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September 17, 2003
Shareowner Action Prompts Procter & Gamble to Sell Fair Trade Coffee
    by William Baue

In response to a shareowner action campaign, Procter & Gamble launched a Fair Trade Certified coffee; critics challenge the company to commit more fully to sustainability.


Earlier this week, Procter & Gamble (ticker: PG) launched a new coffee product that is Fair Trade Certified, a protocol that guarantees coffee farmers a minimum of $1.26 a pound for their harvest instead of the 52-cent per-pound global average for green coffee. The move culminated a long dialogue between the largest seller of coffee in the US and a coalition of shareowner activists and nongovernmental organizations (NGOs) that had filed a shareowner resolution urging P&G to address the global coffee crisis.

"This is a small step forward, but a significant one," said Adam Kanzer, general counsel and director of shareholder advocacy for Domini Social Investments, which led the shareowner dialogue with P&G.

"We're glad that Procter & Gamble is making this first-step commitment to Fair Trade, and look forward to the day when it commits to paying farmers a decent price for all its coffee--like the coffee companies that pioneered Fair Trade," added Sarah Ford of the Interfaith Fair Trade Initiative, a faith-based organization that advocates for fair trade.

P&G's goal is to lead the market in Fair Trade coffee in the near future, according to Tonia Hyatt, a spokesperson for P&G. P&G will sell its Fair Trade coffee to wholesale accounts such as universities and restaurants. It will also be available to consumers through its Millstone brand and will be sold on the Millstone web page and through a toll free telephone number.

"If we were to become a leading seller someday in the next few years, that would mean approximately two to three million pounds," Ms. Hyatt told SocialFunds.com. Ms. Hyatt could not say what percentage of Millstone or of P&G coffee imports this amount would represent, as "that's competitively sensitive information."

Equal Exchange, a Massachusetts-based cooperative that imports three million pounds of Fair Trade coffee annually, estimates that P&G's two major coffee brands, Folgers and Millstone, together import over 500 million pounds of green coffee annually. P&G's projection of two-to-three million pounds of Fair Trade imports thus represents "well less than one percent of P&G's coffee imports," according to Rink Dickinson, president of Equal Exchange.

"If the likes of P&G, with their massive resources, can't commit to Fair Trade for even one percent of their coffee, their announcement appears more driven by marketing than substance," Mr. Dickinson told SocialFunds.com. "The company does not seem willing to honestly address the fundamental inequities inherent in the world coffee trade."

Equal Exchange has issued a challenge to P&G: if the marketing giant matches Equal Exchange pound for pound in 2004 Fair Trade coffee sales, the cooperative will donate $25,000 to one of its small farmer cooperative trading partners in Latin America.

"Unfortunately, their choice to only offer a single Fair Trade coffee, at a higher price, and not make it available in stores where people shop, says they're trying to do as little as possible," Mr. Dickinson said.

Ms. Hyatt characterized P&G's actions differently.

"We've been monitoring consumer interest in these types of coffee that are excellent in quality and that also assist farmers, and we would like to build more consumer awareness before we go to retail stores," she said. "The consumer will vote and the consumer will decide if and when we go into retail stores."

The positions taken by P&G and Equal Exchange may not be mutually exclusive, but instead complementary.

"I don't necessarily see this as opposing camps, but rather as healthy competition," said Mr. Kanzer of Domini. "Everybody acknowledges that if you want to make a real difference and really impact the crisis these farmers are living under, you need to bring in the big players to significantly increase the volume of fair trade coffee that's purchased."

"We're hoping that this commitment from Procter & Gamble will expand, and that it will encourage other major roasters to get involved," Mr. Kanzer told SocialFunds.com.

"The more players that get involved, the better for the farmers," said Mr. Kanzer.

 

 
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