Producing and Consuming Narratives The value of fairtrade coffee
Silje Johannessen
Department of Noragric Master Thesis 60 credits 2008
Producing and Consuming Narratives
The Value of Fairtrade Coffee
By:
Silje Johannesen
Master thesis Management of Natural Resources and Sustainable Agriculture Universitetet for Miljø og Biovitenskap
Supervisor:
Tor Arve Benjaminsen
The Department of International Environment and Development Studies, Noragric, is the international gateway for the Norwegian University of Life Sciences (UMB). Eight departments, associated research institutions and the Norwegian College of Veterinary Medicine in Oslo. Established in 1986, Noragric’s contribution to international development lies in the interface between research, education (Bachelor, Master and PhD programmes) and assignments.
The Noragric Master theses are the final theses submitted by students in order to fulfil the requirements under the Noragric Master programme “Management of Natural Resources and Sustainable Agriculture” (MNRSA), “Development Studies” and other Master programmes.
The findings in this thesis do not necessarily reflect the views of Noragric. Extracts from this publication may only be reproduced after prior consultation with the author and on condition that the source is indicated. For rights of reproduction or translation contact Noragric.
© Silje Johannessen, June 2008 [email protected]
Noragric
Department of International Environment and Development Studies P.O. Box 5003
N-1432 Ås Norway
Tel.: +47 64 96 52 00 Fax: +47 64 96 52 01
Internet: http://www.umb.no/noragric
3 Declaration
I, (name), declare that this thesis is a result of my research investigations and findings.
Sources of information other than my own have been acknowledged and a reference list has been appended. This work has not been previously submitted to any other
university for award of any type of academic degree.
Signature………..
Date………
ACKNOWLEDGEMENT
First of all, I would like to thank my supervisor in Norway, Tor Arve Benjaminsen, for his guidance through the work of this thesis. Further, I would like to thank the team at CATIE, CeCoECO for welcoming me and helping me connecting to a wider network of actors within the coffee industry in Central America. A special thank to Dietmar Stoian and Jeremy Heggar at CATIE, for constructive advice and guidance.
In Nicaragua, I would like to express deep gratefulness to Julio Solorzano at FondeAgro, and Chepe (Martinez), manager of El Polo, who welcomed me and made my field work possible. I want to express deep gratefulness to all the coffee farmers in Yali, who devoted their time to long interviews, always greeting me friendly.
In Guatemala, I would like to express great thankfulness to Alberto de Leon at Fedecocagua, who friendly welcomed me in Guatemala City, and helped me with the practicalities of the field work in Guatemala. In particular, I would like to express gratefulness to the technical advisors who assisted me with transportation and other means. And in particular, I want to express deep gratefulness to the coffee farmers of Guatemala, who friendly and welcoming devoted time to long interviews.
I would like to express a particular deep gratefulness to my brother, Steffen Johannessen, who took time off from completing his PhD dissertation to assist me in the final and most stressful phase of writing. Your devotion and enthusiasm within the field of Anthropology has particularly inspired my work.
v ABSTRACT
This thesis explores the Fairtrade network through analyzing Fairtrade coffee. The expansion of the Fairtrade network has led to increasing pressure and competitiveness of cooperatives in the Fairtrade market. The thesis analyze the impact of the increasingly demand of Fairtrade
products and the move of the system to mainstream market through two certified Fairtrade cooperatives. The certified cooperatives studied are; a first level cooperative in Nicaragua and a second level cooperative in Guatemala. Furthermore, the thesis analyzes the value of Fairtrade coffee through exchange value, symbolic value and sign value. The economic exchange value of Fairtrade product is analyzed using the tools of a global value chain analysis. The varieties of meanings invested in the network, ie the sign value and the symbolic value, are explored by investigating how the structures of narratives are constructed among producers, consumers, and communication strategies. These I have labeled ‘commodity cultures’.
The economic income from Fairtrade coffee is found to be highly centralized in consuming country, where importers/roasters have an income of about 74 percent, retail about 13 percent, Max Havelaar almost 3 percent, and producers around 4 percent. However, a larger share of income to producer country was evident in Guatemala, where the second level cooperative received almost 10 percent of total income. However, the income did not trickle down to producers in Guatemala, which received around the same income as producers in Nicaragua, around three percent of total income.
The value of Fairtrade coffee is concentrated within the constructed meaning attributed the product and verified by a label. The constructed narrative of Fairtrade is based on selective stories of producers where Fairtrade is recognized as aid and creating connectivity between producers and consumers. However, the narratives communicated are not general
representation of producers. According to my study, most producers had very limited knowledge of Fairtrade and did not see any direct benefits from the system. The selective stories are argued as communication strategies. Thus Fairtrade is not a de-fetishized product, where the narratives rather resemble commodification of new realms.
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TABLE OF CONTENTS
Acknowledgement... iv
Abstract ... v
List of Figures ... ix
List of Tables ... ix
List of Images ... ix
List of Appendices ... ix
Abbreviations ... x
Measures and Exchange Rates ... xii
1.0 Introduction ... 1
1.2 Research objective ... 14
1.2.1 Specified objectives ... 14
1.2.2 Research questions ... 14
2.0. Background ... 15
2.1. History of coffee ... 15
2.2 the International Coffee market ... 17
2.3 Sustainability initiatives in the coffee sector ... 21
2.3.1 History of Fairtrade ... 26
2.3.2 Fairtrade in Norway ... 34
3.0 Research methods ... 37
3.1 Field work In Central America ... 40
3.1.1 Development of field research in Nicaragua ... 42
3.1.2 Nicaragua’s political economy in brief ... 43
3.1.3 The cooperative El Polo ... 46
3.1.4 Development of field research in Guatemala ... 49
3.1.5 Guatemala’s political economy in brief ... 50
3.1.6 The second level cooperative Fedecocagua ... 52
4.0 Theory and analytical framework ... 55
5.0 Results and diskussion I: The global value chain of Fairtrade coffee ... 73
5.1 The Global Value Chain – Processing of product ... 74
5.2 The global economic value chain - Income From Fairtrade coffee ... 76
6.0 Results and discussion II: The commodity cultures of Fairtrade ... 85
6.1 Communication Strategies of Fairtrade ... 86
6.2 Producer narratives of Fairtrade coffee in Guatemala ... 102
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6.2 Producer narratives of Fairtrade coffee in Nicaragua ... 112
6.3 Consumer narratives of Fairtrade ... 122
6.4 Example: Lidl distributing Fairtrade Coffee ... 131
7.0 Conclusion ... 133
List of References ... 149
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LIST OF FIGURES
Figure 1: premiums and standards communicated by sustainability initiatives ... 24
Figure 2: Price differentiation of certifications for producer cooperatives ... 28
Figure 3: Fairtrade as percentage of total import Norway ... 35
Figure 4: Development of field research ... 40
Figure 5: Development of field research Nicaragua ... 43
Figuree 6: Development of field research Guatemala ... 49
Figuree 7: Global Value Chain ... 58
Figure 8: Commodity Culture of Fairtrade coffee ... 65
Figure 9: Processing of coffee ... 74
LIST OF TABLES Table 1: Estimated income from coffe in Toasted Coffee Equivalents ... 77
Table 2: Distribution of value, Farmers coffee ... 79
Table 3: value distributed of one cup of coffe, UMB ... 81
Tabel 4: Hypothetical Producer Income from one Fairtrade cappuccino ... 82
Table 5: Consumer confidence ... 123
LIST OF IMAGES Image 1: Map of Nicaragua ... 43
Image 2: Map of Guatemala ... 51
Image 3: Fairtrade label ... 89
Image 4: Farmers Coffee ... 95
Image 5: Friele Fairtrade ... 95
LIST OF APPENDICES Appendix 1: Calculation of economic income, producers Guatemala ... 163
Appendix 2: Calculation of Producer income, Nicaragua ... 165
Appendix 3: Calculation of income from Fairtrade coffee, University of Life Sciences... 169
Appendix 4: Calculation of Hypothetical producer income from one Cappuccino ... 171
Appendix 5: Calculation of income from Farmers Coffee ... 172
Appendix 6: Visualized value chain analysis ... 174
Appendix 7: Interview Guide; Producers………...175
Appendix 8: Survey Importers/Roasters………180
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ABBREVIATIONS
ANACAFE Asociación Nacional de Café Guatemala
ANT Actor Network Theory
Asdi Agencia Sueca de Cooperacion Internacional para el Desarrollo
CATIE Centro de Agronomía Tropical, Investigación y
Enseña
CeCoEco Centro de Competitividad de Eco Empresas
CEH Commission for Historical Clarification
CETREX Centro de Tramites de las Exportaciones
CONARCA The National Commission for Coffee Modernization
‘C’ price Conventional coffee price based on New York Stock Exchange
CSCE New York Coffee, Sugar and Cocoa Exchange
CSR Corporate Social Responsibility
EFTA European Fairtrade Association
El Polo Cooperativa de Servicios Múltiples El Polo R.L.
EUREP-GAP The Euro Retailer Produce Working Group
Fedecocagua Federacion de Cooperativas Agricolas de Productores de Café de Guatemala R. C.
FINE Common term for FLO, IFAT, NEWS! and EFTA
FITA Federation of International Trade Association El Polo Cooperativa de Servicios Múltiples EL Polo R.L.
FLO Fairtrade Labelling Organization International
FOB Free on board
FSLN The National Liberation Front
GAP Good Agricultural Practices
GATT General Agreement on Tariffs and Trade
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GCC Global Commodity Chain
GCE Green Coffee Equivalents
GVC Global Value Chain
ICA International Coffee Agreement
ICO International Coffee Organization
IDB International Development Bank
IFAT International Federation of Alternative Trade IISD International Institute for Sustainable Development
IMF International Monetary Fund
INRA National Institute for Agrarian Reforms
MAGFOR Ministerio Agropecuuaria y Forestal del Gobierno de Nicaragua
MHN Max Havelaar Norway
MIFIC Ministerio de Fomento, Industria y Comercio
NEWS! The Network of European Worldshops
Oro Green Coffee
PEC Political Ethical Consumption
Pergamino Parchment coffee
Platas money
PND Plan de Desarollo Nicaragua
SAPs Structural Adjustment Programs
SCI Sustainable Commodity Initiative
SHG Strictly High Grown
SIFO Statens Institutt for Forbruksundersøkelser Starbucks C.A.F.E. Practices Starbucks Coffee and Farmer Equity Program
TCE Toasted Coffee Equivalents
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UNCTAD United Nations Conference on Trade and
Development
UPE State Production Units
VAT Value Added Tax
VSI Voluntary Sustainable Initiative
WB The World Bank
WTO World Trade Organization
MEASURES AND EXCHANGE RATES
1 quintal 100 pounds 45 kilograms
1 kg 2.2 pounds
1 quintal green coffee 1.2 quintal pergamino (parchment coffee) 1 kilogram green coffee 1.19 kilogram toasted coffee (Talbot, 2004; ICO)
1 US dollar 5.39 NOK
1 US dollar 7.6 Quetzales (Banco de Guatemala 2006/2007)
1 US dollar 18 Córdoba (Banco Nacional de Nicaragua
2006/2007
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1.0 INTRODUCTION
The importance of my study is based on international trade in commodities and the unequal terms of trade created by power imbalance in the coffee commodity chain.
Profit of coffee is increasingly being made in consuming countries, which are usually industrialized countries in the ‘North’. It is estimated that around 10 million small farmers around the world grow coffee and produce about 70 percent of the world’s supply. Further, around 25 million people depend directly on coffee for their livelihood (Talbot, 2004: 128). The relevance of my study is based on the increase in Fairtrade commodities, and how the Fairtrade commodities are viewed as a challenge to the conventional trade in commodities. Fairtrade has increased both in sales and marketing, where coffee is the most important product. I research the impact of Fairtrade coffee and the value of Fairtrade coffee. The concept of Fairtrade is becoming increasingly well known through extensive and unconventional marketing strategies. The concept in itself is diversifying through a number of promotional activities. In Norway there are currently 6 municipalities who have gained status as Fairtrade municipalities. Sauda was the first municipality, currently including also Lier, Asker, Stavanger, Fredrikstad and Kvinesdal. There are 43 other municipalities in Norway working for a Fairtrade status (Max Havelaar Norway). In the UK, which is the leader of promoting Fairtrade products, there are currently more than 300 Fairtrade towns, more than 4000 Fairtrade churches and more than 70 Fairtrade universities (Fairtrade Foundation UK). Euros are today printed on Fairtrade cotton (Max Havelaar Norway)and in major political arenas it is currently served Fairtrade products, such as in the Norwegian Parliament (Max Havelaar Norway) and at the World Bank headquarters (Fridell, 2004). Annually, more than 18.3 million Euros (NOK 143.894 million) are spent on education, public awareness and marketing of Fairtrade products (Krier, 2005).
Max Havelaar is appreciated in Norway as having the potential to benefit small scale coffee producers through increased price, a social premium for development motives and market access. Max Havelaar is promoted as to generate good stories and connectivity for Norwegian consumers to the manners of production. The idea of Fairtrade is essentially based on educating the consumer of unequal terms of trade and
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exploitation of poor producers. The exploitative structures of international trade in coffee originate from the colonial masters. Max Havelaar was a Dutch colonial administrator in a novel written by Multatuli (pen name of Eduard Douwes Dekker). The novel was written as a protest against the colonial policies of the Dutch government in Java. Written in its narrative form, the novel marks the point of departure of the current analysis. My analysis is framed by narratives of fair trade and a global value chain analysis to investigate the income generated from Fairtrade coffee.
The aim of the analysis is to assess the potential of Fairtrade to challenge negative effects of international trade and neoliberal market ideology. The potential of Fairtrade is analyzed by looking at the value of Fairtrade coffee. Value is defined in terms of economic exchange value, and use value, which are production centered concepts essentially derived from Marx (1971). The economic value of a product is based on demand and thus do not reflect use value of the product nor the value of labor or social relations in production. However, I understand the value creation of the Fairtrade commodity to incorporate a social constructed value, through symbols and signs.
Therefore I find theories from Appadurai (1986) and Baudrillard (1975) highly inspiring. These theories are often related to as consumption centered approaches to value, including sign value and symbol value, derived from Baudrillard (1975). The sign value of a product is the value of the object in relation to other objects, such as the value of a brand or a label. The symbolic value is the value of a product in relation to other subjects. The consumption centered values are central within the social construction of meaning to the Fairtrade product.
The political point of departure is within the debate of resources taken as commodities in international trade. It is situated in the debate of fair trade as opposed to free trade, and the fair trade movement as opposed to the fair trade network. It is the Fairtrade network which is of particular interest, which is the international network of actors behind the Fairtrade labeling initiative. The particularly important international actors include Fairtrade Labelling Organization International1 (FLO), the International Fair Trade Association (IFAT), the European Fair Trade Association (EFTA) and the Network of European Worldshops (NEWS!), which are joined in the informal alliance of FINE
1 Including FLO Cert, the certification agency of FLO International.
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(Raynolds and Long, 2007). The emphasis of my analysis is on FLO, which is the standard setting and labeling initiative of the international Fairtrade network.
International trade may be seen as a contest of ecological justice where resources can be taken as ‘commodities’ or resources taken as ‘commons’ (Byrne et al., 2006). The response to the commons in the global system can be seen as one of commodification.
According to Byrne and Rich (1992) commodification is a process determined by increased social capacities to produce and purchase goods and services where the physical environment is valued directly as a commodity in the form of raw materials and resources extracted for social use. It is the process by which something requires an exchange value (Fisher, 2007), or the process and practice of enclosure. However, according to van Binsbergen, commodification is (2005: 11) the ways in which things and social relations are affected by the market. Thus, central to the commodification process is the involvement of the market, and according to the latter theory, commodification relates to both things and social relations. The former theories relate to a production centered approach and the latter theory relates to a consumption centered approach.
In international trade, the process of commodification is argued as privatization of resources, traded in the global market according to their exchange value. For many small scale farmers, this has been a prime method of earning an income, thus they have become dependent on ‘cash crops’ (Byrne et al., 2006). According to Hindess and Hirst (1975), followed by privatization of certain raw materials used as ‘cash crops’ is a process of ‘articulation’ where the producer have one foot in the global markets and one foot in a subsistence production exchange system. Nietschmann further follows this argument in his study of the Miskito Indians at the coast of Nicaragua, where the dual articulation creates a predictable inequality in power and exchange (Nietschmann, 1979).
Central feature of the commodity argued by economists is that of an undifferentiated product, competed as a race to the bottom in production price (Lewin et al, 2004).
Exchange value of the product is essentially determined by demand where conventional agricultural products are offered at prices which do not reflect the environmental and social costs of production. This forces communities of Southern countries to cover the burden of unsustainable production, explained by the term ‘ecological injustice’ (Byrne et al., 2006). Furthermore, global trade has the effect of eliminating the connection
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between production and consumption, which eliminates knowledge of the social and environmental cost of production (Byrne et al., 2006). In economics this is argued as negative externalities of the free market. Marx, on the other hand, argued this as commodity fetishism, a natural outcome of the capitalist mode of production (Marx, 1971). …’Commodities contain a double fetish that both obscures realities at the site of production and creates cultural and economic surpluses for consumers’ (Bryant and Goodman, 2004: 348). Central to the argument of international trade and economic globalization is the free trade advocacy.
…’free trade seeks the unencumbered movement of goods, services, labor and capital between markets with minimum state interference, such as in the form of regulations, tariffs and restrictions on capital flows. Free trade is supported by claims that it best produces economic growth and that markets without state restrictions are the most efficient’ (Byrne et al., 2006:65).
Free trade supporters claim that economic globalization ‘lifts all boats’ – that is, ultimately everyone grows richer from it. The anti-globalization movement counters that it ‘lifts all yachts’ – that is, only the rich benefit (Buckman, 2004: 68). According to the anti-globalization movement, claims of development through free trade have been depressed by rich countries double standards. Through large international institutions such as the WTO, WB and the IMF and TNCs, rich countries preach open markets and force developing countries to open their markets. However, the rich countries themselves practice protectionism through taxes and subsidies (Buckman, 2004). The critics of free trade policies argue that free trade provides economic advantage to the more powerful economic states and actors, where producers have little bargaining power, and prices are depressed. Production is in many cases guided by global markets, where farmers become increasingly reliant on ‘cash crops’ (Byrne et al., 2006: 65, 66).
Thus, with current neo-liberal market policies, wealth is argued to be increasingly transferred to core nations. In particular, poor countries have lost out in international trade, with policies increasingly balanced in favor of core nations. Many poor nations are highly dependent on the export of raw materials, where the terms of trade have fallen increasingly in later years. According to Buckman (2004) the anti-globalization movement has been divided in two main schools; the fair trade school and the localization school. The fair trade movement believes in a globalised economy, but
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through restructuring current policies and trade rules, whereas the localization movement is more radical and believes that local economies should be at the centre of economic activities, not the global marketplace. The former argue that if world trade was conducted fairly it has the ability to lift millions of people out of poverty. In particular, trade should be made fair through developing country protectionism and special treatment for poor countries. Thus, the argument is essentially about challenging power structures in trade and restructuring global trade rules in favor of poor nations.
The localization school, on the other hand, believes in major structural change building on principles of self-reliance. The localization school is positioned in contrast to the ideology that increased trade will lead to development. Thus, they see a need to minimize international trade, where development is building on economic self-reliance nationally and regionally.
My analysis is based on the Fairtrade network, which builds on the ideology of the fair trade movement, where trade may lead to development. It is distinguished from the movement as it is working within the market. Thus, the Fairtrade network work in the market and against it, therefore it is naturally controlled by market logic. The case study within Fairtrade is built on coffee, an important commodity in international trade which highlights many controversial debates of trade. ‘Coffee has been one of the most important primary commodity exports of the Third World since World War II, second only to oil in total income earned by Third World exporters. …over 90 percent of the coffee exported by Third World producers is consumed in the core’ (Talbot, 1997:60).
The international coffee market is characterized by fluctuating prices which creates high vulnerability and risks for producers. This is argued as a consequence of imbalance of power in the coffee value chain causing a lack of bargaining power from the producer side (Talbot, 2004; Gibbon and Ponte, 2005). Furthermore, structural global oversupply and lack of regulation of price are contributing factors (Slob, 2006). More than 90 percent of coffee production takes place in developing countries, where coffee is the most valuable agricultural product exported (Talbot, 2004). The majority of producers are small scale farmers where 85 percent of the producers are family run farms relying on coffee as the main source of cash return (Slob, 2006). According to Giovannucci and Ponte (2005:285) increasing producer income of coffee have large developing prospects as producers generate more than thirty times revenue per capita from exports than they
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receive in aid. Thus enterprise development within the coffee sector might have a key role in poverty reduction by promoting responsible business and sustainable livelihoods for low income households (Mayoux, 2003).
The sustainability initiatives in coffee include certifications and standards in production, such as Fairtrade. In recognition of the link between commodities and sustainable development, the Sustainable Commodity Initiative (SCI) was launched in 2002 by the United Nations Conference on Trade and Development (UNCTAD) and the International Institute for Sustainable Development (IISD). The SCI identifies that voluntary sustainability initiatives (VSI) have the potential to;
...’ create higher and more stable revenues through the identification of sustainable products/markets; better farm and business management practices among producers;
improved producer awareness of market trends; reduced producer risk exposure to market volatility; more efficient and strategic natural resource use; improved consistency, quality and supply of products to consumers; improved consumer awareness of producer conditions through private sector communication channels; improved coordination and efficiency of supply chain management; and increased private sector investment for sustainable production and consumption.’ (Sustainable Commodity Initiative, 2008).
Increasing producer income is referred to as upgrading in the value chain for coffee producers. Searching for methods of upgrading in the value chain includes searching reward structures of the chain, and the roles that generate rewards (Gibbon, 2004). In other words, methods where the producers can increase power and income generated from coffee. Upgrading on the producer side of the value chain of coffee has increased rewards in two main methods. The first method is within the commercial market for Robusta and hard Arabica, from large or very large grower-exporters that are able to consistently supply high volumes, meet basic or above basic quality requirements, guarantee proper handling, and provide efficient logistics up to the loading of a ship (Gibbon, 2004:23). This is basically a quantitative measurement where rewards include a higher reference price and medium to longer term commitments from buyers (Gibbon, 2004). The second method concerns mainly higher quality mild Arabica such as
‘specialty’ or ‘gourmet’ coffees (Gibbon, 2004). Upgrading within mild Arabica is identified either through increased quality or adding credence attributes to the product (Slob, 2006). The former refers to production method and technology for a better
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quality product, and the latter refers to standards based on trust, usually communicated through a label. Such voluntary standards are defined by Nadvi and Waltring (2002);
’Standards are agreed criteria… by which a product or a service’s performance, its technical and physical characteristics, and/or the process, and conditions, under which it has been produced or delivered, can be assessed’’ (Nadvi and Waltring, 2002, cited in Giovannucci and Ponte, 2005:286)
Through these standards, developing country farm and business will gain market access, in particular access to niche markets (Giovannucci and Ponte, 2005). The element of diversifying products, or searching for niche markets, is a normal response in the neo- liberal market with increasingly varied consumer demands. In the literature, the term sustainable coffee has increasingly been referring to the method of upgrading in coffee through quality and credence attributes. The sustainability segments, such as economic viability, environmental conservation and social responsibility are directly attributes from the upgraded product. Producers participate in such programs where they believe it will bring economic benefits and market access. The standards and certifications are promoted to improve producer income, use competitive advantage and empower the producer. Furthermore, it is enhancing ecological production methods through environmental standards and increased knowledge of sound agricultural practices (Ponte, 2004; Giovannucci and Ponte, 2005).
Different types of sustainable coffees currently on the market are; gourmet or specialty coffee, denomination of origin, organic, Fairtrade, Rainforest Alliance, Utz Certified, Bird friendly and shade grown, in addition to private standards such as Starbucks CAFÉ practices, Nespresso, Coop café future, 4C, among others (Ponte, 2004; Giovannucci and Ponte, 2005).
My analysis is highly inspired by the approach of political ecology. Political ecology is a field of critical research concerning the condition of the environment and the people who live and work in it. It is a field which has attracted researchers from the fields of anthropology, forestry, development studies, environmental sociology, environmental history and geography (Robbins, 2004). It incorporates the perspective of political economy held together by a focus on the use and management of natural resources, combined with an interpretation of discourses, meaning and narratives.
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Political ecology is a contested field where …’’some stress the political economy while other points to more formal political institutions: some identify environmental change as most important while others emphasize narratives or stories about change’’ (Robbins, 2004:5). Blaikie and Brookfield (1987) explained the concept of political ecology the following manner;
‘’The phrase ‘political ecology’ combines the concerns of ecology and a broadly defined political economy. Together this encompasses the constantly shifting dialectic between society and land-based resources, and also within classes and groups within the society itself’’ (Blaikie and Brookfield, 1987:17).
The political ecology approach has evolved in different directions. This paper will emphasize discourses, narratives and meanings inspired by Peet and Watts (1996) and Roe (1991, 1995). It will focus on highlighting the role of images and representations through narratives in the struggle over natural resources (Peet and Watts, 1996). Thus, the theoretical approach of my analysis is a social constructivist approach influenced by Derrida’s (1966) theory on deconstruction. Essentially, I will deconstruct the concept of Fairtrade coffee and interpret the meaning of Fairtrade within different cultures. In particular, I deconstruct the meaning of Fairtrade through producer and consumer cultures, and through communication strategies of Fairtrade. However, as the deconstructed system fail to highlight the power structures in the chain, I show this by the GVC analysis.
My paper will include two types of analysis; the global value chain analysis and the commodity cultures approach. The GVC analysis is an economic analysis of the income generated by Fairtrade coffee. The GVC approach is highly descriptive of the exchange value, or the economic income generated by actors in the chain. The approach of a value chain is a linear imagination of a chain from producer to consumer. The total income corresponds to the retail value of the product. The GVC of Fairtrade coffee essentially takes the Norwegian coffee market as a point of departure, where total income generated from the Fairtrade coffee equals the retail value of the product. The main suppliers of Fairtrade coffee in Norway is the second level cooperative Fedecocagua in Guatemala. However, in order for comparison, a first level cooperative in Nicaragua, which exports Fairtrade coffee to Sweden, is included. The main aim of the GVC is to show how the economic income is distributed through the chain.
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The commodity culture approach is parallel to the work on material cultures and builds on methodology from the political ecology of development and from consumption studies. It is ideally a study which makes it possible to counter the divide between production centered and consumption centered studies. There is quite a large debate on production centered and consumption centered approaches to understanding commodities and their circulation from production to consumption. In trying to avoid this debate and the implications of either approaches, I decided to use the commodities culture approach. I use the approach in which I understand it is possible to interpret different commodity cultures individually. The commodity cultures refer to groups of actors central to the commodity. I have divided the commodity cultures into representation culture, producer culture and consumer culture, which I believe are the key commodity cultures of Fairtrade coffee. The commodity cultures approach necessarily involves a deconstruction approach, where the key groups of actors are separated and studied individually.
The commodity cultures approach involves rethinking the linear commodity chain or global value chain approach to incorporate more complex circuits and networks for new modes of understanding (Jackson, 1999, 2002). The framework is operationalized through Appadurai’s (1986) idea of the social life of a commodity but taken further as to expose neo-Marxist double fetishism of commodities (Bryant and Goodman, 2004). The social life of the commodity is related to the different cultures in which the commodity circulates. In particular, the approach highlights social relations and narratives part of the social construction of the commodity. This is essential a Marxist idea where the commodity contains a fetish which obscures social relations in production. By exposing neo-Marxist double fetishism, it is possible to expose the power structures in the global network of the commodity2 and the regimes of exploitation and the economic and cultural surpluses this creates for consumers (Bryant and Goodman, 2004:348). The commodity culture approach is grounded on post Marxist theories (Foucauldian and feminist theories) and grounds support and importance through social relations based on social constructivist approaches (Bryant and Goodman, 2004). The commodity is not only a raw product where value is added from production, processing and final
2 The idea is essentially taken from the critique which came after Appadurai’s (1986) ‘The social life of things’. The social biography of a commodity was insufficient to describe the unequal power relations in the commodity network (van Binsbergen, 2005).
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consumption. The commodity has a biography which is possible to visualize through narratives of the actors participating in the complex network. …’ Acknowledgement of the textuality of the material world is enormously helpful in understanding the social significance of material objects, enabling, for example, commodity analysis to break out from narrowly economistic approaches by breaking down (artificial) distinctions between the 'economic' and the 'cultural, and by demonstrating how commodities (and the spaces that supply them) are significant sites of cultural spectacle, key spaces through which we come to understand the processes shaping society and seek to work out alternative forms of social relations’ (Bridge, 2001, cited in Bakker and Bridge, 2006:14).
However, as Bryant and Goodman (2004) highlight the importance of exposing neo- Marxist double-fetish, their analysis lacks reference to power inequalities and relations in production3. I find commodity cultures approach insufficient to highlight the power structures in the network, which made it insufficient to break the distinction between the economic and the cultural, as highlighted above (Bakker and Bridge, 2006).
Therefore, I found it necessary to include the GVC analysis in addition to the commodity cultures approach. Thereby I run the risk of a production centered approach and production-related consumption. This is highlighted by van Binsberg (2005) and Appadurai (2005), building on a revised approach to the book The Social Life on Things (Appadurai, ed., 1986). Accordingly, the book, even though revealing consumption as a central theme, is referred to as production-related consumption (Van Binsbegen, 2005;
Appadurai, 2005). Appadurai (2005) later emphasize the importance of bridging the two fields of consumption and production.
’We need an equivalent sociology of consumption (not a mirror image) to that Marx gave us for production. That is, we need to know the technical basis of consumption in and across national spaces, we need to know the class-formation dimension of consumption which recognizes that consumption creates classes in its own right’ (Appadurai, 2005:61).
However, this is a large debate within the field of anthropology. I do not intended to dwell on the debate in this paper, where it is more related to extensive analysis of consumption. I have mostly used consumption theories from Baudrillard, referred to in
3 Bryant and Goodman (2004) introduce the first production moment of the solidarity seeking commodity culture with a few lines before they interpret the second production moment of Fairtrade coffee; the symbolic and sign value of the product.
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the above quote as mirror images of consumption, and Appadurai’s (1986) The Social Life of Things. Though I acknowledge the importance of the debate and relate some difficulties in my analysis to this debate.
By analyzing the Fairtrade network it is essential to highlighting the historical frame of which the network came about, along with the different perceptions and definitions of the active actors involved. Producers, importers, roasters, consumers, activists, NGOs and scholars alike, have various different interpretations of what stipulates Fairtrade coffee. A central feature of the commodity culture approach is how the meaning and perceptions of Fairtrade coffee changes through the commodity network as different production moments of the product4.
Particularly important when characterizing a Fairtrade coffee are the representation narratives created by the Fairtrade network. The communication strategies and the selective producer narratives distinguish Fairtrade coffee from a conventional coffee (Whatmore and Thorne, 1996). Moreover, the Fairtrade coffees’ success relies on consumer sensitivity to arguments of social and environmental justice (Renard, 1999) which is essentially an argument of demand and whether this demand is socially constructed (Bryant and Goodman, 2004). Thus, there is a need for a focus on social constructs and textuality which are sensitive to cultural frames of actors and authors in which they operate.
Discussing Fairtrade coffee in terms of consumption, Guthman (2003) argues a new paradigm of consumer demand for socially constructed shared values such as health, nutrition, authenticity; ecology and social justice. The ethics behind the new paradigm of consumer demand is, according to Renard (1999:489)
…’resulting from the industrial, productivist agricultural system that prevailed during the Fordist era-together with overproduction and the resulting financial problems-which has placed this (the current) model in question, and has caused a lack of confidence in the quality of food products.’’
The new consumer demand for ethical products, resisting mass consumption and assembly lines, has been coined by the ‘reflexive’ consumer (Guthman, 2003) building
4 Economists usually refer to production moments as the steps of processing.
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on theories of life politics from Giddens (1991). Lifestyle politics builds on the notion of a reflexive project of the self where material products and choices form a certain narrative of identifying self (Giddens, 1991). According to Giddens (1991) in the era of late modernity, one identifies the self in the capacity of keeping a certain narrative going. This is also in line with moral theory presented by Macintyre (1985), where we understand our lives and live our lives in terms of narratives. The reflexive consumer choose Fairtrade product as part of defining the reflexive project of the self.
However, ethical considerations of consumption is not merely reflecting consumer behavior, it is highly influenced by marketing and representation strategies (Barnett et al., 2005). Thus, there is a need to conceptualize ethical consumption in these terms;
…’ ethical consumption as a field of marketing, campaigning, and policy-making by which ordinary, practical moral dispositions of everyday consumption are re-articulated by policy-makers, campaigning organizations, and business’ (Barnett et al., 2005:29).
Thus, Fairtrade is guided not only by consumer reflexivity and producers’ search for niche markets, but also by the social construction and marketing which gives meaning to the product.
My paper is structured as to first give a brief history of coffee and outline structures of the international coffee market. Secondly, I will briefly discuss certifications of coffee as sustainability initiatives in coffee before I move on to introduce history of Fairtrade and the Fairtrade market in Norway. This section I have named background.
The following section will outline research methodology and theory. It will firstly give an introduction to the general research approach I have taken. Secondly, there are two field methods sections, which are divided geographically between Guatemala and Nicaragua. I will give a brief introduction to political issues within the countries and outline the institutional structures of the two cooperatives I have studied. The third part within this section is devoted to theory of the analytical tools I am using to analyze my data. I outline the main theorists related to the approaches and justify for my use of the approaches. I have given particular space to justify the reason behind the two different analytical tools.
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The next two sections are devoted analysis and representation of results. I have divided the result section in two different chapters as I believe they differ in such fundamental terms that it was easier to understand them separately. Thus, one chapter is devoted the value chain analysis and a second result chapter is devoted narrative analysis within three commodity cultures. The three commodity cultures are firstly, the representation culture, or strategy, secondly the producer culture and thirdly, the consumer culture. At last I have included a short example in order to highlight that these cultures are connected.
At last, I have a concluding chapter. The conclusion brings together results from the two analyses, draw the attention back to the objective of the study and highlight key findings.
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1.2 RESEARCH OBJECTIVE
The key research objective is to analyze the Fairtrade system through Fairtrade coffee. I aim to identify the meaning and value of Fairtrade coffee bought in Norway in order to discuss the impact of Fairtrade. My research is guided by questions of whether Fairtrade has the ability to challenge international trade and whether the Fairtrade network is growing in accordance with, or on behalf of, the impact it has on producers. I will identify the value of Fairtrade coffee through an economic value chain analysis and the commodity cultures approach. The economic value chain highlights the income and power structures in the chain. The commodity cultures approach deconstruct the Fairtrade coffee network to interpret meaning and value through narratives within the key cultures comprising the Fairtrade coffee network.
1.2.1 SPECIFIED OBJECTIVES
1. Carry out a global value chain analysis of Fairtrade coffee, which includes the identification of economic benefits accrued by each actor.
2. Identify the Fairtrade narratives presented by key actors within commodity cultures, with main emphasis on producer narratives.
1.2.2 RESEARCH QUESTIONS
1. Who are the key actors participating in the global value chain/network of Fairtrade coffee for Norwegian consumers?
2. What is the economic exchange value of the product to each key actor?
3. What are the varieties of meanings invested in the network?
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2.0. BACKGROUND
2.1. HISTORY OF COFFEE
Arabica coffee most likely originates from the highlands of Ethiopia. The legends have it that coffee was discovered by the goat herder Kaldi at the horn of Africa, in Ethiopia, probably in the province of Kaffa circa A.D. 800. Kaldi noticed his herd dancing from one coffee shrub to the other, grazing on the red cherries, and he decided to try it for himself.
The legend further explains how a monk witnessed Kaldi eating the cherries and tried it for himself, being very alert to divine inspiration that same night (International Coffee Association; the story of coffee, undated). Coffee was being cultivated in Yemen at least by the 15th century, most likely earlier. Coffee was brought in at the port of Mocha, which was also the main route to Mecca. The Arabs followed a strict policy not to export fertile beans5, in order to keep the profitable activity for themselves. The Arabian coffee houses became centers of political activity. This was seen as a problem and apparently led to their suppression. The coffee houses and coffee was banned several times, but the coffee houses kept reappearing. The solution came as a tax on coffee and the coffee houses (International Coffee Association; the story of coffee, undated).
By early 1600, coffee had been introduced to Europe where coffee houses spread quickly. The Arabs controlled the cultivation of coffee and had monopoly on the desired product. They forbade the export of fertile seeds and par-boiled the coffee before export for the coffee not to be germinated. However, the seeds found its way to India, where a Dutch botanist brought them further to Java, and to a greenhouse in Amsterdam. The French eventually sent some seedling to Martinique where coffee spread to the rest of Latin America (Talbot, 2004).
‘Almost all of the coffee trees now growing in Latin America are direct descendants of a few seeds from Java. …Coffee was also introduced to East Africa around 1900 by Catholic missionaries. And ironically, although it had probably originated there, the seeds for these plantings came from the Caribbean, completing a five hundred-year journey around the world’ (Talbot, 2004:45).
5 The coffee beans are the seeds of the coffee tree, but they become infertile if one strip off the outer layer (ICA).
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Robusta coffee, on the other hand, originates from Central and West Africa, and was discovered by French colonists due to its similarity to Arabica coffee. The Robusta coffee plant is more robust or resistant than the Arabica plant. The Arabica coffee plant is highly susceptible to various diseases and pests due to its limited genetic stock, in particular to leaf rust which is the main threat to Arabica coffee along with the coffee berry borer worm (broca). In many parts of Asia, Arabica was replaced either by Robusta due to its resistance to leaf rust, or by tea due to preferences, leaving Latin America as the main supplier of Arabica coffee (Talbot, 2004). Talbot explains the importance of coffee during colonial times as following;
‘Brought around the world by colonists, coffee along with other commodities became important sources of colonial power for Britain, as well as essential consumption items for the growing industrial working class. In Britain and other European powers, coffee and tea, sweetened with sugar, gradually replaced beer and wine as working-class beverages’
(Talbot, 2004:46).
One of the most comprehensively description of the introduction of colonial products, in particular coffee, to rural societies is the novel Max Havelaar by Multatouli, pen name of Douwes Dekker;
’…der kom Fremmede vesterfra, som gjorde sig til Herre over landet. De ønskede at drage Nytte af Jordbundens Frugtbarhed og paalagde Indbyggerne at anvende en Del av deres Arbejde og Tid til at tilvirke andre Produkter, der vilde kaste mer af sig, naar de blev solgt paa det europæiske Marked. …Men spørger man mig, om de javanesiske Aagerbrugere selv faar et Udbytte, der svarer til denne Rigdom, maa jeg give et nægtede Svar. …Da det dog til syvede og sidst gælder om at tjene noget, kan dette kun ske ved netop at betale Javaneserne saa meget, at de ikke dør af Sult, hvilket vilde formindske Folkets Arbejdskraft6’ (Multatuli, 1901:46).
6 ..there came unknown people from the west, which made themselves Rulers of the country. They wished to make use of the fertile soil and instructed the inhabitants to make use of their labor and time to
produce other products, which would give more in return, when it was sold at the European market… But if one ask me, if the Javanese farmers themselves receive a return, which corresponds to this wealth, then I have to give a denial answer… When it in the end concerns about earning something, this can only happen by paying the Javanese as much, as they do not die of hunger, which would have decreased the peoples’
work capacity (Multatuli, 1901:46).
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2.2 THE INTERNATIONAL COFFEE MARKET
The majority of coffee is typically sold as what economists refer to as a primary commodity, which is an undifferentiated good sold in bulk quantities. This reduces incentives for growers to maintain or improve quality. The market for coffee is characterized by high price volatility. High price volatility refers to ...’the inability to predict prices before an event and the retrospective measurement of their level of variation’ (Lewin et al, 2004:20). The reason for the high price volatility is the available quantity of stocks (it is possible to store unprocessed coffee, parchment coffee for up to two years in right conditions, Mitchell, 1988), sudden changes in the supply/demand balance usually caused by natural disasters where frost in Brazil has been the main cause of increasing prices. Additionally, there is a lack of information to producers about the coffee market. These changes are particularly damaging when the parameters of variation are not known in advance, which is particular the case with commodity prices (ibid). Coffee is a tree crop which takes three to four years to produce cherries. Thus, planting coffee trees require farmers to take a long-term view, which is difficult with unpredictable prices and limited access to credit (ibid). Furthermore, when prices are volatile, the actors within the supply chain with direct exposure to prices will raise their margins in order for a certain security. When this happens at the expense of farmers, revenue is transferred directly to traders (Lewin et al, 2004:22).
The inadequate access to information creates shocks and instability in producing countries. The market is characterized by its ups and downs. There are good times and there are bad times, though there are always better times in local communities around coffee harvest. The coffee harvest proceed for about three months, and these three months are described as the liveliest times in Yalí, a small village two hours north of Jínotega, northern Nicaragua. People have ‘platas’ (money) during these three months, because the whole village is somehow included in the coffee industry. They are proud of their coffee, rumors has it that the first coffee plant in Nicaragua was brought here many years ago (although this is only a rumor, other coffee villages claim the same). They are also proud of the quality they have, this is coffee grown at high altitudes, which is the first characteristic of a good quality coffee. The village is dependent on the sale of coffee;
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the village is based on coffee, like so many other rural villages in Central America7. Coffee is one of the world’s most important Third World commodities and over 90 percent of the coffee production takes place in developing countries (Slob, 2006). More than 70 percent of the coffee-producers are small scale farmers (Milford, 2004), who produce coffee on farms of less than ten hectares (Oxfam, 2002).
Coffee was a profitable activity in producing countries from about mid 1960s to late 1980s, and profits were spread through rural areas (Talbot, 2004). The prices for coffee are determined on the two big future or stock markets in London and New York, the former is the benchmark for Robusta coffee and the latter for Arabica. Futures prices reflect not just current physical market prices but also the expectation of future events which can have impact on prices, including speculating activity from actors such as large financial traders and speculators (Lewin et al, 2004). The coffee futures contract traded on the New York stock exchange is called the ‘C’ contract, based on Central American Arabica coffees. Coffee has been exchanged there since the founding of the New York Coffee exchange in 1882. It merged with sugar and cocoa to the New York Coffee, Sugar and Cocoa Exchange (CSCE) in 1982 (Talbot, 2004).
Like other commodities, coffee is a good which is inelastic to demand. This means that a sharp decrease in price due to a good harvest year will not mean a significant increase in demand. Nevertheless, coffee harvests differ enormously, where yields could be ten times as large in good years as in bad years, resulting in very unstable coffee prices (Hira and Ferrie, 2006). Furthermore, the prices are largely dependent on big producer countries, such as Brazil, evident when the price soared to US 1.80/lb in 1994 when frost damaged the coffee harvest (Hira and Ferrie, 2006).
The market is defined by its booms and busts as a consequence of natural disasters, in particular damage of the harvest in Brazil. Under the International Coffee Agreement (ICA), which controlled the export of coffee through quotas, a little more than half of the total income from coffee went to producing countries, with a third of it as surplus (Talbot, 2004). However, the 1975 Brazilian frost created an increase in surplus to producing countries for the harvest of 1976-1977 of about 80% of total surplus available along the chain (Talbot, 2004). After the 1976-1977 harvest the surplus was
7 Based on conversations with farmers in the community of Yali.
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evenly distributed between producer and importer nations until the aftermath of the Brazilian draught in 1985, which lead to price increase and temporary suspension of ICA quotas in 1986-1987. The income of producer countries fell to about a quarter, while the income in consuming countries rose to two thirds of the total. However, because total surplus increased, there was a shift in distribution of surplus, now 60 percent to the producers.
The next mayor shift was caused by the end of quotas and the price crash of 1989 (Talbot, 2004). The vulnerability in the coffee market is seen as a consequence of structural global over supply, natural disasters in Brazil, and a shift in bargaining power of agents in the coffee chain due to a failure to renew the International Coffee Agreement (ICA) in 1989. The entrance of Vietnam as a leading coffee producer and Structural Adjustment Programs (SAPs) from the International Monetary Fund (IMF) are also important factors, which increased supply and affected coffee prices (Bacon, 2005;
Muradian and Pelupessy, 2005). Income in producer countries rose to three quarters of total, while income of producer countries fell to about 15 percent. The Brazilian frost shifted temporarily surplus back to producer countries, but leading to the second crisis, almost all surpluses was retained in consuming countries. Many producers received less than it cost them to produce (Talbot, 2004). From the late 1980s-early 1990s until 2004, earnings of coffee producing countries in terms of export free on board (FOB) decreased from US$10-13 billion per year to US$5.5 billion.
In the broader picture, prices of most major agricultural commodities have fallen between 50 and 86 percent during the last 20 years. However, coffee showed one of the greatest fall (Slob, 2006), reaching a record low in 2001 (Milford, 2004). Under the ICA regulations, coffee was traded in the managed market. Governments in both producing and consuming nations sought to agree pre-determined supply levels by setting expert quotas for producing countries. The breakdown of the ICA in 1989 had many causes, most important being the incapacity of members to negotiate a new quota allocation, lobby actions from American firms8 and the inability of producer and consumer countries to control extra quota in coffee movements (Muradian and Pelupessy, 2005).
The reasoning is also related to the geopolitical historical context of the Cold War. The
8 Including large coffee corporations such as Procter & Gamble and Sarah Lee (Fridell, 2004).
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new neighbor policy of the US wanted to reward friendly governments through coffee trade, which was impossible with the current ICA structure, therefore the Reagan Administration decided to sabotage renewal negotiations by making impossible demands from Brazil and Colombia (Jaffee, 2007:42).
The agreement survived, administered by the International Coffee Organization (ICO), but it lost power to regulate the supply of coffee through quotas and the price corset (Oxfam, 2002). The consequence of the breakdown of the ICA and liberalization policies by the World Bank (Talbot, 2004) was an increase in coffee production followed by rising inventories9 in consumer countries, slow-moving demand and market concentration in trading and roasting industries (Ponte, 2002). Consequently creating a shift in power to the roaster and retailing end of the commodity chain and falling prices paid to the producers (Ponte, 2002; Bacon, 2005).
Thus, when the frost in Brazil drove prices upwards in 1994, growers responded by increasing coffee planting. Before liberalization, the state would have increased taxes and revenues which would have worked as insurance against next period of low prices.
This would also have reduced incentives to plant more coffee for producers. When the increased production hit the market around 1998, this set off the second coffee crisis.
Media have increasingly blamed World Bank policies for funding increased production in Vietnam for the second coffee crisis. However, according to Talbot there has been limited evidence for this. What has been more important is the increased power of large TNCs which have taken advantage of their position by buying larger quantities of low quality Robusta coffee from Vietnam and blending this with higher quality Arabica coffee. This has lowered demand of Arabica coffee, thus pressing the prices down.
Furthermore, the changed structure of the coffee chain along with privatization policies, as explained above, has limited the producer state control. Large TNCs have currently control of the entire chain, from producer to consumer. ‘Increasingly, small peasant farmers producing coffee using family labor on one side of the market were directly confronting giant transnational conglomerates with state of the art information technologies, access to virtually unlimited financial resources, and a clear picture of the entire global coffee situation on the other side’ (Talbot, 2004: 129). According to Eakin et
9 Inventories refers to keeping a certain amount of stock in storage.
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al. (2006:156), revenue from coffee sales in Central America declined as much as 44 percent. The coffee market is described as oligopolistic where few large TNCs dominate the market (Talbot, 2004). The crisis is described as a market failure due to oligopoly and the creation of cartels or informal agreements between firms. The price paid to farmers for both Robusta and Arabica coffee was in 2001, taking inflation into account, 25 percent of its level in 1960, which only covered 60 percent of the production cost in many countries (Oxfam, 2002).
In 2004, the international coffee market showed some signs of recovery. The upward trend started in the last month of 2003 and continued to 2005 (Slob, 2006). In February 2005, prices reached the same levels they averaged in 1999 of more than US 85 cents per pound (Slob, 2006).
The value added along the chain takes place increasingly in consuming countries. In producing countries, actors sell material coffee according to quality evaluated on export point. While in consuming countries, coffee is sold packaged with symbolic and in- person service components where value is controlled by roasters, retailers and coffee owners (Daviron and Ponte, 2005), creating the so-called ‘latte revolution’ (Ponte, 2002).
2.3 SUSTAINABILITY INITIATIVES IN THE COFFEE SECTOR
One of the main challenges for the coffee industry is how to sustain better market conditions to avoid the cycles of boom and bust (Slob, 2006). The recovery of producer prices after the coffee crisis currently makes coffee production a profitable activity for many. However, roasters and retailers have shown capacity to add substantial value to the green beans by targeting ever more segmented consumer markets. Roasters and retailers capture increasingly more profit downstream. Producers have seen their total value decline from 30 percent to 5 percent of total retail price in the past two decades (Lewin et al, 2004:95). Farmers seek differentiated markets for better prices and improved production methods. However, these are not easy tasks for the poorest farmers, which demands understanding of current market trends, appropriate technology, multiple distribution channels and financial, logistical and risk management options. These new methods require new organizational and management capacities of organizations such as cooperatives. But it also includes a different view of the product
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by roasters, importers and consumers, as a commodity, according to economists, is an undifferentiated bulk product which rewards the lowest cost of production
The practices of the differentiated coffee differ in design, standards, attributes, and values added (Slob, 2006) and they are traded through differentiated channels. In order to participate, producers need a differentiated product and the ability to access buyers and to export their product. It involves a shorter supply chain, but for many, traders and middle men are still important actors.
The term specialty or differentiated coffee is not clearly defined and has been a source of confusion in the industry (Lewin et al, 2004:99). In particular, marketing campaigns in the global coffee trade have imprecisely used terms like ‘gourmet’ or ‘shade grown’
coffee.
Clearly, if the industry itself is unclear (about these terms) one can only assume that consumers are equally at loss. Consumer confusion is known to depress rather than stimulate markets (Lewin et al, 2004:99)
Not only are consumers confused about what stipulates a specialty coffee or the different certification initiatives in coffee; the growing increase in specialty coffee initiatives appeal to the consumer in different ways. They differ in the information strategies communicated to the consumer and what they actually represent (see Figure 1). Standards are important for producers in developing countries as they determine access to new markets and new terms of participation in global value chains. Standards set entry barriers and it provides the opportunity for the selected producers to add value, improve their product and assimilate new functions along with a different relationship with buyers in importing countries (Giovannucci and Ponte, 2005).
Standards can be seen as a market tool of product differentiation, market penetration, system coordination, quality and safety assurance, brand complementing, and product niche differentiation (Giovannucci and Reardon, 2000).
The different standards and certification of coffee communicate information about the attributes of a product. Ponte (2004) classify these attributes according to the ease with which they can be measured. Search attributes are verified at time of transaction, such as the color of the coffee bean. Experience attributes are assessed after the transaction has taken place, such as the taste. These attributes pertain to the product itself, such as