A casual stroll through the supermarket coffee aisle presents a surplus of flavors, types, and tastes of coffee, but chances are there are only a handful of brands with a Fair Trade-certified label. However, that small label packs a big punch, tackling issues like poverty, workers’ rights, climate change, and sustainability — all to the tune of about $1.5 billion in U.S. revenue.
But how can a certification that only 41% of Americans have even heard of capture such an enormous share of the market?
Sahra Nguyen, founder and CEO of Nguyen Coffee Supply, offers one explanation: It’s all about transparency. Nguyen told CBS that bringing visibility to injustices in the coffee industry and paying farmers fair wages is important to her customers and has become central to her company’s mission.
“It’s really about this mission for me to bring visibility and representation to such a historically marginalized community, and one that had been completely rendered invisible for its massive contributions to the global coffee experience,” Nguyen said. “I felt like there was an injustice there for me to right by developing our own supply chain.”
And just like that, Nguyen belonged to the Fair Trade community.
Paying a Small Premium to Support Ethical Trade
Fair Trade products are certified by one of several organizations that offer third-party verification of established standards. These labeling organizations are often, but not always, members of the World Fair Trade Organization (WFTO).
Certification verifies that a product was produced without forced labor or child labor, under good working conditions, and with sustainable growing and harvesting practices. It also means the farmers and laborers were paid fair wages without discrimination, including equal opportunities for disadvantaged producers.
This blend of economic, environmental, and social criteria attracts altruistic consumers who don’t mind paying a little extra to support ethically sourced products. This price premium funds all sorts of projects for farmers and their communities, from health centers and community education classrooms to boreholes and aqueducts for access to potable water.
Nguyen Coffee Supply: A Case Study
While coffee is the most recognized Fair Trade product, chocolate trails just slightly behind. Consumers are willing to pay up to 35% more for Fair Trade-certified coffee and 30% more for certified cocoa. With its origins rooted in social justice, the Fair Trade model developed a global network of producers and consumers in cooperatives that work directly with each other. It allows small community farmers to integrate successfully into a global export market without an exuberantly priced middleman to transport goods.
Farmers get to keep more of their earnings, which allows them to invest in themselves and their communities.
Despite being the second-largest producer of coffee in the world, Vietnam has a reputation for manufacturing cheap, low-quality coffee. But Nguyen is leaning into her talents as a filmmaker and storyteller to spin a new narrative for the Vietnamese robusta coffee bean. By upgrading the equipment used to harvest and roast the robusta beans and refining the processing to an art, Nguyen’s company now produces a full-flavored robusta bean with twice the caffeine as the ever-popular arabica bean.
By sourcing her product from a single family farm in Da Lat in the central highlands of southern Vietnam, Nguyen supports the Fair Trade model while elevating Vietnamese coffee in the consumer’s eyes. For the past five years, the company has sold direct-to-consumer via its website, and Nguyen attributes its success to storytelling through marketing.
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Leveraging Paid Advertising
For the first 18 months, the company didn’t have the ad spend to pay for marketing, so it relied on growing its audience organically through social media. As Nguyen wrote in Business Insider Mexico: “What started as friends and family following us quickly grew to affinity groups who cared about the same things I did: The Asian American community, the immigrant community, and the specialty-coffee community.”
Nguyen worked with major news networks to educate consumers about the ethics of transparency in the coffee industry and the importance of rebranding Vietnamese coffee. Keeping a watchful eye on social media impressions and site traffic, Nguyen knew it was time to introduce paid advertising when organic traffic became limited by the algorithms set by social media channels.
However, measuring paid advertising required a slightly different approach. Nguyen emphasizes the synergy that is created when paid channels work together. “Instead of paying attention only to the return on advertising spend of any given advertising channel, we also look at the blended return on advertising spend (also called the marketing-efficiency ratio) across all channels: How much money are we spending on ads across platforms, and how much revenue are we gaining from e-commerce?” she wrote. “That helps us get a full-picture view of how our marketing efforts are working together.”
Nguyen’s company raised $2.6 million in 2022 in support of new distribution, innovation, and marketing initiatives, which she believes will go a long way toward putting her product into brick-and-mortar stores.
Disadvantages of the Fair Trade Model
While a market-based solution to social injustice seems like a win-win scenario, some economists warn Fair Trade might actually do more harm than good in the long run. Cause-driven consumers paying a premium for Fair Trade products sets a price floor that may or may not equal the actual quality of the product. If consumers decide the quality does not warrant the higher price, they will likely choose an alternative, leaving the Fair Trade cooperatives with a surplus of product they cannot sell.
Similarly, this price floor can harm small farmers who do not participate in Fair Trade initiatives. As greater revenue is funneled to cooperatives, non-Fair Trade farmers become more and more marginalized through their inability to compete with their larger-scale counterparts. While clearly not the intent of the Fair Trade model, the potential for harm is an unfortunate consequence of setting price floors on Fair Trade products.
Competition and the Power of Solidarity
Many Fair Trade supporters believe these economic disadvantages will only catalyze innovation toward a more refined system in the future. Partnerships between companies and cooperatives may be the next step in the model’s growth — complementary goals (if not complementary strategies) can help small producers become stronger exporters. This, of course, brings diversity and variety to the market, encouraging consumer demand.
It is worth imagining a market where cooperatives are unnecessary because small producers have been so well educated by the Fair Trade movement that they can freely enter and exit markets successfully. Consumers might one day demand ethically sourced products to such a degree that the price premium is no longer a floor but an equilibrium. The highest ideal, however, is an imagined future where human rights and the power of solidarity have become the finest form of capitalism.
