Fairtrade and Market Efficiency: Fairtrade-Labeled Coffee in the Swedish Coffee Market
2. Earlier Research
3. Data Description
- The import price for beans inclusive of VAT and weight lost is where is the border price of conventional or Fairtrade green beans and 1.19 is the adjustment due to weight lost (European Coffee Federation 2014).
- Producer countries’ income from sales of Fairtrade beans is where 0.893 removes the VAT from the difference in prices of Fairtrade and conventional beans.
- Fairtrade Sweden’s income from the certification fee is . Fairtrade Sweden gets the net of VAT value of SEK 0.015 times the net of VAT retail price.
- Roasters’/retailers’ excess margin on Fairtrade coffee,, is i.e., the difference between the margins from sales of Fairtrade and conventional coffee:
- To calculate how the Fairtrade premium in the consumer market is distributed, a measure of total income from Fairtrade retail sales is needed. It is defined as Thus, income from Fairtrade is made up of the license fee plus the income of the producer country and roasters’/retailers’ excess margin from sales of Fairtrade coffee. The government’s income is ignored since the VAT is small.
- Roasters’/retailers’ share of the total additional value of Fairtrade retail sales is
- Producer countries’ share of the additional income from Fairtrade retail sales is
- Fairtrade Sweden’s share of the additional income from Fairtrade retail sales is
5.1. How High Are Fairtrade Prices?
5.2. Distribution of the Premium Paid for Fairtrade Coffee
Conflicts of Interest
|250–500 g Packages||400–500 g Packages||Four Large Roasters Only (400–500 g)||Only with Price <SEK 100/kg (400–500 g)||No Private Label|
|(3.43) ***||(2.80) ***||(2.06) **||(2.61) **||(2.27) **|
|(2.69) ***||(2.32) *||(3.91) ***||(1.20)||(2.41) **|
|(5.62) ***||(4.62) ***||(5.06) ***|
|(5.36) ***||(5.63) ***||(3.90) ***||(4.83) ***||(5.59) ***|
|(7.92) ***||(7.52) ***||(9.19) ***||(12.17) ***||(6.60) ***|
|(2.00) **||(1.96) *||(2.05) **||(2.23) **||(0.82)|
|(26.27) ***||(25.48) ***||(29.39) ***||(26.83) ***||(23.39) ***|
|Up to March 2011||From April 2011||Weighted Average|
|Fairtrade social premium||1.85 (0.25)||3.70 (0.50)||3.11 (0.45)|
|Organic beans social premium||3.70 (0.50)||5.55 (0.80)||4.66 (0.70)|
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The term Fairtrade refers to products certified by Fairtrade International. I use the term fair trade when referring to fair trade programmes in general.
Nelson and Pound (2009) conclude that Fairtrade producers enjoy higher returns and more stable incomes than others. Dragusanu et al. (2014) agree but note that the empirical evidence is based primarily on conditional correlations, while Mohan (2010), Blackman and Rivera (2011), and Dammert and Mohan (2015) argue that there is a lack of persuasive evidence that coffee certification provides significant economic benefits. Recent empirical studies on the impact of Fairtrade on coffee farmers are Weber (2011); Jena et al. (2012); Dragusanu and Nunn (2018); Chiputwa et al. (2015); de Janvry et al. (2015); Minten et al. (2015); and Nelson et al. (2016). Their findings are mixed, yet none of them reports strong positive average effects on income and other indicators of standard of living. In a study commissioned by Fairtrade, Darko et al. (2017) review recently published research and conclude that contextual factors affect the impact on producer markets.
I analyzed instant coffee and the results are available on request. They are qualitatively similar to the ones reported for ground coffee.
Before April 2011, the social premiums were 10 and 20 US cents, respectively.
Personal communication with Morgan Zerne, CEO of Fairtrade Sweden.
|Conventional||151||71.20 (10.20)||64.08 (9.20)||30.00 (4.30)||175.93 (25.10)|
|Fairtrade organic||22||107.16 (15.30)||90.80 (13.00)||69.32 (9.90)||185.71 (26.50)|
|Fairtrade not organic||3||121.00 (17.30)||95.00 (13.60)||82.00 (11.70)||186.00 (26.60)|
|Organic, not Fairtrade||12||71.69 (10.20)||67.54 (9.70)||41.02 (5.90)||129.44 (18.50)|
|Import price per kg Import price of 1 kg of green beans||29.72 (4.30)||32.80 (4.70)|
|Cost of producing 1 kg roasted coffee||35.37 (5.00)||39.03 (5.60)|
|(1.97) *||(1.68) *||(3.99) ***|
|(1.85) *||(1.84) *||(1.62)|
|(4.96) ***||(4.76) ***||(2.61) **|
|(11.90) ***||(5.25) ***|
|Organic, not Fairtrade||6.14||6.17|
|(1.74) *||(1.75) *|
|(26.03) ***||(25.18) ***||(22.09) ***|
|Measure||Definition||Conventional Coffee||Fairtrade, Other Costs = SEK 0||Fairtrade, Other Costs = SEK 5||Fairtrade, Other Costs = SEK 14.80|
|Retail price||62.00 (8.90)||79.12 (11.30)||79.12 (11.30)||79.12 (11.30)|
|Cost of beans (inclusive of value-added tax (VAT) and weight lost)||37.95 (5.40)||42.09 (6.00)||42.09 (6.00)||42.09 (6.00)|
|Fairtrade additional cost (assumed)||0.00||0.00||5.00 (0.71)||14.80 (2.10)|
|Roasters’/retailers’ excess margin||-||11.10 (1.60)||6.64 (0.95)||0.00|
|Producer countries’ income||-||3.70 (0.50)||3.70 (0.50)||3.70 (0.50)|
|Fairtrade Sweden’s income||-||0.95 (0.15)||0.95 (0.15)||0.95 (0.15)|
|Total additional income from Fairtrade sales||-||15.75 (2.25)||11.29 (1.60)||4.65 (0.65)|
|Producer countries’ share||-||24%||31%||80%|
|Fairtrade Sweden’s share||-||6%||8%||20%|
|Sum of shares||-||100%||100%||100%|
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Durevall, D. Fairtrade and Market Efficiency: Fairtrade-Labeled Coffee in the Swedish Coffee Market. Economies 2020, 8, 30. https://doi.org/10.3390/economies8020030
Durevall D. Fairtrade and Market Efficiency: Fairtrade-Labeled Coffee in the Swedish Coffee Market. Economies. 2020; 8(2):30. https://doi.org/10.3390/economies8020030Chicago/Turabian Style
Durevall, Dick. 2020. "Fairtrade and Market Efficiency: Fairtrade-Labeled Coffee in the Swedish Coffee Market" Economies 8, no. 2: 30. https://doi.org/10.3390/economies8020030