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/MAY DAY/ECONOMY: Coffee Giant Spurns Fair Trade Outreach to Shareholders
By Jim Lobe
WASHINGTON, Apr 22 (IPS) - Oxfam International's first effort to bring its campaign to save the livelihoods of some 25 million coffee farmers in poor countries to the notice of company shareholders was stymied Tuesday by one of the world's largest roasters, Kraft Foods.
Instead of promising to increase its purchases of Fair Trade-certified coffee, which assures that farmers are paid a living wage for their product, Kraft management told its annual shareholder meeting in New Jersey that it did not see sufficient demand in the market.
''Kraft had the opportunity to show leadership today in addressing the coffee crisis,'' said Simon Billenness, a corporate-accountability expert with Oxfam America who attended the meeting. ''It not only failed to show leadership; it failed to show effective compassion as well.''
The Kraft meeting was the first of a series of efforts in a six-month-old campaign by Oxfam to bring the disastrous impact from the dramatic plunge in coffee prices over the past three years to the attention of shareholders of the four major coffee buyers - Kraft, Procter & Gamble, Sara Lee, and Nestle - which between them buy about half of the world's coffee supply.
On Friday, a group of shareholders of Proctor & Gamble will file an unprecedented resolution for its shareholders to consider when they meet later this year that calls on management to review the effects of the crisis and consider measures it can take to "help ensure a sustainable livelihood for the farmers who grow its coffee''.
The activists want the biggest coffee roasters to commit themselves to buy at least five percent of all their coffee from Fair Trade-certified supplies. Fair Trade coffee, which is certified by an international monitoring group called the FairTrade Labeling Organisation (FLO), is produced by farmers who are paid a living wage by buyers that may also provide producers with others forms of critical support, such as loans for those who lack access to credit.
Worldwide, the price of coffee has fallen almost 50 percent and now hovers near a 30-year low that is well under the cost of production. The result has been a humanitarian crisis in over 50 poor countries. Producers in Central America, parts of South America and Latin America and the Caribbean, east and west Africa, and Southeast Asia have been hit especially hard.
Thousands of families have been forced off their land, while working men are abandoning their homes to seek work elsewhere. In Central America alone, some 600,000 temporary and permanent jobs have disappeared over the last several years.
In some coffee-growing regions of Central America and East Africa, conditions have become so bad that children are suffering severe malnutrition, while families, unable to afford books, are taking their children, especially girls, out of school.
The crisis has a ripple effect. Local coffee traders are going out of business, while, unable to recover loans, some banks, especially in Central America, have collapsed, putting heavy pressure on governments to rescue them with funds that otherwise would be devoted to primary health and education or for debt repayments.
Lower coffee prices also mean lower export earnings for the countries themselves. In famine-stricken Ethiopia alone, export revenues from coffee fell in a single year from 257 million dollars to 149 million dollars.
"The coffee crisis has become a development disaster whose impacts will be felt for a long time," according to a recent Oxfam report, 'Mugged: Poverty in Your Coffee Cup'.
While the plight of small farmers has become increasingly desperate, the major roasters have been doing very well. Starbucks, which has bought limited amounts of Fair Trade coffee, tripled its profits between 1997 and 2000, while Nestle made an estimated 26 percent profit margin on instant coffee, and Sara Lee's profits on coffee are running at an annual rate of nearly 17 percent, according to the study.
To redress the situation, the governments of coffee-producing countries, under the auspices of the International Coffee Organisation (ICO), have agreed on a plan that aims to reduce the supply. But it will only work with the backing of the companies and consuming countries, Oxfam says.
It wants the major companies to commit themselves to: pay farmers a price sufficiently greater than the costs of production so that they can at least send their children to school and afford medicines and food; increase the percentage of coffee they buy under the Fair Trade system; reduce the supply by raising minimum-quality standards as recommended by the ICO, and destroy at least five million bags of coffee.
Kraft Chairman Louis Camilleri told shareholders Tuesday that the firm buys coffee in Vietnam and Indonesia that does not meet even minimum ICO standards, although he insisted that it continues to work with farmers in the two countries to bring their coffee up to ICO requirements.
"Kraft has the problem backwards,'' said Billenness. ''If Kraft paid a fair price to coffee farmers in Vietnam and Indonesia, those farmers would have the money to improve the quality of their coffee.''
Indeed, he added, ''by not paying a fair price to farmers in other countries as well, Kraft is putting at risk the quality of its coffee supply. Unless farmers get a fair price, they won't have the money to maintain quality.''
Kraft's statement that it was buying sub-quality beans was the first such admission by a major company.
The roasting companies have benefited from several key developments over the past decade, including a sharp increase in global production especially as a result of Vietnam's entry into the market and increases in Brazil's crops. While the global supply of coffee has grown by more than two percent a year, demand has not kept pace.
Also, the trend toward free-market systems, encouraged by the World Bank and the International Monetary Fund (IMF), has given the companies much more leverage than in the past, when governments managed coffee markets both internally and internationally.
Rather than reduce supplies, buy more Fair Trade coffee and less sub-standard coffee, Camilleri said the company's duty was to ''increase demand''. But, at another point in the meeting, he insisted that Kraft did not see sufficient demand for Fair Trade coffee.
''Kraft claims it is capable of increasing demand for coffee,'' said Billenness, ''so it should demonstrate that by increasing demand for Fair Trade coffee.'' He noted that Sara Lee is providing a growing market for Free Trade Coffee in university dining services. ''Sara Lee has demonstrated there is demand and that it can grow, why can't Kraft''? he asked.
(END/2003)
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