Wednesday, September 5, 2012

What do Fairtrade & Direct Trade Have to Do with Quality?

One of the biggest challenges the artisan chocolate community faces is perception. Consumers have perceptions around many of the issues that define artisan chocolate, such as the monikers for "fair trade" and "direct trade". What do these terms mean? It depends upon whom you ask. They are complex issues that are not easily reduced to a sound byte.

And that's the problem.These terms often end up reduced to a label used for marketing hype. I can't blame the marketers. The issues are complex and messy. They don't make an easy story for marketing purposes. Unfortunately, when reduced to a simple moniker, such as "fair trade", they often take on perceived meanings that may not be entirely accurate. I thought it would be useful to provide some thoughts on how fair trade and direct trade affect the cacao industry. Since fair trade and direct trade are meaty topics that would fill many pages, I'm going to provide a few high-level examples from recent conversations I've had with experts on these topics.

Let's start with fair trade. As Dr. Kristy Leissle (a.k.a., Dr. Chocolate) pointed out at our recent Serious Chocolate Talk ("Is my chocolate bar Fair, Direct or Free?"), one of the challenges with the formalized certification body, Fair Trade International (aka, "FLO"), is that there are dozens of pages of administrative, environmental, economic and other rules that members must follow to earn the label of Fairtrade certified. The administration of these rules is something that's put together by chocolate consuming countries (e.g., developed nations) and imposed upon cacao producing countries that have little to no infrastructure. Dr. Leissle points out that FLO has done a lot to raise awareness of the plight of farmers growing agricultural commodities in the Third World. It has not, however, been the economic revolution it purports to be.

Fairtrade certification can be expensive and logistically difficult to maintain, and in most situations it does not provide incentives for the farmer to produce quality cacao. The current $200 per metric ton Fairtrade premium is typically used to fund development projects at the village level, such as installing water pumps or digging wells. These projects do benefit farmers, but they are not explicitly intended to improve cacao quality and have nothing to do with growing fine flavor strains.

By contrast, many of the small-batch chocolate makers pay 2-3x the world market rate for cacao, and they usually purchase more directly from the farmer. For some prized cacao, they're often paying much more than 2-3x the world market rate. The current bulk market commodity price for cacao is approximately $2,450 per metric ton (as of August 20, 2012). Isn't it in the farmer's benefit to receive $4,900 per metric ton (2x $2,450) for growing a fine flavor strain than it is for them to receive $2,600 ($2,400+$200 Fairtrade premium) per metric ton of bulk cacao?

But it's not just the farmer who benefits. Chocolate eaters benefit as well. Paying the farmers a premium for quality creates incentive for them to continue to produce quality varietals of cacao using excellent fermentation techniques. This results in some darn good chocolate.

So what, exactly, is direct trade? Not surprisingly, it depends upon whom you ask. Unlike Fairtrade, there is no certification body for direct trade. There are many different examples of what I'd consider direct trade. For me, it comes down to stated principles that provide the farmer with incentives to produce quality cacao and leave him or her with more of the profits, eliminating layers of middlemen. There are many different ways to accomplish this in the complex world of cacao sourcing. I offer a few as examples.

I'll start with a brief mention of Askinosie Chocolate, whose purchasing practices I discussed in more detail in another blog post. Askinosie develops relationships with farmers, purchases cacao directly from them and shares 10% of profits with them. That's about as direct as it gets.

Taza Chocolate, a small-batch American chocolate maker, purchases 90% of its cacao from a cooperative in the Dominican Republic called La Red. Taza has created its own certification called "Direct Trade Certified Cacao" based on its relationship with La Red. While creating your own certification might sound like a marketing ploy, it actually can work well in a situation like Taza's. By setting up criteria that are clear, simple and important to both Taza and the farmer, Taza is able to keep bureaucracy to a minimum and provide the farmer with incentives to produce quality cacao. Taza pays the farmer a premium to produce organic cacao using fair and humane labor practices with a minimum of a 95% fermentation rate and 7% or less moisture content. It's straightforward and it's focused on quality measurements.

I had a long phone conversation with Colin Gasko of Rogue Chocolatier, one of my favorite craft chocolate makers, to better understand how he sources cacao. He produces some of the smallest batches of chocolate around, and he currently makes 4 different single-origin bars. His sourcing model demonstrates the many complexities of buying cacao, particularly as a small-batch maker who purchases small quantities of cacao.

Colin's cacao sourcing strategy varies depending upon the origin of the cacao. He buys from renowned cooperatives in some countries, shares containers that come from well-known farms in other countries, and buys directly in others. In situations where Colin might develop a direct relationship with a farmer, he usually hires a broker when it comes time to make a purchase of cacao from the farmer.

Why hire a broker? Brokers are better equipped to deal with importation logistics, such as customs and freight. As Colin put it, he doesn't have the scale or expertise to be an importer, and that's not where his time is best spent. Does Colin's direct relationship with the farmer classify as direct trade, even though he's hiring a broker? I would say most definitely "yes". In this example, most of the layers of middle men have been eliminated from Colin's purchasing process and the farmer receives much more of the value of his cacao in payment. In addition, Colin is often paying considerably more than the world market rate to the farmer for producing quality cacao.

As you can see, fair trade and direct trade are complex issues that really can't be covered in a sound byte or one blog post. So what can a conscientious consumer do? Look beyond the labels. Understanding the truth behind your chocolate takes a bit of research. If you really want to know, you'll need to do the work.

The best starting point is the chocolate maker's website. See what they have to say about how they source cacao, and if you don't see anything, ask. The way they answer the question and their willingness to talk about the issues will also give you an idea of how they view the issue altogether.

Make sure to also compare what you learn from different sources. For example, many of the largest chocolate companies in the world are members of the World Cocoa Foundation, a 501(c)(3) that was established to improve the incomes of poor cacao farmers. The World Cocoa Foundation has a number of nobly stated goals, but exactly what do they mean in practice? Is your bar of chocolate helping the farmers improve their incomes? If so, how? How does this approach contrast with the approach of the small-batch makers? Do these goals encourage the farmer to plant better varietals and improve fermentation?

You may be saying to yourself, "But I just want to eat my chocolate bar, already!". I don't blame you. It's a lot of serious talk for such a happy treat. Let me simplify this for you. Don't take labels at face value. I'm not saying you shouldn't purchase chocolate with labels like Fairtrade and direct trade. I'm just saying that you shouldn't assume that they're a panacea to a farmer's problems. They might be, but without doing the research, you won't know.

Happy chocolate tasting,
Chief Chocophile

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