Why Paper Boat chose to launch a fair trade product
It was only natural that Hector Beverages, owner of the Paper Boat brand of distinctly Indian drinks like aam panna and jaljeera, would venture into traditional Indian snacks. But what is surprising about the recent launch of Paper Boat Chikki is that it is a fair trade product, the first recognisable Indian brand to do so.
Fair trade, a popular concept among consumers in western Europe and the US, ensures everyone involved in the making of a product is fairly paid; there is no child labour or forced labour; there is gender equality; and there are no damages to the environment.
Standards for fair trade are laid down by not-for-profit organisations like Fairtrade International, World Fair Trade Organisation (WFTO) and Fair Trade USA. Paper Boat Chikki is Fairtrade-certified.
Abhishek Jani, CEO of Fairtrade India, says it was not hard to convince Neeraj Kakkar, chief executive of Hector Beverages, when they first met in April 2015. “He said, ‘We need to do right by farmers.’ That was commendable. I haven’t come across the owner of a national brand who has said that.”
For the Farmers
After Hector Beverages decided to launch a fair trade product, the key was to find a source for the product’s main ingredient, peanuts. Jani then turned to a farmers’ collective near Rajkot in Gujarat, which had recently joined the Fairtrade network to sell cotton. Some of the cotton farmers also grow sesame and groundnut, and they sold 250 tonnes of peanuts to Paper Boat late last year at the Fairtrade minimum price of $670 per tonne.
(The sugar and jaggery for the chikki come from north Karnataka.) In addition , they would get a Fairtrade premium of $110 per tonne, which goes into the common fund of the collective, called Rapar and Dhrangadhra Farmers’ Producer Company, which is one of 200 such organisations part of the Fairtrade network in Asia-Pacific and 1,240 around the world.
Shailesh Patel, general secretary of the group, says it comprises around 500 farmers, and twice the number are keen to join. “But we will add only 300 this year. We are enrolling farmers on the basis of demand for our produce.” Patel says that while the Fairtrade minimum price for cotton may not be more than the minimum support price (MSP) set by the Indian government, it is still better. “Earlier, when the demand was low, we were forced to sell below the MSP.
But now we never have to sell below the Fairtrade minimum price,” says Patel. The collective earned Rs 25 lakh in Fairtrade premium for its cotton last year and has bought a tractor, a loader and a truck with it, and has managed to improve the sports infrastructure of government schools in the villages . Fairtrade producers, which include 1.6 million farmers and workers in 75 countries, earned premiums of €138 million, or over Rs 1,000 crore in today’s terms, in 2015. Farmers linked to Fair Trade USA, which was till 2011 a member of Fairtrade International, earned $47.5 million (Rs 322 crore) in premiums in 2015. Around €7.3 billion worth of Fairtrade products were sold globally in 2015, with Indians spending well under a million euros.
Parvesh Debuka, marketing head of Hector Beverages, says it took the company over a year to launch the product. The company’s objective is to make its drinks Fairtrade-certified too. “When we started working with Fairtrade and understood how they work, the supply chain team took upon itself to certify every product…. Considering the large number of ingredients and imported ingredients that go into our drinks, it may take longer.”
The Beginning
The fair trade movement has its origins in 1946, when Edna Ruth Byler, a volunteer for the Mennonite church in Pennsylvania, US, travelled to Puerto Rico with her husband and returned with needlework made by poor women in the La Plata valley. She sold this out of the trunk of her car, which then gave birth to Ten Thousand Villages, a retailer with $28 million in sales in 2014-15.
In Europe, Oxfam, a charity, started selling crafts made by Chinese refugees in the 1950s and the first fair trade organisation was formed in 1964. Nine years later, a fair trade body in the Netherlands imported the first fair trade coffee from farmers in Guatemala. The European Fair Trade Association was formed in 1987, followed by the WFTO in 1989.
The fair trade movement got a leg up with the introduction in 1988 of the first fair trade label — Max Havelaar, the name of a protagonist in an eponymous Dutch novel critical of the Dutch colonisers’ exploitation of farmers in present-day Indonesia. The label was used on coffee imported from Mexico. This led to the establishment of Fairtrade International’s predecessor in 1997.
Coffee is by far the biggest fair trade product, with around half of Fairtrade farmers and workers growing it. Fairtrade is focused on smallholder farmers (owning less than five acres each) since nearly four-fifths of the world’s coffee is grown by 25 million of them. Coffee farmers earned two-thirds of the total premiums paid to Fair Trade USA’s farmers in 2015. Coffee chains like Starbucks and Peet’s Coffee sell fair trade coffee. Other popular brands that have embraced fair trade include Twin ..
How Fair is the Trade?
Fair trade is not without its share of critics. A four-year study on coffee, tea and flower farms in Uganda and Ethiopia found that workers in Fairtrade-certified farms were not paid better than their non-Fairtrade counterparts and, in some cases, even paid less.
Christopher Cramer, a professor at the School of Oriental and African Studies, University of London, and co-author of the study, finds Fairtrade’s international audit system not very effective. “The benefits (of fair trade) go to a minority of producers who dominate a cooperative rather than to the poorer producers and wage earners.”
Arun Ambatipudi, co-founder of Chetna Organic, which has a network of 15,000 Fairtrade-certified cotton farmers in Telangana, Maharashtra and Odisha, says Fairtrade minimum prices for products should be revised more often and be in keeping with local conditions: “Most producer organisations do not have dedicated brands buying from them.” Chetna, fully owned by the farmers, counts the UK supermarket chain Tesco and Columbia Sportswear among its customers.
The Indian Route
Fairtrade, which had been helping Indian farmers exporting to Europe for two decades, began focusing on selling its products to Indian consumers in late 2013, but it has not been an easy ride as most of the brands are very niche, including No-Nasties tee shirts and Oothu tea from Wadias-owned Bombay Burmah Trading Corporation. “But now (after Paper Boat), conversations with companies are happening faster. Usually, niche brands are more open because their scale is small,” says Jani.
Devendra Chawla, CEO of Future Consumer and mentor to Paper Boat, says the young demographic wants to do good and brands can give them an avenue through fair trade. “Change has to be driven by consumers eventually and they can push the agenda that everyone in the (product) chain is fairly paid.” Despite Paper Boat’s efforts, he adds, it will take time for firms to take the fair trade route.
Piyush Kumar Sinha, a professor of marketing at IIM-Ahmedabad, says fair trade is linked to the principle of triple bottom line, which looks not just at financial gains, but also social and ecological benefits. He says companies can tap their corporate social responsibility funds to better the lives of those in their supply chain. “Until government plays a significant role, fair trade will continue to be niche in India.”
Meenu Chopra, executive director of Fair Trade Forum India, a member of WFTO, says when we pay Rs 300 for a tee shirt, we should know the real costs behind the price, which hides exploitation. Tapan Ray, a Fairtrade International board member and CEO of Nature Bio-Foods, which sells Fairtrade rice, says consumers have to be told why they are paying a premium of 10-20% for such products.
“Fair trade will bring stability in the supply chain and it is essential to protecting traditional varieties of rice, which farmers won’t grow if they don’t get the right price.” However, as Debuka notes, “Over a period of time when there are more producer organisations, prices are bound to be competitive.”
Farming has become more and more unsustainable in India over the years, with 8,000 farmers and 4,600 agri-labourers taking their lives in 2015, mostly because of indebtedness. While the vagaries of monsoon push farmers deeper into debt, the volatility in prices for their produce and middlemen are also contributing factors. Fair trade could in theory mitigate farmers’ woes but, to realise that, scale is essential and it will likely retrace the steps taken by organic food in India, which was once very niche but is now less so at least in some product categories.
Source: ECONOMIC TIMES