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Fair Trade, Source Direct: A Purple Cow in Rhode Island #3pVOTE

contest | Monday December 27th, 2010 | 2 Comments

This post is part of our year-end “year in review” sustainable business writing contest. We’ve asked 3p readers to submit their own thoughts about the state of sustainable business in 2010. More information about the contest is available here. All submitted articles will be available on this page. Voting will happen in January!

By Robert Hart

This weekend, while visiting the Wintertime Farmers’ Market in Pawtucket, RI, I stopped by the booth of New Harvest Coffee Roasters, a local roaster of whom I am a loyal customer.  I typically pick up their packages of Whole Bean coffee when I shop at Whole Foods, but often I will savor a cup of their Pour-Over coffee while I idle around the Farmers’ Market.   On Saturday, I approached the booth, and asked the barista for a cup of Kenya AA Gaturine Estate, a coffee I had not seen previously at Whole Foods.  The barista carefully prepared my cup, then handed it to me.  To quote Agent Dale Cooper in the seminal television program Twin Peaks, it was a damn fine cup of coffee.  I asked the barista why I never saw this coffee at Whole Foods.  He told me that Whole Foods is very careful about what types of coffee they want.  

A post card explained:

SOURCE DIRECT: How to connect coffee consumers with coffee growers

“A DIFFERENT WAY”

Source Direct is an alternative to Fair Trade.  As artisan roasters, we need to connect with small producers to develop the highest quality coffee.  This is difficult under the Fair Trade model, which is based on very large cooperatives that produce huge mixed-lots of coffee.  It treats coffee as a commodity.  We consider coffee to be an artisan food, and Source Direct is a way for us to achieve new levels of quality with our farmer producers.

THE MODEL

Source Direct is not a certification.  It is commitment to do what it takes to create real collaboration between New Harvest and small coffee farms.  The most important element is communication: farmers need to know what we want and we need to know what their challenges are in meeting our needs.  Usually it means visiting the farms at least once a year, checking up on the picking and processing practices, tasting coffee with growers and comparing notes.  Sometimes it involves purchasing a crop months before we receive it.  Occasionally, a barista trainer will find himself training 30 Costa Rica farmers at a Tarrazu wet-mill.

At Whole Foods, New Harvest sells 4-5 varieties of coffee that are all Shade Grown, Fair Trade, and USDA Organic certified.  Yet, at the farmers market, New Harvest was promoting a variety of coffee with none of those certifications, but instead under a new program where the company pledges only to “do what it takes.”   New Harvest’s Source Direct program, a brand new initiative from the local company, represents a potential paradigm shift away from Fair Trade.  The example of these two types of coffee, sold through two different distribution channels, speak to the complexity associated with the Fair Trade label as it continues to grow in volume; estimated worldwide sales of Fair Trade products increased 187% between 2004 and 2007.

Valery Bezencon, a management consultant and Peruvian business professor, in his thesis The Fair Trade Journey: Conciliating Romance and Strategy, examines the Fair Trade market as a whole, specifically comparing the growing mainstream distribution growth with traditional alternative distribution, and identifies the different motivations of customers who purchase Fair Trade products.  Bezencon’s analysis provides context for the New Harvest Source Direct program, as well as prescriptions for marketers and managers of Fair Trade products.

Fair Trade’s continued growth and relevance hinges partially upon the manner with which it is marketed to consumers.  The Fair Trade label that consumers see on products serves as an instrument to provide information to consumers, and to convey the underlying values of the company that sells the product.  Fair Trade products are not competitive on price with non-Fair Trade products, so the Fair Trade products must provide an added value.

Consumers approach Fair Trade products for different reasons, but for Benzecon, it all comes down to the level of “involvement,” or motivation, to seek out Fair Trade products; that involvement can originate from the product itself or from the Fair Trade certification.  Benzecon coins a term to describe the latter consumer involvement: Fair Trade adhesion, the extent to which consumers buy Fair Trade products because of their underlying Fair Trade principles.   According to Benzecon, increasing the Fair trade adhesion will result in greater sales of Fair Trade products.  However, New Harvest Coffee, a local roaster popular with foodies who appreciate both Fair Trade and good local food, is marketing a new product that runs in direct opposition to Fair Trade.  Why would they do that?

New Harvest took the initiative to communicate about its new product, directly to its most ardent consumers.  In one sense, Source Direct is, in the frame of Seth Godin, a Purple Cow.  However, New Harvest makes an important claim about the Source Direct coffee: it tastes better.  According to New Harvest’s marketing material, Fair Trade coffee is a commodity sold in mixed lots.  For a company that continues to sell many pounds of that Fair Trade coffee, that is a bold strategy.  According to Benzecon, the folks at New Harvest may be onto something:

Hedonic value is a weak predictor of Fair Trade decision involvement.  This means that taste is hardly an argument to prefer Fair Trade over conventional coffee.  Indeed, Fair Trade products do not at present differentiate themselves with better quality or taste.” (Benzecon 86)

According to Benzecon, the biggest indicators of commitment to Fair Trade products are Fair Trade adhesion, concentrating on empowering small farmers and improving their working conditions.

New Harvest emphasizes in its marketing material that Source Direct “is commitment to do what it takes to create real collaboration between New Harvest and small coffee farms.  The most important element is communication: farmers need to know what we want and we need to know what their challenges are in meeting our needs.” New Harvest is taking the most important aspects of Fair Trade that appeal to consumers, and repackaging them around their own Purple Cow: finer tasting coffee.  In fact, New Harvest seems to be reading right out of Benzecon’s playbook.  He recommends that the communication strategy for a company to increase Fair Trade’s revenues “should be focused on the dimensions that exacerbate a differentiated identity in order to nourish consumers with additional signification related to Fair Trade values, adding competitiveness to the products.” (Benzecon 89)

Despite New Harvest’s Purple Cow, Fair Trade products are growing in availability.  It used to be that consumers could only find Fair Trade products at specialty shops, and at grocery stores like Whole Foods.  Now, most big grocery chains have organic sections with a wide variety of products; even Wal-Mart sells Fair Trade products.  How can Fair Trade avoid becoming a meaningless, ubiquitous seal, whose standards of excellence are swallowed under the pressure of greater market share and revenue?

Most companies just throw the Fair Trade label on their product and leave it to consumers to judge.  An artisan coffee producer like New Harvest has the luxury of communicating more directly with its customers than a global behemoth like Starbucks does.   Benzecon has a strategic recommendation for any company that wants to increase sales of their Fair Trade products: know the market, including its consumer segments, and communicate directly to those niches.   Benzecon surveyed 433 consumers of Fair Trade coffee in Switzerland, and discovered some important insights.  He found that younger and less educated consumers buy Fair Trade products for different reasons than older and more highly educated consumers.  For example, the taste of Fair Trade coffee is very important to less educated consumers.  The Fair Trade market is much more complex than previously understood, and communicating with it effectively and efficiently will require more than a simple seal – it will require tailored communication.

However, despite their foray outside the Fair Trade universe, New Harvest is a model for communicating with its customers.  New Harvest baristas treat their coffee like fine wine, and empower their customers with knowledge. When New Harvest says they are committed to doing “what it takes” for their partner farms, their customers believe it.  The Starbucks of the world can learn a lot from New Harvest.


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  • Toivo Halvorsen

    This was a very interesting and informative post. I had no idea that this was happening. Thanks Rob!

    • Wildcat

      Source Direct seems to be a terrific way to create value in the differentiation and specialization that would otherwise not be recognized on the commodities market. By bringing craft to coffe sourcing you open a pleathura of options. I wonder if Source Direct has considered Zero Carbon Coffee?