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Apples and Oranges: How We Compare Direct Trade to Fair Trade

When the Fair World Project published this comparison of select brands in the U.S. coffee market last year, I was sorely tempted to respond — to explain publicly what was happening privately: that I was being asked by Fair Trade roasters in the upper tiers to arrange meetings with Direct Trade roasters in lower tiers at the time the report was published. The former wanted to learn from the latter — to better understand how they were working to marry a relentless focus on cup quality with a serious commitment to social impact. But instead, I bit my tongue.

After FWP took more pot shots at Direct Trade last week in this editorial on The Huffington Post, however, I feel compelled to weigh in.


Because even though FWP concludes — correctly, in my estimation — that you can’t judge a roaster based on the label it chooses to apply to itself, it throws some sharp elbows, and a few grenades, in the direction of the Direct Trade camp along the way.

I don’t write as an apologist for Direct Trade, but in the interest of a fair-minded comparison of the two approaches — as one of the few international development practitioners who has worked as extensively with Fair Trade roasters as I have with Direct Trade roasters. And as someone who still believes that the next-generation business model innovations that will unlock the deepest value for everyone along the supply chain will emerge from the place where these two models overlap.



Where I Agree with FWP

Roasters who practice what FWP calls “authentic Fair Trade” (more on that later) are explicitly committed to transformation in a way that Direct Trade roasters generally are not. For many coffee consumers, this may be all that matters, and may inform a preference for Fair Trade over Direct Trade. Fair enough!

My Argument with FWP

What I struggle with is this: FWP continues to judge the merits of the Fair Trade model on the basis of the contributions of the roasters who do it best while judging the merits of Direct Trade on the basis of a tired stereotype. It compares the practices of specific roasters it characterizes as authentic Fair Traders — pioneers like Equal Exchange and activist roasters like Just Coffee and Higher Grounds — with an amalgam of practices attributed to Direct Trade generically. The Fair Trade narrative, informed by FWP’s active participation in the Fair Trade movement, is richly textured; the Direct Trade narrative thin and underdeveloped by comparison. Apples and oranges. It isn’t clear to me whether FWP doesn’t fully understand what the best Direct Trade roasters are doing, or whether chooses to omit that evidence from its communications. Either way it doesn’t make for a fair fight.

Disingenuous Claims

The table inserted in the FWP editorial includes some claims that I find less than illuminating.

Direct purchasing. FWP says the claim to direct sourcing “can mean just about anything” when advanced by Direct Trade roasters, but boasts that “the best Fair Trade roasters work in solidarity with small-scale farmers who grow their coffee.” So too, of course, do the best Direct Trade roasters. Implying there is a difference in the sourcing approaches of the leading proponents of each model is misleading.

Quality focus. In the third column, where FWP renders its judgments, it cautions consumers against equating cup quality with quality of life: “let’s not pretend there is any correlation between high quality coffee and making the world a better place.” I agree with this sentiment and flatly reject the suggestion made by at least one celebrity chef that the search for fine flavor will save the world. Flavor has no transformative potential if it is disembodied from a consideration of the social, economic and environmental circumstances in which it is created. But, when higher quality coffee fetches higher prices for the smallholder farmers who grow it — as it does in the Direct Trade model — fine flavor makes a contribution to the viability of smallholder farming, a contribution whose importance I would not discount at a time when the underlying economics of coffee farming are tenuous.

High prices. FWP says that the high prices paid by Direct Trade roasters “may not be the price going to the producer,” implying that the full FOB price paid to Fair Trade coops does go directly to the producer. Coops play the same commercial role that exporters do, delivering services including credit, transportation, warehousing, grading, hulling, export, financial options, etc. Like those exporters, coops need to recover the costs they incur in delivering those services, as well as the costs of certification. The table disingenuously suggests otherwise by raising this caution only for Direct Trade.

Farmer organization. Finally, FWP argues that, “Organized producer groups do more than pool together coffee and create market access for small-scale coffee farmers. They also advocate for political change and oversee community projects, making improvements for all.” As the leading cash crop for millions of smallholder farming families around the world, coffee and the terms on which it is traded are pretty important. But I agree with FWP. The coffee trade alone won’t likely foster widespread rural development or pull large numbers of smallholder farmers out of poverty in a single generation.

This research, based on real data from our Borderlands project in Colombia, reaches a similar conclusion. Farmer organization for political engagement and advocacy and for community activism are essential as both means to and evidence of real empowerment. Fair Trade as a movement is without a doubt more explicitly committed to processes of social organization and empowerment than Direct Trade. But does Fair Trade deserve all the credit for the extraordinary efforts of smallholder farmers in coffee-growing countries? Shouldn’t we attribute the achievements of La Fem, the inspiring group of women coffee farmers in Nicaragua enlisted as evidence of Fair Trade’s transformative potential, first and foremost to those women themselves?

Growers participating in our Borderlands project in Colombia have organized effectively, staring down guerrillas who tried to intimidate them. They have created community-based savings groups and emergency funds for people in need. They have pressed their claims on government, and they have gotten results in the form of public investment to improve infrastructure, reduce hunger, and make the coffee sector more competitive. They have sold their coffee mostly to Direct Trade roasters. But we attribute their successes in organization and their empowerment to them, not to their Direct Trade partners.

One other note here. FWP wants to give Fair Trade credit for something that is not part of its charter but central to Direct Trade (trading directly) while refusing to do the same for Direct Trade on something that is not part of its charter but central to Direct Trade (supporting smallholder farmer organization), when my experience suggests that the best roasters in each category do both.

In Summary

Direct Trade in coffee wasn’t born out of the same desire to radically transform the coffee trade that drove Fair Trade’s pioneers. Is has not had — or aspired to have — the same kind of social impact as Fair Trade.

But there are some good things happening in the coffeelands beyond the confines of authentic Fair Trade, despite the evidence marshaled by FWP. And some of these good things involve Direct Trade roasters who are unapologetically driven by pursuit of cup quality, not indifferent to the economic, social or environmental impacts of their work, and often keenly insightful about the conditions of smallholder production.

Here are just three immediate examples from my current work with Direct Trade roasters that are top-of-mind.

Economic. This research, based on data from our Borderlands project in Colombia, suggests that the only lots that were profitable in the low market of the 2013 crop year were the ones sold to Direct Trade roasters.

Environmental. More than 80 percent of the coffee that Counter Culture sources is certified organic — a pretty deep commitment to a top-shelf set of environmental practices. In Nariño, where there is little certified organic coffee available and less interest in pursuing certification, we are working with Counter Culture to develop a customized environmental performance scorecard that encourages agroforestry practices and ties financial incentives to continuous improvement in environmental practices.

Social. When confronted with the critique leveled by FWP that Direct Trade undermines social cohesion, Counter Culture invested in original research on the social impacts of its purchasing model. One of the commitments Counter Culture made as a result of that process was to not only source the highest-quality coffees from its partners but also those that don’t make the microlot cut. Counter Culture has made good on its commitment in our collaboration, sourcing single-A coffees along with microlots. Similarly, we will be working with Intelligentsia during the 2016 harvest as it expands its purchasing into lower quality tiers, including a single-A tier that will generate price premiums for coffees that haven’t previously qualified for them.

There are important distinctions between Direct Trade and Fair Trade. What I find frustrating is that those distinctions are often not fairly characterized in the debate about and between Direct Trade and Fair Trade. More importantly, I think the best expressions of the two models have more in common than the debate suggests. My conversations with Direct Trade roasters getting more serious about social impact and Fair Trade roasters getting more serious about quality incentives confirm that. And make me optimistic about the future of the coffee trade.



David P.

Great article. It’s hard for me not to look at the position FWP is taking with a rather high degree of cynicism. Its like any other ngo staking claim to both their own narcissism and market share. I absolutely believe in their founding principles but the reality is that they are huge and like any other Company, they are looking to generate more and more revenue every year. Direct Trade is competition, nothing more.

Nora B

I think it’s probably also worth mentioning that a large amount of the social impacts that result from Fair Trade or Direct Trade have less to do with how the coffee is traded than with the existence of third parties and organized networks who are helping out. That’s something conversations comparing and contrasting the two generally leave out, probably because both tend to highlight the lack of third parties in their model. However, transnational corporations and government agencies fund cooperatives who sell a % of their coffee FT and a % DT to do all sorts of social projects–even those organizations whose missions are to maintain free trade and liberalization of markets (while Fair Trade might ideologically oppose liberalization, it’s still a market solution). Fair Trade, by encouraging organization, does provides a space for those corporations or gov’t organizations to fund the projects they want to see, so that is one way FT contributes to social good in a very unique way. Coops and FT are a bit chicken-and-egg at this point. Also at this point, most impacts have very little to do with the price of coffee, not to mention that poverty-stricken individuals in developing countries have a different set of criteria for what success means, or what positive impacts are, or what a lot of money is. While La FEM may be made up of strong women who together have accomplished a lot, their existence as a cooperative–of many products, not just coffee–provides them the opportunity to be stronger, precisely because funders are seeking out organized cooperatives that sometimes sell Fair Trade coffee. This is just simply because a lot of cooperatives in Latin America sell FT coffee, and it’s easy to do social projects with a trusted, organized, vetted group. Counter Culture, while a pioneer of Direct Trade that many other roasters admire, needs groups like CRS to manage the social aspects of their DT model. If it were up to me, we’d be studying the Borderlands Project and seeing what about that model works in conjunction with DT, not the DT model alone. Counter Culture happens to be a good partner for the project, but I not convinced that has as much to do with DT or FT as it does with the general fact that coffee people fund coffee projects, even Nestle and the mega TNC members of IDH. Perhaps even especially those guys.



Thanks for your considered comment. I agree that the role of external support is important to consider in this conversation. My experience suggests that Fair Trade has benefited from exceptional access to external resources over the years—far more than Direct Trade and far more, perhaps, than its advocates care to admit.

The creation of TransFair USA and Fair Trade Certification in the U.S. market was subsidized by the Ford Foundation. USAID and European donor agencies have invested heavily in Fair Trade cooperatives for more than a decade. At CRS, our first coffee value chain project—the Fair Trade Coffee Project in Nicaragua beginning back in 2003—was funded by USAID to build Fair Trade supply networks in response to the coffee price crisis. And it hasn’t been just grants. Loans, too. I don’t know the figure, but I would be willing to bet that the overwhelming majority of Root Capital’s clients in the coffee sector are Fair Trade Certified coops.

This is part of what one Direct Trade pioneer once told me was so revolutionary about Fair Trade from the market perspective: it didn’t just help buyers find growers more efficiently than they did before, it also plugged them into the kinds of resources they need to make the whole chain work efficiently: agronomic extension, business development services, certifications, trade finance…It wasn’t all streamlined as a single consolidated turn-key affair, but the actors who delivered those services tended—like the Direct Trade buyer I mentioned—to converge naturally on FT Certified coops.

I don’t mean to suggest by this that somehow Fair Trade has had an unfair advantage. Quite the opposite: Fair Trade connected so naturally and neatly with these external investments and ancillary services precisely because it created a viable, market-driven platform for those investments and created a market demand for those services.

Nothing on a similar scale has happened with Direct Trade coffee roasters as far as I can tell, and that may be in part because Direct Trade has resisted both Fair Trade’s explicit embrace of social impact and its codification of principles and practices. While roasters like Counter Culture have explicitly articulated what Direct Trade means to it and hired third-party auditors to verify its compliance with the terms of its own DT Certification, there is no shared standard that is recognized across roasters. That makes it hard for investors to know what they are getting when they invest in supply chains anchored in the marketplace by Direct Trade roasters.

Finally, I suspect Counter Culture would object to your suggestion that it needs organizations like CRS “to manage the social aspects of their DT model.” The company was doing just fine on that account before we came along! Fair Trade coops manage a lot of the groundwork for Counter Culture just as they do for FT buyers. One of the company’s deepest coop relationships is with Valle del Santuario in Peru, which is part of the CENFROCAFE cooperative. In Bolivia, its Nueva Llusta relationship grew out of its work with CENAPROC. Most of its Ethiopia relationships are managed by the Yirgacheffe Coffee Farmers Cooperative Union that is a long-standing Fair Trade organization.

The situation is different in Nariño, Colombia, where we have had our deepest collaboration to date with Counter Culture in connection with our Borderlands project, because there ARE NO FARMER COOPERATIVES! Well, that’s not entirely true. There is one FT Certified coop in Nariño, about 2.5 hours from where Counter Culture is purchasing most of its Borderlands coffees. That coop has fewer than 300 members while Nariño has over 40,000 smallholder growers. In this context, in other words, Fair Trade roasters would also need to partner with organizations like CRS to manage the social aspects of their model to build cooperatives! (That is, incidentally, something we have been busy doing over the past four years, and we expect Nariño’s second FT Certified coop to enter the market next year.)


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