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1783 Where Does the Fairtrade Money Go? How Much Consumers Pay Extra for Fairtrade Coffee and How This Value Is Split along the Value Chain Helene Naegele 2019 30 S.

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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.

JEL-Classification:

L15;L31;L66;O13;Q01

Keywords:

Coffee, Fairtrade, Price premium, Value chain, Voluntary sustainability standards