Fair Trade as a Business Model: Don't Look at Fair Trade as a Charity-Treat It as a Business Model, Argues Paola Ghillani, Former Head of the Max Havelaar Fair Trade Organization in Switzerland

By Hulm, Peter | International Trade Forum, April-June 2006 | Go to article overview

Fair Trade as a Business Model: Don't Look at Fair Trade as a Charity-Treat It as a Business Model, Argues Paola Ghillani, Former Head of the Max Havelaar Fair Trade Organization in Switzerland


Hulm, Peter, International Trade Forum


Q How did you come to take over leadership of Max Havelaar in Switzerland after being at a big business multinational?

A I wasn't the first choice, since I didn't come from the development cooperation field. Max Havelaar Switzerland was created in 1992 by six Swiss NGOs to show solidarity with smallholders in coffee production. In 1998, when the Director had been ill for two years and unable to lead the organization, it was decided to appoint a new director--but with the order to make Max Havelaar self-financing within one and a half years.

This gave me my chance, since I came from management and marketing. And the reason I applied was that I believed in fair trade as a business model. I knew that I did not buy fair trade goods myself out of a sense of charity, but because they represented value for money to me.

Q What was your strategy?

A I set myself the goal of introducing at least one new product per year onto the market, partly to make people aware of the new approach. Each new product exists in a different economic situation, with a different set of problems. We had to make people aware of this.

We started with cut flowers and organic bananas. Of course, you have no guarantee that your approach is going to be successful. But we found a market among people who wanted to buy fresh products and fruit they could safely give to their children.

The retailers were initially suspicious. It required some hard negotiations to persuade them to feature our products. But when they saw that fair trade products were growing by 30-40% per year, after two or three years they came to us and asked for new products to feature.

That's how we achieved the target of making Max Havelaar Switzerland self-financing within 18 months. It gave us the resources to take financial risks, which has not been the case in some other countries. As a result, we were able to develop other fair trade products and improve the income of new beneficiaries in developing countries.

Q What does fair trade mean in your definition?

A It means paying producers enough to cover the cost of sustainable production plus the value of their work (salary, wages) to enable them to develop themselves, their families and their communities. It does not mean what I call the extreme pricing model that we see today in, for example, coffee.

Q What's wrong with that?

A The average cost to produce a pound of coffee is 70-90 cents ($1.56-2 a kilo). The minimum price set for fair trade producers in 1992 was $1.26 * and it hasn't changed. It is no longer in relation with the market price. It is no longer up-to-date and thus is distorted.

On the conventional world market, the coffee price for producers is 40-60 cents a pound. This is due to overproduction that is encouraged by the importers, because they can make higher margins, since the price of coffee to consumers has not gone down much. So that price is distorted, too.

I argue that fair trade producers could accept lower prices for their coffee beans--more in line with the fair trade production costs and the value of their work--and still come out ahead because they could sell a lot more coffee closer to market prices, rather than a small amount at a distorted price.

Q But the consumer is still paying a premium price for fair trade goods ...

A Not necessarily. Fair trade bananas in Switzerland, for example, don't sell for any more than the conventional products. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Fair Trade as a Business Model: Don't Look at Fair Trade as a Charity-Treat It as a Business Model, Argues Paola Ghillani, Former Head of the Max Havelaar Fair Trade Organization in Switzerland
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.