How to Brew Justice

By G. Jeffrey MacDonald/ West Bridgewater, Mass.

In the mid-1980s, Rink Dickinson wanted to go into business to help an unusual constituency: his vendors. He proposed to import coffee by paying impoverished Latin American farmers double the going rate for their beans. Reaction from potential investors was predictably cool. "People were just, like, 'That's a bad idea,'" he recalls. "The concept of having your values embedded in everything you did in your business ... was just not happening in any major way at all." Nonetheless, with just $100,000 from family, friends and a few supportive idealists, Equal Exchange was born in 1986 in a 2,000-sq.-ft. room in Boston's South End. Today copresident Dickinson boasts a 77,000-sq.-ft. facility outside Boston, a full-time staff of 80 and a 33% average annual growth rate over 19 years.

But the real accomplishment, Dickinson will tell you, is what has happened in the 15 developing nations where Equal Exchange buys from indigenous farmer cooperatives. In Oaxaca, Mexico, residents ride a fleet of cooperative-funded buses on routes that take hours to walk. In La Libertad, El Salvador, children who used to walk past an empty school building now study inside with a teacher who is paid by the cooperative. In Chajul, Guatemala, a cooperative-funded health clinic is helping reduce child mortality. And in remote corners of Peru, growing numbers of children of uneducated farmers are leaving to pursue university degrees, thanks in part to a predictable market for family-grown crops.

Equal Exchange can also boast that it started a trend. About 450 coffee importers opt to pay above-market rates for certain beans and then sell the product as premium coffee in 45,000 stores nationwide with Fair Trade certification, an independent audit from TransFair USA. The Fair Trade sector accounts for just 2% of the $22 billion domestic retail coffee market. But the industry is striving to keep up with rising public expectations for the way the brew comes to market.

Starbucks Coffee, for instance, in 2004 piloted its own certification program known as Coffee and Farmer Equity (C.A.F.E.) Practices. By 2007, the company intends to buy more than half its coffee from a supply chain that independent auditors have inspected. Among the criteria: growers must minimize deforestation and receive "premium" prices, that is, those high enough to turn a profit.

Equal Exchange has helped create a new paradigm in an industry with a reputation for keeping suppliers poor. "The coffee industry for several hundred years has been viewed as a competition between producers and consumers," says Ted Lingle, executive director of the Specialty Coffee Association of America. "Where the specialty market is changing is in getting everyone in the supply chain to recognize that there's a partnership [which entails] some sort of shared prosperity."

At Equal Exchange, countercultural thinking comes naturally. Employees ride bicycles and trains to pickup spots to minimize auto emissions en route to company headquarters in an industrial park in West Bridgewater. The office wing resembles a college dormitory: tapestries cover walls, posters plead for peace, an acoustic guitar sits atop the desk of Rob Everts, Dickinson's copresident and a former organizer of California farmworkers. As a matter of policy, top management earns no more than three times the salary of entry-level employees, who start at around $25,000 a year. After a probationary period, all employees own one share of voting stock in the company, which gives each an equal say in key policy decisions.

But to fulfill their social mission, staff members rely on shrewd business acumen and a few key premises. First, they trust that consumers are willing to pay a little more to help family farmers, especially if the coffee in their cup is extraordinarily tasty. They keep costs down by eliminating middlemen whenever possible. And they defy industry norms by lending cash to farmers prior to harvest. That move aims to breed loyalty, eco-friendly harvesting techniques and uncompromised bean quality.

Despite Equal Exchange's efforts, there's still a long way to go before coffee growers will have a fair deal. Serious problems persist for coffee producers in developing nations. Commodity prices have languished well below $1 per lb. for much of the past two decades, so crops have often been sold at a loss, leading many families to abandon their farms for a better life in the cities. "It's forcing families who have depended on coffee for income into destitution," says Matthew Aho, who is producing a documentary on Fair Trade's impact on Peruvian farmers.

Fair Trade isn't a panacea for coffee growers' difficulties. Uneducated farmers sometimes don't understand why their cooperative has made certain decisions with their dollars, for example, according to Todd Caspersen, director of purchasing at Equal Exchange. What's more, the cooperative movement is still just developing, so big companies say they have to buy from brokers as well. "A company of our level couldn't find all we need from cooperatives," says Dub Hay, senior vice president of coffee and global procurement at Starbucks.

In the meantime, Equal Exchange is pursuing new ways to do good business. The company is exploring produce markets in what would be a bid to show that squeezing local fruit and vegetable vendors for rock-bottom prices isn't the only way to run a profitable business. In fact, their vendors might be the ones ready to do the squeezing--with hugs of gratitude.