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September 30, 2002
Oxfam Launches Coffee Rescue Plan
    by William Baue

Oxfam International's new effort to promote the fair trade of coffee garners immediate support from Domini Social Investments.


On September 18, global nonprofit Oxfam International launched the Coffee Rescue Plan, an ambitious initiative that encourages cooperation among governments, large coffee roasters, and other stakeholders to help solve the current coffee price crisis. To coincide with the launch, Oxfam released a report entitled Mugged: Poverty in Your Coffee Cup that describes and documents the problems in the global coffee market. Also on the day of the launch, Domini Social Investments announced its support of the Coffee Rescue Plan.

"The worldwide coffee industry is in crisis," said Adam Kanzer, Domini's director of shareholder advocacy. "Over the last three years, the price that coffee farmers receive for their harvest has fallen by almost 50 percent to a 30-year low."

Oxfam's report points out that it now costs more to grow and pick coffee than it does to sell it, a situation that imperils the livelihood of farmers. According to Oxfam, coffee farmers in the 45 coffee-growing countries receive on average 24 cents per pound while consumers in developed countries pay about $3.60 a pound. This represents a 1,500 percent markup.

"A market that relies on such shocking inequities cannot be sustained," said Mr. Kanzer.

The Coffee Rescue Plan points out that the "Big Four" coffee roasters--Sara Lee (ticker: SLE), Procter & Gamble (PG), Nestlé (NESZn), and Kraft, owned by Philip-Morris (MO)--buy nearly half of the world's coffee crop. They thus dominate the $60-billion global coffee industry and their healthy profit margins range between an estimated 17 and 26 percent.

"If everyone in the supply chain were benefiting, this would not matter," states Oxfam in its report. "As it is, with farmers getting a price that is below the costs of production, the companies' booming business is being paid for by some of the poorest people in the world."

Oxfam contends, and Domini agrees, that the Big Four's business strategy is short-sighted and ultimately self-destructive, as their practices put coffee farmers out of business. Furthermore, the Big Four risk alienating consumers, who are gaining awareness of the social and environmental costs of coffee production. Oxfam points to the rise in sales of fair trade coffee, which promotes paying coffee farmers a living wage price, as evidence of growing consumer concern.

Oxfam also criticizes the International Monetary Fund and the World Bank. Through their unregulated, free market approach, these two organizations in effect promote increased coffee production in developing countries. In Oxfam's view, this results in a failure to protect against price decreases due to oversupply. Coffee growers in developing countries now suffer the most because global coffee production outpaces consumption by eight percent, according to Oxfam.

The Coffee Rescue Plan calls on large coffee roasters and international governments to increase the market for fair trade coffee. The plan also encourages roasters governments to bring the current oversupply of coffee back into line with demand and to help ensure that coffee farmers earn a decent living.

"Oxfam's Coffee Rescue Plan is certainly the most comprehensive response yet offered by anyone to the ongoing coffee crisis," said Rodney North of Equal Exchange, a Massachusetts-based dealer in fair trade coffees. Mr. North spoke as an industry expert, though his views may not represent the official views of Equal Exchange. "What makes it such an appropriate, and important, contribution is that it makes clear that there is no one 'silver bullet' solution."

Mr. North specifically endorsed the destruction of at least five million bags of the lowest grade coffee stocks, saying that such action could help bring global supply and demand back into balance. Oxfam recommends that developed countries and large roasters fund this effort.

Mr. North also endorsed Oxfam's call for investors to register their concerns with coffee companies.

"I would go further and suggest that investors who feel strongly could put their capital to work at those companies that are more proactive and remove it from those companies that are indifferent or slow to address the crisis," Mr. North told SocialFunds.com.

 

 
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