HUI Working Papers, HUI Research
Are Fairtrade Prices Fair? An Analysis of the Distribution of Returns in the Swedish Coffee Market
Abstract: Consumers pay a premium for Fair Trade coffee, often
assuming that it mainly benefits poor coffee farmers. However, several
studies report that most of the premium accrues to actors in the consumer
countries, such as roasters and retailers. This paper analyses how the
returns to Fair Trade are distributed among bean producer countries,
roasters and retailers, and Fairtrade Sweden, using scanner data on 185
products from Sweden and information about costs of production. The
distribution depends on how much more costly it is to produce Fair Trade
coffee compared to conventional coffee, given costs of beans and licences.
Assuming the difference is 5 SEK per kg (about USD 0.80), which is on the
high side, roasters and retailers get 61%, while producer countries, i.e.,
coffee farmers, cooperatives, middlemen, exporters and Fairtrade
International, get 31%. The rest accrues to Fairtrade Sweden. These
estimates are uncertain, but there is there strong evidence that Fair Trade
retail prices are higher than the level attributable to the costs of Fair
Trade beans and licences.
Keywords: coffee supply chains; ethic labels; Fair Trade premium; Fairtrade; market power; organic coffee; (follow links to similar papers)
JEL-Codes: D43; O19; P46; (follow links to similar papers)
25 pages, February 22, 2015
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