Where Does the Fairtrade Money Go? How Much Consumers Pay Extra for Fairtrade Coffee and How This Value Is Split along the Value Chain

Abstract

Fairtrade 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 Fairtrade-certified coffee in US supermarkets and finds estimates around $1 per lb. I then assess 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 Fairtrade-certified coffee, compared to conventional coffee. The coffee farmer receives about a fifth of the price premium paid by the consumer, but it is unclear how much of this (quantity-dependent) benefit goes toward the payment of (quantity-independent) license fees.