Third World Gets Help to Help Itself

PARIS: A steaming bowl of golden Maftoul couscous is an ancient Mediterranean dish transformed to nouvelle cuisine in France by adding standard chickpeas and an extra helping of a Fairtrade guarantee.

The sun-dried couscous, pressed by hand from wheat flour and salty water, is part of a so-called fair trade food chain linking the village of Taybeh, on the West Bank near Ramallah, with Alter Eco, a Parisian import company.

When the Palestinian uprising blocked markets for the village cooperative's couscous, olive oil and other products, Alter Eco stepped in to offer the cooperatives a chance to trade - at a decent price.

"People couldn't sell olive oil in the Arab world because their borders are closed," said Father Raed Abu Sahlia, a parish priest in one of the last Palestinian communities that is almost entirely Christian. "From there, our story begins."

Two years later, Taybeh is one outpost in a vast Fairtrade network, a system aimed at providing a better life for about 800,000 third world growers by paying them above-market prices for their goods - and passing the cost on to affluent Western consumers.

The idealistic movement started nearly two decades ago with coffee beans, and has grown into an estimated $500 million industry covering an ever-growing range of products from African cotton to Peruvian coffee.

But it remains a small part of global trade - and the business of compassion is being increasingly confronted with competitive pressures.

Discount stores have cut into Fairtrade sales in countries like Denmark by waging price wars for bananas and coffee. Critics scoff that some large companies offer a limited number of Fairtrade products to burnish their corporate reputations.

And then there is the quirky behavior of customers who express support for ethical labeling, according to surveys, but do not always act on their best social impulses, whether because of low product visibility or higher cost - up to 10 percent more for a package of Fairtrade coffee, for example.

"Consumers are very schizophrenic," said Tristan Lecomte, chief executive and founder of Alter Eco, which imports 56 categories of certified products. "On the one hand, they say that they want to be socially responsible, but then they all jump on the hard discounts."

The concept goes back to 1988, when the Max Havelaar Foundation was formed in the Netherlands during a world coffee market crisis to ensure that third world growers earned above market prices. Havelaar was the hero of a controversial Dutch novel, published in 1860 by Edouard Douwes Dekker, who denounced the colonial exploitation of Javanese coffee workers.

The idea spread and in 1997, an umbrella group, Fairtrade Labelling Organizations International, was created. Based in Bonn, it represents 19 countries, including the United States.

Companies that want to place the trademarked Fairtrade label - which in Europe features an abstract blue and green figure that seems to be briskly waving - agree to buy goods at above-market prices that guarantee small growers a profit. They also must contribute to development projects for local cooperatives, aiming to eliminate costs of middlemen in a system monitored independently for labor and environmental standards.

"When prices on the conventional market are too low for us to produce, Fairtrade allows us to profit from the cultivation of coffee and sugar cane," said Santiago Paz López, a member of Cepicafe, a cooperative in Peru that has been certified since 1997. "In the past, coffee growers were considered marginal citizens of the third or fourth class. Fairtrade has given the growers back their esteem and pride in their products."

The Fairtrade organization has tracked steady increases in global sales, with volumes nearly tripling to 121,856 metric tons between 2001 and 2004.

But the reality remains that Fairtrade sales still make up less than 0.01 percent of the world's markets.

In France, the Fairtrade market is marginal as well, with the French spending on average about 64 euro cents, or 49 U.S. cents, annually on the products, compared to €10.20 for the Swiss.

At E.Leclerc, a French hypermarket chain, the products amounted to just 0.3 percent of sales last year, according to the company's chief executive, Michel-Édouard Leclerc.

Revenue last year totaled €9 million, or $11.6 million, but Leclerc expected that to rise this year to €15 million. That is largely because the chief executive has seized on Fairtrade as a corporate issue, appearing at a Paris news conference in April to discuss the growing market and opening his stores to a series of events in May to promote the products with appearances by some growers and producers.

Leclerc insisted that customers were becoming more sophisticated, buying basic goods at discount stores and shopping for luxury goods, jewelry and cosmetics at his stores.

"With the new maturity of consumers, there is a real social demand as customers learn more about production conditions," he said. "All of the chains are going to have to respond to ethical demands."

Top retailers in a small country like Switzerland have already started. Fairtrade bananas became a category killer, elbowing out giants like Dole, when the two largest supermarket chains, Coop and Migros, made a decision to promote them. Today Fairtrade bananas have more than 50 percent of the Swiss market. Migros sells about 10,000 tons of Max Havelaar-labeled bananas annually at a price that is about 10 euro cents higher per kilo than other bananas.

Their success is a lesson in the key elements that allow Fairtrade to flourish. The highest levels of sales are in countries with distribution in mainstream outlets with well-informed consumers and effective publicity.

"Why bananas and not coffee?" said Constantin Kostyal, a product manager for bananas for Max Havelaar in Switzerland. "Our consumers have been educated. I think bananas have a bigger stigma because historically bananas were handled by a few companies that at a certain time had a huge influence on politics in Latin America."

Those trends have prompted other industry giants to take notice. Chiquita Brands International is involved in discussions in the United States to gain certification for some of its bananas. Dunkin' Donuts serves Fairtrade espresso while Starbucks stocks one brand of whole-bean Fairtrade coffee. In April, the Ben & Jerry ice cream brand introduced three flavors made with certified coffee extract.

"Across markets, whether it's bananas, coffee or tea, when some companies start to do Fairtrade, then other companies sitting on the sidelines start to think, 'We should do it too,"' said Paul Rice, founder and chief executive of TransFair USA, a nonprofit Fairtrade licensing organization in California.

"We're not so naïve to think that a big company like Sara Lee or Procter & Gamble is going to convert to 100 percent Fairtrade overnight. And so the label allows a company to try a test."

Perhaps the most nagging fear for fair traders is the threat of low-price supermarkets, which generally do not stock their products. In Denmark, sales of Fairtrade coffee declined by almost 20 percent in the past three years because it faced stiff price pressures from four chains of discount stores.

Sales have stabilized lately, said Judith Kyst, the head of marketing for Max Havelaar in Denmark. To compete, the organization set up coffee clubs and a billboard campaign that featured well-known politicians on the right and the left sharing a cup of coffee.

"If you say to a retailer, Fairtrade is the big trend today, the answer you get back is that it is nothing. It has gained 2 percent market share on coffee, but it's a margin. In contrast, the big hard discount stores have gained 15 percent on all their products. There's a big discrepancy," said Lecomte of Alter Eco. "If we're not good enough in marketing and offering quality products, then it will be difficult to stay on the shelves."

To maintain his own standards, he conducts personal inspections of his producers, including a visit to the Palestinian village of Taybeh.

Seven years ago, the 31-year-old chief executive started Alter Eco with backing from individual investors. His business plan was to make direct connections with small, marginal producers in southern countries to stock two Parisian stores. But the branches failed, leaving his company with more than €400,000 in debt. Since then, he has built Alter Eco back to profitability with distribution through hypermarkets like E.Leclerc and Carrefour, earning €80,000 on revenues of €5.5 million last year.

The links in his import chain now spread over 19 countries and 25 cooperatives from rice growers in Thailand to olive oil producers in Taybeh, where he pays €4.50 a liter for olive oil along with contributions for community projects such as its school.

He estimates that the Fairtrade net- work has benefited 246 farmers whose main income comes from olive oil, along with 20 women in the couscous cooperative. The trading, he said, also has inspired new ambitions, including developing a cosmetics line of olive oil creams and shampoos.