How does Fairtrade work?

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When I talk to people about fairafric and our impact a lot of folks say, but wait, isn’t Fairtrade solving these problems already? I usually make this calculation for people in order for them to get an idea about the impact of Fairtrade (and to compare it to fairafric):

The Impact of Fairtrade

One ton of cocoa that is shipped from West Africa, Asia or South America is valued at around $3,000. There are differences in prices for different qualities but the bulk of beans are traded at prices that are determined on a commodity exchange. You can find current quotes here.

The Fairtrade premium for one ton of cocoa is $200. This sounds a lot but compared to the $3,000 for the ton in the first place it’s really only a top up of 6.7%. Fairtrade also guarantees a minimum price of $2,000 per ton, however, since 2008 we haven’t seen any prices below $2000 so this guarantee has more of a symbolic character by now. You can find these numbers on Fairtrade’s website. I’ll calculate the per bar impact further down.

Another question people often ask, is how much of the price I pay is actually going to farmers or the country of origin as a Fairtrade premium. This is a complex calculation and Fairtrade tends not to talk too much about numbers like this and it is not that easy to get hold of these figures. This is one rare document that details revenues and premiums and even delivers percentages per food category, it’s the annual report of the German division of fairtrade. The numbers that can be found within are as follows:

Fairtrade Financial Impact

 

 

 

 

 

 

 

 

 

 

 

 

For chocolate for instance, the premium as a percentage of the full price paid is 0.7%. This means that, on average, the farmer or country of origin receives an additional cent for every 1,50€ you spend on Fairtrade chocolate. People who think they are changing the world when buying Fairtrade certified chocolate are almost certainly not at all aware of this. Keep in mind that these numbers are additional revenue. Any costs associated with obtaining the Fairtrade certification are not deducted. Now let’s look at this from another angle.

The impact of Fairtrade for the country of origin

Most people buy Fairtrade and other certified products to fight poverty and help the people in the Third World without really knowing what this  means in terms of money flows. And that leads ultimately to the question: What share does the country of origin become of the price that you as a consumer pay. According to fairtrade this is way below 10% while the big chocolate brands are netting some 70% of the price you pay in the shop. Let’s make the calculation ourselves:

fairtrade per bar

 

 

 

 

 

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This shows that the premium of $200 actually translates into a premium of between 1.4 cents for dark chocolate and for the more popular milk chocolate 0.5 cents per bar. The Fairtrade premium per bar is around or even less than 1 cent and that’s assuming no cost to obtain certification whatsoever.

This by any standards poor impact motivated us to start fairafric. We want to provide consumers who are willing to pay a fair price for a proper social impact with a real opportunity to do so. Every bar of fairafric will leave at least 70 cents in the country of origin and increase local revenue by at least 50 cents per 100g bar. Learn more about our impact.

If you want your chocolate consumption to have a lasting positive impact, to create skilled employment and increase income and access to education & health services in Ghana then get yourself and your loved ones some delicious fairafric!