

• We reinvest the majority of our profits to empower growers, giving them a stronger voice, and the tools to earn a decent living and build a better future.

– Quality improvement– Improved access to market info– Strengthen organisation

• Our Producer Partnership Programme develops growers’ businesses and strengthens their ability to trade.– Organic Conversion– Yield improvement

Blanca Molina, CECOCAFEN, Nicaragua

A commitment to quality

• By working directly with our grower partners, we are able to get the perfect quality ingredients for our products

Amin Mtui, Chief Liquorer at KNCU Coffee cooperative.

Tasting coffee for the Cafédirect Kilimanjaro Gourmet product

Case Study: The Cloud Forest Story

• Most of the world’s coffee growers have no idea what coffee tastes like. Hard to believe, but true.

• One of the uses to which the Cafédirect PPP investment is put is Cupping Training – teaching staff at grower-organisations how to taste and evaluate the quality of their own product.

• Rather than taking all the responsibility for the finished product away from the growers, we are actively empowering them to take control of and constantly improve the quality of their products, which ultimately will enable them to achieve better prices for their produce – and enable us to bring the best quality products to market

• The ‘Cloud Forest’ is in Nicaragua, a mountainous region where one of our grower organisations, the PRODECOOP cooperative, grow their produce

• ‘Cuppers’ at PRODECOOP found that coffee grown within the cooperative had some very distinctive characteristics, defined by the altitude the coffee was being grown at…

– At San Juan del Rio Coco - farmers at altitudes between 850-1100 metres – the coffee was chocolately and had good body

– At Dipilto - above 1200 metres – the coffee had citrus notes, floral, sweeter acidity.

• Blending these two coffees together gave a distinctive but very well balanced flavour…. Cafédirect Cloud Forest was born!

Case Study: The Cloud Forest Story

Case Study: The Cloud Forest Story

Cloud Forest is now sold as a whole-bean product and as a highly successful roast & ground product, exclusive to Sainsbury’s

So a story about ethics can also be a story about quality…

• Our Producer Partnership Programme has had a real impact on the quality of life of the communities surrounding our grower organisations…

• …But it has also had a direct, demonstrable impact on the quality of the products which we bring to market

• So quality needn’t be seen as something to achieve despite an ethical approach; it can be achieved as the direct result of that approach

So a story about ethics can also be a story about quality…

• Quality lies at the heart of sustainability, because in order to invest and develop, our growers need to know that there will be demand for their product tomorrow, as well as today

• Achieving great quality is therefore at the heart of our priorities, and one way to do that is through direct involvement and continuing investment.

To find out more, or to get our incredibly tasty drinks served in your office (spot the plug)visitwww.cafedirect.co.uk

Thanks for listening!

Appendix

PAYING FAIRER PRICES – ARABICA COFFEE

PAYING FAIRER PRICES - TEA

Kayonza and Igara Averages:Highest Weekly Auction Price vs. Cost of Production vs. Cafedirect Price

-

0.50

1.00

1.50

2.00

2.50

$

Highest Weekly Auction Price

Cost of Production

Prices Paid by Cafédirect*

* Note, Cafédirect does not buy tea from Kayonza and Igara every week, hence some of the values on the orange line are simlulated ie what Cafédirect would have paid, had a purchase been made that week

Bertha Fanueli Matowo, Kilimanjaro, TanzaniaBertha Fanueli Matowo, Kilimanjaro, Tanzania Coffee growers from Recocarno, HaitiCoffee growers from Recocarno, Haiti

Tea pluckers, Michimikuru, KenyaTea pluckers, Michimikuru, KenyaBeatrice and Molly, Kayonza tea farmers, UgandaBeatrice and Molly, Kayonza tea farmers, Uganda

Growers: The Heart Of CafédirectGrowers: The Heart Of Cafédirect

The Cafédirect DifferenceThe Cafédirect Difference• Grower started, grower operated, grower owned.

• In 2004 we successfully undertook the UK’s biggest ethical public share issue.

• Empowering, not overpowering, we invest on average 60% of our profits in the businesses and communities of our grower partners.

• Nearly £2.5 million in last five years.

• Our pay scale:• Rewards growers for organic• Rewards growers for quality• We’ve paid over £10m above the market price in the last five years

Together we’ve improved the lives of 1.2 million people.Together we’ve improved the lives of 1.2 million people.

• In the UK Cafédirect is the 4th largest roast and ground coffee brand, 5th largest freeze dried brand and the 7th largest tea brand.

• Available in almost 5,000 major supermarkets, over 1,300 independent outlets and thousands of food service venues, such as hospitals, universities, schools and hotels.

• Emerging global brand; Ireland, Hong Kong, Singapore, Slovakia and Greece.

Fatima Lopez, PRODECOOP, Nicaragua

Fatima Lopez, PRODECOOP, Nicaragua

COCLA's shop, Cusco, Peru COCLA's shop, Cusco, Peru

Improving the quality of Ugandan teaImproving the quality of Ugandan tea

Empowering GrowersEmpowering Growers

Delicate ecosystems on the slopes of Mount KilimanjaroDelicate ecosystems on the slopes of Mount Kilimanjaro

Raúl del Águila, Cocla Peru, Representing Coffee Producers in Latin America

Raúl del Águila, Cocla Peru, Representing Coffee Producers in Latin America

Raymond Kimaro, KNCU (Kilimanjaro Native Cooperative Union, Tanzania)Representing Coffee and Tea Producers in Africa

Raymond Kimaro, KNCU (Kilimanjaro Native Cooperative Union, Tanzania)Representing Coffee and Tea Producers in Africa

A voice for the future:Growers have direct say in Cafédirect’s strategy

A voice for the future:Growers have direct say in Cafédirect’s strategy

A voice for the future:Growers have direct say in Cafédirect’s strategy

A voice for the future:Growers have direct say in Cafédirect’s strategy

Consultations with growers on tea pricing took place in 2007: Nairobi, Kenya, Dar Es Salaam, Tanzania and Fort Portal, UgandaConsultations with growers on tea pricing took place in 2007: Nairobi, Kenya, Dar Es Salaam, Tanzania and Fort Portal, Uganda

To find out:

how we’re changing the world

how you can help

how you can get our drinks in your office

visit

www.cafedirect.co.uk

To find out:

how we’re changing the world

how you can help

how you can get our drinks in your office

visit

www.cafedirect.co.uk

ALEJANDRO CLIP

Paying A Fair PriceCovering the cost of sustainable production and ensuring a

decent wage for growers.

 

Provision of Pre-Finance Making partial advance payments when requested by producer

groups

Paying a “Social Premium”This is for producer groups to invest in social and developmental

projects for their organisation and / or community.

The aim of this is to ‘Guarantee a better deal for Third World Producers’

WHAT IS FAIRTRADE? - Recap

FAIRTRADE - NICHE TO MAINSTREAM

• 2006 – Marks & Spencer

• 2005 – Nestlé

• 2004 – Sainsbury

• 2003 – Tesco

• 2001 – Waitrose

• 1997 – Day (Divine)

• 1994 – Safeway

• 1993 – Green & Blacks

• 1992 – Fairtrade Foundation

• 1991 – Cafédirect

1999

2002

2001

2000

2004

2003

2006

2005

GROWTH OF FT SALES & PRODUCTS

• Hot Beverages are the roots of Fairtrade Sales

• Steady growth of FT Hot Beverages category

• Recently we have seen many more commodities and products becoming Fairtrade, such as

- Wine

- Flowers

- Footballs

- Cotton

Cafédirect works with: • 37 producer groups in • 12 countries in the world

OUR RETAIL RANGE

Today Tomorrow Clip

Thank You for listening