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Where does the Fair Trade money go? How much consumers pay extra for Fair Trade coffee and how this value is split along the value chain

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  • Naegele, Helene

Abstract

Fair Trade certification aims at transferring wealth from the consumer to the farmer; however, coffee passes through many hands before reaching final consumers. Bringing together retail, wholesale, and stock market data, this study estimates how much more consumers are paying for Fair Trade-certified coffee in US supermarkets and finds estimates around $1.50 per lb. The study then assesses how this price premium is split between the different stages of the value chain: most of the premium goes to the roaster’s profit margin, while the retailer surprisingly makes smaller absolute profits on Fair Trade-certified coffee, compared to conventional coffee. In the period studied in this study, the coffee farmer receives about a sixth of the price premium paid by the consumer.

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  • Naegele, Helene, 2020. "Where does the Fair Trade money go? How much consumers pay extra for Fair Trade coffee and how this value is split along the value chain," World Development, Elsevier, vol. 133(C).
    • Handle: RePEc:eee:wdevel:v:133:y:2020:i:c:s0305750x20301327
    DOI: 10.1016/j.worlddev.2020.105006
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    4. Auld, Graeme & Renckens, Stefan, 2021. "Private sustainability governance, the Global South and COVID-19: Are changes to audit policies in light of the pandemic exacerbating existing inequalities?," World Development, Elsevier, vol. 139(C).

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    More about this item

    Keywords

    Coffee; Fair trade; Price premium; Value chain; Voluntary sustainability standards;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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